Media giant Time Warner issued its Q3 08 earnings report this morning (PDF) showing ongoing shrinkage and weakness in its AOL albatross unit but solid performance in its separately traded cable unit, which is soon to be split off almost entirely from the parent company.
Time Warner's intense efforts to turn around the ailing online unit over the past five years have produced almost no improvement in AOL. During the quarter, AOL lost 740K dial-up subscribers (leaving it with a still-remarkable 7.5 million paying customers) and, worse, experienced an ad revenue drop of 6% year-over-year to $507 million, despite lots of optimistic talk that early this year that AOL was being repositioned to take advantage of what was then an online ad boom.
Pretty much everything else was down at AOL too -- total revenue (down 17% year-over-year), total page views (down 3%), cash flow (down 7%) and operating income (down 9%).
On the other hand, Time Warner Cable posted a relatively strong performance during the quarter. Although the cable company lost 30,000 basic video customers during the quarter, bringing basic penetration solidly below the 50% mark, it maintained relatively healthy growth in high-speed subscribers and slowing but respectable growth in its digital voice service.
As a consequence of growth in high-speed, digital voice and digital video (net gains of 124,000 during the quarter, roughly on par with Q3 07 levels), Time Warner Cable's revenue rose 8.5% year-over-year to $4.34 billion while cash flow advanced by 8.8% to $1.55 billion. Free cash flow soared 143% year-over-year to $454 million.
With this kind of disparate performance, Time Warner's strategy of hanging onto AOL but spinning off its cable unit seems financially foolhardy even if operationally more efficient. The media giant believes its future lies in a pure content arena.
That may be true on the TV network side of the business (where revenues rose 7% year-over-year) and possibly in the motion picture segment (where revenues slid due to a weaker 2008 slate), but not in publishing (where revenues dropped 7%). Overall, Time Warner revenues were basically flat at around $11.7 billion while company-wide net income slipped dipped by 2% to $1.07 billion.
Cynthia Brumfield at 5:51 PM|Comments(0)
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