Time Warner's profit up, but AOL struggles

Time Warner grew its revenue and earnings in Q1, but AOL's performance suffered as subscribers fled its Internet access service.

Time Warner Inc.'s net income rose sharply in its first quarter, ended March 31, 2006, but its AOL LLC unit saw its revenue and operating income drop as its subscriber rolls continued to shrink, the New York-based media conglomerate said Wednesday.

Time Warner generated total revenue of US$10.46 billion, up 1 percent over 2005's first quarter, but below the $10.9 billion consensus expectation from analysts polled by Thomson Financial.

Meanwhile, net income jumped 59 percent to $1.46 billion, or $0.32 per share. A Thomson Financial official said the company is still trying to determine the proper earnings per share comparison for the $0.20 per share consensus from its polled analysts.

Time Warner said in a statement it was particularly pleased with the results from Time Warner Cable, which provides cable TV, digital phone and high-speed Internet services. The unit's revenue increased 15 percent to $2.6 billion and its operating income grew 25 percent to $501 million.

Performance wasn't as stellar at AOL, which generates revenue from online ads and from subscription fees to its proprietary Internet access service, whose accounts are mostly of the slower dial-up type. Revenue declined 7 percent to $2 billion, caused by a 13 percent fall in subscription revenue. Advertising revenue increased 26 percent, offsetting part of the subscription decline. Operating income fell 14 percent to $269 million.

In the U.S., AOL had 18.6 million subscribers as of March 31, down by 3.1 million from 2005's first quarter. In Europe, subscriptions fell by 452,000 to 5.9 million.

AOL is shifting its focus from the subscription fees model toward the online ad model that has proven so successful for competitors such as Yahoo Inc. AOL is also trying to get its dial-up subscribers to switch to its new broadband access plan. Starting in March, AOL increased the price of its most popular dial-up access plan, which provides unlimited connection time, to nudge subscribers toward its new AOL High Speed plan.

Time Warner also has units for film, TV networks and publishing.

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