Ad Revenue Declines Pull Down AOL

NEW YORK Time Warner reported today that all of its business units achieved year-over-year revenue gains in 2003, save for its struggling America Online division. AOL's revenue declined 5 percent to $8.6 billion last year from $9 billion the year before. For the fourth quarter, the Dulles, Va.-based Internet unit's total revenue was $2.2 million, a 7 percent decrease from $2.3 billion in the year-ago quarter and 5 percent increase from $2.1 billion in Q3.Pulling down AOL's overall revenue was a 40 percent drop in advertising revenue. The falloff was attributed to the reduction of benefits of prior-period contract sales of about $550 million, as well as lower inter-company revenue of $138 million.Full-year operating income for AOL improved to $663 million from a loss of $32.7 billion in 2002, while Q4 operating income rose to $109 million from a loss of $33.4 billion in the year-earlier period. The AOL results were released as a part of Time Warner's fourth-quarter and full-year earnings report. The company as a whole recorded 2003 revenue of $39.6 billion, a 6 percent rise over $37.3 billion in 2002. The New York-based media giant also reported that AOL had 24.3 million domestic subscribers as of Dec. 31, a decrease of 2.2 million for the year and 399,000 from the end of Q3. Despite the lackluster performance, subscription revenue grew 5 percent, due primarily to strong gains at AOL Europe. The overseas online service, which has about 6.4 million members, benefited from favorable foreign currency exchange rates and higher prices. The rise in subscription revenue, however, was more than offset by declines in advertising and other revenues. For the year, other revenues dropped 61 percent, due mainly to AOL's previously announced strategy to reduce the promotion of its merchandise business.The Securities and Exchange Commission continues to investigate a range of transactions principally involving the AOL unit, including advertising arrangements and the methods used to report subscriber numbers. The SEC has determined that the accounting of two related transactions between America Online and Bertelsmann AG was not correct. Time Warner said that it continues to believe that the accounting for those transactions was appropriate. However, the company said that it might learn additional information as a result of its own review, discussions with the SEC and/or the SEC's ongoing investigation that would then lead it to reconsider its views.Shares in Time Warner (TWX) were trading on the New York Stock Exchange today at $18.19, down 62 cents or 3 percent. The stock's 52-week high is $19.30 and low is $9.90.

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Ad Revenue Declines Pull Down AOL

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Ann M. Mack