AOL taps Pittman in restructuring

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America Online named former MTV: Music Television CEO Bob Pittman to lead its new AOL Networks division as part of a corporate restructuring announced on Tuesday.

Mr. Pittman, most recently CEO of Century 21 Real Estate Corp., will assume a role similar to that previously held by AOL Services Co. President Ted Leonsis, who now will lead the new AOL Studios unit, focusing on content. A third unit, ANS Communications, will continue to be led by Bruce Bond.

The Pittman announcement came amid a slew of news from AOL, the nation's largest online service provider with more than 6 million subscribers. AOL said it would shift to a basic pricing plan of $19.95 per month for unlimited usage, from an hourly plan. It also said it would offer a content-only package for $9.95 per month for those who already have Internet access. For subscribers willing to commit to two years, the price is $14.95 per month.

AOL Chairman-CEO Steve Case said in a conference call that the company expects to pass the 7 million subscriber mark next month. But he seemed to back off his aggressive plan to reach 10 million subscribers, saying the company will be "modulating [its] marketing efforts to make sure we grow in a steady, controlled fashion." AOL has experienced severe growing pains at times during the past few years, causing delays in access and other problems.

Mr. Pittman said that AOL will step up its efforts to generate ad revenue in the future. Comparing the growth of AOL to the rise of cable TV in the 1980s, he said, "We see an opportunity to grow subscriber revenue and add those new revenue streams," such as advertising. AOL generated $20 million in ad revenue in the quarter ended Sept. 30.

AOL also will change the way it pays content providers. It has signed agreements with some of its largest providers, including Viacom and The New York Times, to pay them a flat monthly fee for their content instead of a commission-type fee based on traffic to a content provider's AOL area, Mr. Case said. In a separate interview, Mr. Leonsis declined to comment specifically on the amount the company will pay content providers except to say it will be "millions of dollars a year."

Under the restructuring, AOL's GNN Internet access service, will no longer exist. Its subscribers and operations will be folded back into AOL. The company also said it would take a one-time charge of $385 million in the September quarter to account for a change in accounting of subscriber acquisition costs. AOL said, effective immediately, it will expense all marketing costs as they are incurred, instead of amortizing them over several quarters.

Copyright October 1996, Crain Communications Inc.

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