AOL Time Warner
While the rest of this year should go about as expected, the company sees essentially no revenue growth for the America Online division in 2003. The culprit is, once again, flagging advertising and commerce sales, which are now expected to fall by an amazing 40% to 50% next year. That drop will be offset by "solid growth" in subscription revenue.
What makes the ad crunch so amazing is that it appears to be unique to America Online. By most accounts, Internet advertising revenue has leveled off industry wide, and is even picking up a bit in some quarters. Perhaps the same long-term contracts that buffered AOL while many dot-coms were going out of business are now expiring, and are not being renewed at the same levels. The company says the drop is "largely due to lower revenue recognition from prior-period commitments."
Meanwhile, in an effort to make AOL more attractive to subscribers, management has decided to provide content from several Time Inc. magazines as part of the basic service. Although that means the online sites for such publications as People, Entertainment Weekly, InStyle, Parenting, and Southern Living will cut back or even eliminate their free content, it does provide some differentiation and justification for AOL's monthly $23.90 fee.