Bewkes: Plans for AOL to Be Revealed 'Very Soon'

Time Warner Earnings Drop 14%; AOL Revenue Off 23%

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NEW YORK ( -- Time Warner didn't offer any decisions on what it will do with AOL during its first-quarter earnings call today, but it offered some heavy hints.

Jeff Bewkes
Jeff Bewkes
The company's earnings dropped 14% in first quarter, to $661 million or 55 cents a share, from first-quarter 2008. Revenue dropped to $6.9 billion, 7% off the same period a year ago. And AOL was hit particularly hard, with revenue down 23% to $867 million. Ad revenue was down 20% and subscription revenue was down 27%.

Reports earlier this week suggested Time Warner will soon spin off the internet portal, and CEO Jeffrey Bewkes said new AOL Chairman-CEO Tim Armstrong is involved in those discussions and that they would announce plans about AOL's future structure "very soon."

The 'new' Time Warner
But the earnings report continued to hint at Time Warner's desire to spin off the internet unit. It reported revenue for its "content group," which includes the three units -- TV networks, publishing and filmed entertainment -- that would compose the "new" Time Warner, once it spins off AOL. Revenue at the content group was off 4% from a year ago.

The TV networks group was the only division to grow revenue from a year ago, up almost 6% to $2.8 billion -- although that growth was largely from subscription revenue; advertising revenue was off 2%. Still, Mr. Bewkes was bullish on cable TV, suggesting its Turner networks were closing the ad-pricing gap that has existed between cable and broadcast networks.

Publishing was down almost 23% to $806 million and filmed entertainment was off 7% to $2.6 billion. Mr. Bewkes addressed the significant drop at that unit, saying that "we're not assuming this is all cyclical." But he praised Time Inc. for being "the most aggressive publisher of moving its content to the web. Today it gets 15% of its domestic ad revenue online."

Praise for Armstrong
Despite AOL's troubles, Mr. Bewkes praised Mr. Armstrong, who has been in the job three weeks, and his priorities would include getting AOL back to industry-level growth rates and boosting yield, or the amount of money AOL makes off its inventory.

"It's fair to say he wouldn't have come to AOL if he didn't see a lot of upside in the value of the AOL brand, its products and its inventory," he said. Mr. Armstrong yesterday spoke about AOL's various brands and said he and several AOL execs were evaluating which those are worth investing in.

Recently Google, which owns 5% of AOL, notified Time Warner that it would exercise its right to unwind that investment; Time Warner has the opportunity to buy it outright and said today that it has indicated to Google that it plans to do so. Next step is launching an appraisal of AOL.

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