Disney Reaches Deal With Time Warner Cable, Bright House

The Wall Street Journal

 

Walt Disney Co. said it reached a long-term agreement that will provide customers of cable-television providers Time Warner Cable Inc. and Bright House Networks Inc. with a wide swath of programming from Disney's units.

The companies didn't disclose financial details, but media giants such as Disney have been gaining an increasing share of their revenue from fees paid by cable, satellite and fiber video providers.

The deal—called Disney's most expansive content agreement so far—includes the recently announced Disney Junior, a new 24-hour basic channel for preschool-age children, parents and caregivers that will debut in 2012; ESPN3.com, ESPN's live sports broadband network; a new authenticated service that will let subscribers watch ESPN, ESPN2 and ESPNU through their broadband services as well as mobile Internet devices; and a new super-highlight channel, developed with Time Warner Cable, called ESPN Goal Line, that will take fans around the best matchups each Saturday during the NCAA football season. A similar service called ESPN Buzzer Beater will be available for the college basketball season.

"We are pleased to have reached an agreement without any interruption in service," said Time Warner Cable Chairman and Chief Executive Glenn Britt.

Several cable providers have come to standoffs that threatened their subscribers' access to major events before striking new deals with media companies in the past few years.

Time Warner Cable, the second-largest cable operator in the U.S., was involved in a high-profile war with News Corp. over rights fees that threatened to black out Fox on its systems in January. News Corp. also owns The Wall Street Journal.

Then, Disney threatened to pull the signal of its New York ABC affiliate from more than 3 million Cablevision Systems Corp. customers if it didn't receive more compensation. After U.S lawmakers threatened to intervene, the two sides reached an agreement in time for viewers in New York to see ABC's March telecast of the Academy Awards.

Time Warner Cable serves the New York City area, southern California, Texas, Ohio and the Carolinas. Bright House Networks, the ninth-largest U.S. multichannel video programmer distributor, has 2.4 million customers in several large cities, including Tampa Bay and Orlando, Fla.; Indianapolis; Detroit; and Birmingham, Ala.

AOL Posts $1.4 Million Profit

CNN Money

In its first quarterly filing since splitting from Time Warner, AOL Inc. said Wednesday that it swung to a profit in the fourth quarter from a year earlier.

The New York-based company reported net income of $1.4 million, or 1 cent per share, in the three months ended Dec. 31. That compares with a loss of $1.9 billion, or $18.52 a share, in the year-ago quarter.

Sales fell 17% to $809.7 million, led by sharp declines in AOL's subscriber base. Subscription revenue plunged 28%, while advertising sales were down 8%.

The company continued to lose subscribers as users flock to higher speed Internet connections. AOL's subscription base fell 27% to about 5 million from 6.9 million a year earlier.



But the overall sales figure was better than expected. Analysts surveyed by Thomson Financial had forecast sales of $700 million.

"We have made significant progress in support of the long-term vision we see in the future of AOL," said AOL Chief Executive Tim Armstrong in a statement. "But today's results continue to reflect the need for our focus and execution on the work required in the turnaround of the company."

Flying solo

The results reflect AOL's performance since it regained its independence from media giant Time Warner in December. It is also AOL's first report as a standalone firm since October 2000, when the company posted a quarterly profit of $350 million.

Time Warner, which owns CNNMoney.com, spun AOL off to shareholders late last year, ending what many experts said was the most disastrous corporate marriage of all time.

AOL has been trying to reinvent itself as a content and advertising company as subscribers to its dial-up Internet access business have dwindled. But the company has lagged rivals Google and Yahoo, in key areas such as display advertising.

AOL's global display advertising revenue declined 3% to $176.4 million in the quarter. Revenue from international display advertising plunged 22%. On the bright side, revenue from U.S. display advertising rose 1%, marking the first quarter of year-over-year growth in two years.

Search revenue, generated when a user clicks on a text-based ad on their screen, fell 19% to $154.4 million.

Profit, Overall Revenue Down For Time-Warner

NY Times

Time Warner, the media conglomerate that was once the world’s largest but has lately slimmed down by shedding some businesses, said both revenue and profits declined in the recent quarter.

The results were hurt by one business that the company has said it will spin-off — AOL — and another that has been battered by the advertising recession and is not viewed by executives as central to the company’s future, the Time Inc. magazine publishing empire.

The company’s biggest business, cable networks, which includes channels such as HBO, TNT, TBS and CNN, gained in revenue and profit. Revenue at the movie unit, the Warner Brothers studio, declined mainly because of lower DVD sales, a trend that has been felt across Hollywood, although its profitability improved.

Time Warner’s performance, like the results posted Monday by a rival, Viacom, is emblematic of a mainstream media industry that is largely contracting as consumers change how they view television and movies. The trend is compounded by the recession.

So media executives are left to cut costs to maintain profitability, rather than increase the revenue pie.

“We are executing well, despite the tough environment,” said Jeffrey L. Bewkes, Time Warner’s chief executive officer, in a conference call with Wall Street analysts.

Over all in the third quarter, revenue declined 6 percent, to $7.1 billion. Net income was $661 million, down from $1.1 billion in the last year’s third quarter. Operating income decreased 10 percent, to $1.4 billion.

The results, though, were better than Wall Street forecast, and the company raised its financial outlook for the remainder of the year. Excluding certain items, the company reported earnings-per-share of 61 cents, better than the 55 cents expected by Wall Street, according to Thomson Reuters.

AOL posted a 23 percent drop in revenue, to $777 million. But the company plans to complete its spin-off of the unit by the end of the year. At Warner Brothers, revenue fell 4 percent, while operating income increased 6 percent to $291 million.

Warner Brothers, like other studios, is facing a decline in DVD sales, which once drove growth in Hollywood. But the performance of the unit, particularly the increase in profits, surpassed what many on Wall Street expected. The studio’s major release in the quarter was “Harry Potter and the Half-Blood Prince.” “I think the most noteworthy thing in the quarter is film,” said Anthony DiClemente, an analyst at Barclays Capital. “They’ve grown operating profits at film for each of the past six quarters. “A lot of it is streamlining and cost cutting,” he said.

The only division of Time Warner to post revenue growth was its cable networks. Revenue there rose to $2.87 billion, from $2.73 billion in the quarter a year ago. Operating income rose to $938 million from $909 million.

Time Warner confirmed that it would take a $100 million restructuring charge to lay off hundreds of workers at Time Inc., which publishes titles like Time, Sports Illustrated, People and Fortune. Also Tuesday, the company said it would close Fortune Small Business, which is produced by Time Inc. but owned by American Express. In the quarter, Time Inc.’s revenue declined 18 percent to $914 million, while its operating income declined 40 percent, to $97 million, from last year’s third quarter.

Advertising revenue declined by $129 million, or 22 percent, while subscriptions declined 13 percent, to $49 million.

Mr. Bewkes said he believed much of the downturn in magazine advertising a result of the recession rather than permanent shifts of readers turning away from print and toward the Internet. This view runs counter to that of many others who believe that print is on a steady decline and will never return to the growth it once enjoyed.

Web Cable Not Ready For Prime Time
Story from the Wall Street Journal

It is called playing defense.

There is no doubt the film and TV industries need to find a way to protect their copyrighted programming on the Web. But the strategy unveiled on Wednesday by Time Warner and Comcast falls short of the ideal solution.

The two companies will test an approach to offering cable shows online without charge but only for viewers who have a video subscription. It is aimed at stopping anyone from turning off their TV subscription and watching video via an Internet connection instead.

Trouble is, as a deterrent to cutting the video subscription, it lacks teeth. Plenty of video programming is available online for free. Not only is there YouTube, but the broadcast networks such as ABC, NBC, Fox and CBS offer many of their shows for free on the Web. There are even a few cable shows available. And consumers also can buy individual episodes of many TV shows on services like Apple's iTunes.

Of course, cable channels have good reason not to throw all of their programs up online for nothing. Unlike the broadcast networks, they get big fees from TV distributors such as cable operators and satellite-TV firms. That has made cable channels hugely profitable and a source of steady growth for Time Warner, Viacom, Walt Disney and News Corp., owner of The Wall Street Journal.

Not only would a free-for-all approach threaten those distribution fees, it would likely undercut advertising revenue. There simply isn't enough ad revenue online to replace dollars lost from television, an issue broadcasters also are wrestling with.

But the Time Warner-Comcast approach could backfire on the cable-network owners. One big reason the sector now draws a majority of TV viewers is that its potential audience has increased. The number of households subscribing to some form of pay-TV service rose to 85% last year from 58.6% in 1990, according to SNL Kagan. That has helped boost cable channels' share of TV advertising.

Putting cable shows behind an Internet wall could start to reverse that trend. Admittedly, the number of consumers switching off their video subscription in the short-term is likely to be tiny. But given the amount of TV programming available and the steadily growing number of technologies making cheap online viewing easier, it will increase.

At the very least, Time Warner and Comcast should offer an online-only option for consumers, so channels won't automatically lose viewers among people cutting off their video subscriptions.

There is little the media companies can do to stop the havoc that the Internet is wreaking on their traditional business. They can slow the drain of profits for a while. But eventually, the companies will have to come up with new business models a little more adventurous than what was unveiled on Wednesday.

Time Warner Takes $25 Billion Hit
Aol On Deathbed

Responding to past problems and the future perils of the economic downturn, Time Warner Inc. attempted to clear its slate by writing down $25 billion of assets to account for the tumbling value of its cable, publishing and AOL businesses.

The move, coming as the advertising outlook sours, could signal more write-downs for media and cable companies. After a rash of acquisitions at peak prices, companies in those industries are having to scale back accounting values in the now-sullen climate. The media industry also faces secular declines in areas such as newspapers, broadcast television and radio, which are being ravaged by ad declines.

Time Warner CEO Jeff Bewkes has signaled a shift to focus more on the TV and movie businesses.

Coupled with weaker-than-expected advertising revenue,Time Warner's fourth-quarter write-down is expected to swing the company to an annual loss for 2008 -- its first in six years.

Time Warner Cable Inc., whose shares have fallen 50% in the past couple of years, represented the bulk of the non-cash write-down, at nearly $15 billion. The news also highlights the lingering effects of Time Warner's disastrous 2001 merger with AOL and a gloomy outlook for the magazine-publishing business.

Time Warner has made a slew of acquisitions since the company's last major write-down in 2002 for the value of AOL and its cable systems. Time Warner Cable spent about $9 billion of cash and 16% of its equity acquiring assets from rival Adelphia in 2005. AOL also has been on a buying spree in its bid to revamp itself as an ad-based company. Investors chided AOL last year for the steep $850 million price tag of its Bebo acquisition.

Cable-TV company Comcast Corp. similarly plans to write down its stake in wireless broadband company Clearwire Corp., whose shares have fallen about 60% in the past 12 months, said people familiar with the situation. Last October, CBS Corp. recorded a $14.1 billion charge, largely for the shrinking value of its local television and radio stations. "We believe that similar announcements from other media companies could be forthcoming," said UBS analyst Michael Morris.

Time Warner's write-down says a lot about the challenges that face Chief Executive Jeff Bewkes. Mr. Bewkes has signaled a shift to focus more on the TV and movie businesses and less on non-content assets such as Time Warner Cable, which he expects to spin off by the end of the current quarter.

But he still needs to find long-term solutions for AOL and publishing. Time Warner CFO John Martin, speaking at an investor conference, said the company is still interested in finding AOL a partner, after on-off talks with potential candidates, but noted the current climate "is not conducive to" quick action.

Time Warner rang more alarm bells about the advertising climate, saying "the economic environment has proved somewhat more challenging" than previously expected, particularly at its AOL and publishing units. The company scaled back its operating projection for 2008, saying it now expects adjusted operating income before depreciation and amortization to be $13 billion, up 1%, a drop from its previous forecast of a 5% increase.

Time Warner shares were down 6.3% at $10.29 in 4 p.m. composite trading on the New York Stock Exchange, while Time Warner Cable stock was down 4.8% at $21.56.

In addition to the write-down, Time Warner will record charges of as much as $380 million in the fourth quarter, including as much as $60 million from the restructuring of a lease for floors in its Time & Life Building in Manhattan held by Lehman Brothers Holdings Inc.; a $40 million increase in its credit-loss reserves for bankruptcy filings by retail customers; and $280 million for a court judgment against its Turner Broadcasting System Inc.

Time Warner still expects cash flows for 2008 to total $5.5 billion, matching its outlook provided in November, because of strong performances from its film division and its cable-television networks.

Time Warner was expected to come under pressure to write down assets as it carried over $42.5 billion in goodwill on the books for 2008. Mr. Martin said he expects no "adverse impacts" from the write-down, noting there are no debt covenants or tax implications that will lead to more financial pain.

The Time Warner Cable write-down reflects the decline in the market value of the company, a drop in the value of its franchise rights and lowered expectations for cash flow amid increased competition and higher borrowing costs. Time Warner Cable said it also plans to take a charge of about $350 million related to its investment in Clearwire.

Time Warner is to report fourth-quarter earnings Feb. 4.

Local Stations Pulled from Time Warner Cable

As the economy slows and competition intensifies, the always-contentious negotiations between programmers and cable-TV operators may be entering a bitter new phase. And with a federal mandate to transition to digital television just four months away, the stakes may even be higher.

In one of the biggest and most hostile battles in recent years, on Friday local broadcaster LIN TV Corp.'s stations were pulled from Time Warner Cable Inc. The move followed heated but thus-far unsuccessful negotiations about retransmission fees -- a charge per subscriber LIN TV is demanding for its local stations -- and affects 2.7 million Time Warner Cable homes. That represents about 30% of LIN TV's footprint.

Shares of Time Warner Cable had dropped about 15% in the previous five days, in part because investors feared the contract with LIN TV would lead to customer losses, said Thomas Eagan, an analyst at Collins Stewart. Shares of Time Warner Cable rose slightly Friday, up less than 1% to close at $22.46 in 4 p.m. composite trading on the New York Stock Exchange. LIN TV shares slipped 11% to $3.80.

Facing declining ratings and a ravaged local ad market, broadcasters like LIN TV are "going to have to play hardball like this," Mr. Eagan said.

To be sure, negotiations between programmers and cable systems over issues like retransmission are always bitter affairs involving posturing and brinksmanship.

But given the transition to digital TV mandated by the Federal Communications Commission in February 2009, the stakes are higher. Analysts widely expect many customers who currently receive on-air broadcasts to switch to cable, satellite or phone operators offering pay television rather than go through the complicated process of procuring the equipment required to receive digital broadcasts. Cable executives have said they are creating special discount packages aimed at these potential customers.

The stakes are particularly high for Time Warner Cable, as the company is preparing for other major negotiations with broadcasters including Univision Communications Inc. this year. "Time Warner Cable has the most to lose because if they give in here, they may end up having to give in down the road also," said Mr. Eagan.

LIN TV Chief Executive Vincent Sandusky said the company needed to secure higher retransmission fees when the dispute first surfaced a month ago. "If we weren't able to be successful in getting subscription fees, I think our local broadcast business would really be jeopardized," Mr. Sandusky said at the time.

Time Warner Cable spokesman Alex Dudley said broadcasters like LIN TV will have to look elsewhere. "They are not gong to prop up their failing business model on our customers' backs," Mr. Dudley said.

By: Vishesh Kumar and Sam Schechner
Wall Street Journal; October 5, 2008

Slide Cuts Deals With Time Warner, CBS

Social-Networking Software Supplier Pursues New Revenue By Distributing Content for Media Firms

Slide Inc., a startup best known for software tools that help people personalize their profiles and amuse themselves on social-networking sites like Facebook and MySpace, is trying to prove it has staying power.

The San Francisco company, begun in 2005 by Silicon Valley wunderkind Max Levchin, on Thursday will kick off distribution partnerships with Time Warner Inc.'s Warner Bros., CBS Corp., and Comcast Corp.'s E! Entertainment channel, among others. Using a new Slide video service, social-networking users will be able to view clips from shows such as NBC's "Nightly News" and "Beverly Hills 90210" for free.

Slide has become one of the most popular services on the web, building tools for social-networking sites. But as WSJ's Jessica Vascellaro reports, its successful applications, which are visited by 160 million a month, haven't translated into proportional revenue. (Oct. 1)

The partnerships are a sign of the maturation of the growing business of building services for sites such as Facebook and MySpace, which allow users to create personal profiles and connect those profiles with others. As the social-networking sites have grown, so has the competition for viewers and advertisers.

Slide plans to sell ads alongside the new content it will offer through the video service, called "FunSpace Channels." In other cases, Slide will take a cut of ads that its media partners sell. The company hopes to distinguish its video service from others by recommending content based on an unusual popularity measure: how actively viewers forward clips to their friends.

Mr. Levchin declined to comment on financial details of the distribution agreements. But the 33-year-old, who co-founded online payments company PayPal in 1998, said he expects the new service will encourage more marketers to advertise with Slide. "Television is a world that advertisers love," he said.

Slide, like many software companies targeting social-networking sites, has had trouble getting the attention of big advertisers. The social networks often limit the types of ads Slide and other service providers can sell. Advertisers also tend to prefer purchasing ads from better-known Internet brands, rather than smaller startups.

Other developers are partnering with big media to expand audiences and ad revenue. San Francisco-based Flixster Inc., which offers a service that allows Facebook users to rate and discuss movies, in August signed a deal with Warner Bros. to promote the distribution of its movies through Apple Inc.'s iTunes service. Another San Francisco developer, Loomia Inc., announced a deal in January to distribute via Facebook online news content via from NBC, The Wall Street Journal and technology web site CNET.

Slide's new online video service is part of the effort to attract new viewers and advertisers. The company's services draw more than 160 million viewers a month, according to research firm comScore Inc. But revenue -- from selling online banner ads, sponsorships and branded tools, such as quizzes -- remains small. The company wouldn't disclose revenue projections for this year. It expects $30 million to $50 million in 2009 revenue, according to people familiar with the matter.

In March, Slide announced it would focus on just three products for Facebook: a service that allows consumers to organize and communicate with a group of "top friends," a greeting card-like service called "SuperPoke," and "FunSpace," which includes the new video service.

Slide changed its approach earlier this year, dropping some services, such as one that distributed digital fortune cookies. "We asked ourselves," said Mr. Levchin, Slide's chief executive officer, "can they generate cash and are they going to be engaging to users a year from now?"

Slide also raised new financing. In January, it announced it received $50 million from T. Rowe Price Associates Inc. and Fidelity Management & Research Co. The funding valued the company at $550 million.

Media companies so far appear enthused about Slide's new video service. Andy Forssell, senior vice president of content acquisition and distribution for Hulu, an online video venture of NBC Universal and News Corp, owner of Wall Street Journal publisher Dow Jones & Co. Mr. Forssell likens the experience that Slide has created to an online version of gossiping around a water cooler. "Half the fun is watching [the shows] and half the fun is talking about them," he said.

By: Jessica Vascellaro
Wall Street Journal; October 1, 2008

AOL Remains Sticking Point for Time Warner

Ad Revenue Stalls; Publishing Unit Is Drag on Earnings

Seven months into the job, Time Warner Inc. Chief Executive Jeff Bewkes's biggest move to reinvent the company has been a spinoff of the cable business. But now he faces a much bigger problem: AOL.

Time Warner reported a 26% decline in second-quarter net income Wednesday, as its Time Inc. publishing unit burned a hole in earnings, countering strength in its television networks and movie studio. The biggest drag on profit, however, was AOL, where advertising unexpectedly stalled.

AOL's bumpy transition from a subscriber-based model to an advertising model has dented Time Warner's performance in recent quarters, putting pressure on the company to consider ways to unload it.

Time Warner announced Wednesday it had completed the work necessary to separate AOL's Internet-access business from its core advertising business in 2009, paving the way, Mr. Bewkes said, "to do something strategic with either of these businesses today."

Time Warner is in talks with both Yahoo Inc. and Microsoft Corp. about a possible deal that could value its core advertising and portal business at about $10 billion. It has also had informal contact with possible buyers for its smaller, Internet access business, including Earthlink Inc.

Mr. Bewkes is under pressure to revive Time Warner's long-stagnant stock price with some bold moves. In April, he unveiled long-awaited plans to spin off Time Warner Cable Inc., focusing the company more acutely on its content businesses. He also cut costs by folding the New Line movie studio into Warner Bros. Now the spotlight is fixed firmly on solving AOL.

For the quarter ended June 30, Time Warner reported net income of $792 million, or 22 cents a share, down from $1.07 billion, or 28 cents a share, in the year-earlier period. Revenue rose 5% to $11.6 billion. Last year's earnings were boosted by the sale of a book business and by tax benefits.

Mr. Bewkes said both AOL and Time Inc. have fallen behind his expectations, weighed down by the advertising slowdown.

Faced with sharp revenue declines in the first quarter, executives had predicted that AOL's ad growth would show some improvement. But AOL reported slim gains, which failed to make up for deep declines in subscribers, stirring concerns about the success of the unit's shift in strategy.

Advertising growth, which decelerated in the previous four quarters, stalled at 1.5%, dragged down by a 14% slump in display ads. The unit posted a 36% decline in operating income.

Mr. Bewkes said AOL was still struggling with integrating recent acquisitions made in pursuit of its new strategy. But he added that "there continue to be encouraging signs about the underlying health of the business," and the company predicted that ad sales would improve in the second half of the year.

Time Warner has held discussions about selling AOL before, but a deal has always proved elusive, in part because of disagreements over valuation. Mr. Bewkes wants to conclude current talks on the core advertising business, however, before turning to the Internet access business.

A bright spot in earnings was the cable-TV networks business, which largely bucked the ad downturn. The division, home to CNN and HBO, reported an 11% rise in advertising and 18% increase in operating income. The Warner Bros. movie studio also had a strong quarter, boosted by DVD sales of "I Am Legend" and "The Bucket List."

Time Warner shares, which have fallen 10% this year, slipped 5 cents, or 0.3%, to $14.83 in 4 p.m. New York Stock Exchange composite trading.

By: Merissa Marr
Wall Street Journal; August 7, 2008

Time Warner, Comcast to Test Web-Usage Plans

Time Warner & Comcast Need to Rethink Network As Internet Traffic Increases And Slows Things Down

Comcast Corp. and Time Warner Cable Inc. will Thursday each begin tests of ways to manage Web traffic on their Internet networks, a contentious issue that has drawn scrutiny from regulators and consumer groups.

Comcast said it will test limiting bandwidth available to heavy Internet users at times of network congestion. The cable operator will test the approach in the Chambersburg, Pa., and Warrenton, Va., markets Thursday. Tests will also soon be under way in Colorado Springs, Co.

Time Warner Cable will try a different approach. The cable operator said it plans to start metering new subscribers -- charging them $1 a gigabyte for Internet usage above a monthly allowance -- beginning Thursday in Beaumont, Texas.

"We realize this will require a cultural shift away from the all-you-can-eat model consumers have grown used to and we want to see what our customers' response will be," said Time Warner Cable spokesman Alex Dudley.

The growth of video and music file sharing has created problems for Internet service providers but particularly cable companies, whose Internet networks are shared among users at the neighborhood level. That means users consuming lots of bandwidth can slow the network performance for those living nearby.

Comcast had said it would experiment with ways to cope with surging Internet traffic on its network. The company had admitted to slowing certain types of bandwidth-heavy applications such as peer to peer file sharing technologies. But advocates of so called net neutrality, who say service providers should not prioritize one type of Internet traffic over another, argue Comcast's approach unfairly targets certain applications and will ultimately hinder consumer choice. By curbing the amount of bandwidth available to heavy users rather than throttling particular applications, the company may deflect some criticism.

Congress is considering legislation that would rein in a carrier's ability to throttle traffic on its network, and the Federal Communications Commission is also investigating the issue.

Time Warner says about 5% of the company's subscribers account for half of local bandwidth use. Mr. Dudley said metered billing is an attempt to deal fairly with the explosive growth of Internet traffic, and the huge amounts of bandwidth consumed by a minority of customers. "We want to find the most equitable way to deal with this issue," said Mr. Dudley.

By: Vishesh Kumar
The Wall Street Journal; June 04, 2008

AOL Ad Project, 'Platform A,' Plots Plan B

Digital Effort Aiming To Unite Multiple Fronts Faces Various Obstacles

Over the past two years, Lynda Clarizio has helped build Advertising.com, AOL's ad network, into one of the hottest properties in online advertising. Her reward: She gets to try to clean up one of the Internet company's messiest divisions.

Time Warner's AOL unit is aiming to transform itself from an Internet service provider into a full-service digital-advertising business. To that end, it has spent about $1 billion to buy seven ad-technology firms with different areas of expertise, from behavioral targeting to video ads. The next step is to knit them together with Advertising.com -- an entity AOL has dubbed Platform A, but has yet to take to market.

AOL's future largely hinges on the success of that transformation, which involves aggressively slashing costs, forsaking billions of dollars in overall subscription revenue, and laying off thousands of employees. Time Warner Chief Executive Jeff Bewkes has said that mission is key to plotting a new course for a company whose stock price has stagnated in recent years.

But Platform A is off to a rocky start. In its first six months, it has been marked by failed sales targets, tensions among its different business groups, and, most recently, the dismissal of its president, Curt Viebranz. A number of marketers say they are ready to spend their ad dollars with Platform A, but can't because the disparate units still operate independently.

The idea behind Platform A is that AOL can be a one-stop shop for placing ads both on AOL's own Web sites and on the broader Web, through its ad networks like Advertising.com, which sell ads on thousands of Web sites. So far, though, the company is a long way from that reality. AOL is fourth among the major Web portals -- behind Google, Microsoft's MSN and Yahoo -- in ad revenue, and the pace of its ad-revenue growth has also dropped off. AOL's ad revenue grew 12% in 2007, compared with 37% in 2006 and 38% in 2005, according to research firm eMarketer.

Even Advertising.com, a rare bright spot in AOL's business recently, is facing new pressures. A major part of a two-year deal with its biggest advertiser, Apollo Group's University of Phoenix, ended in January. Advertising.com was University of Phoenix's exclusive online marketing partner, managing its ad buys both on its network of sites and on other ad networks. The deal generated $215 million for AOL in 2007, up $58 million from $157 million in 2006, and accounted for 17% of AOL's ad-revenue growth last year. (University of Phoenix will continue to buy ads on the Advertising.com network, but decided to take its ad buying in-house.)

AOL's biggest competitors are developing their own ad networks, which will make life tougher for Advertising.com. "If I get the inkling they are not innovating, I'm going to look elsewhere and talk to Yahoo or any of the other Web giants," says Tom Hespos, president of Underscore Marketing, a closely held digital agency in New York.

AOL executives have picked Ms. Clarizio, 47 years old, to rescue Platform A, which has the widest reach of any ad network in the country -- reaching 90% of the U.S. online audience, according to comScore -- but isn't able to effectively sell across that spectrum yet. A nine-year veteran of AOL, Ms. Clarizio led the deal team that acquired Advertising.com in 2004 for $435 million. That unit has accounted for nearly a quarter of AOL's revenue and is one of the fastest-growing parts of the company.

Trained as a lawyer, Ms. Clarizio is known internally for an analytical mind and an ability to delegate. A graduate of Princeton University and Harvard Law School, she came to AOL from Washington law firm Arnold & Porter, where she was a partner for seven years and also worked as an AOL outside counsel.

While AOL is known as a relatively slow-moving, bureaucratic company, Advertising.com has developed a different reputation. "AOL has reinvented itself so many times. It is hard to keep track," says Adam Schlachter, senior partner and group director at Mediaedge:cia, a media-planning firm that is a part of WPP Group's Group M. "(Advertising.com) has been able to grow steadily, consistently and innovate."

Ad.com grew from a cramped townhouse on the outskirts of Baltimore, where brothers Scott and John Ferber opened a digital advertising company called TeknoSurf in 1998. Their idea was to piece together a network of Web sites where they would buy ad space, then resell it to advertisers at a premium. It changed its name to Advertising.com in 2000.

Ms. Clarizio tried to embrace Ad.com's start-up spirit. The company remained at its Baltimore headquarters, instead of relocating to AOL's Dulles, Va., base, 60 miles away. She dressed up for Halloween and competed in relay races.

She also has tried to get the company's various sales teams and engineers working on common goals. During daily 9 a.m. meetings in Ad.com's "War Room," midlevel executives discuss the previous day's results and chart the next day's goals.

Ms. Clarizio wants to replicate that culture at Platform A, which suffers from duplication among its sales, tech and other groups. Different ad units, for instance, call on the same clients -- in essence competing for the business. One of Ms. Clarizio's first moves in her new post was to announce a "leadership team" for Platform A. The new structure puts in place one sales team, one technology team, one product and operations team, one marketing team and one publisher-services team to cut across all the company's different ad units.

Some digital-advertising executives question whether combining sales teams is the right strategy. They fear Ad.com's emphasis on data-driven results will come to dominate Platform A, frustrating bigger-brand marketers used to the tailored campaigns they have gotten from some of AOL's ad-sales teams.

But Ms. Clarizio is moving full speed ahead with the integration. AOL also announced last week that it has integrated two of the companies that provided separate search-engine-marketing services -- Advertising.com and Quigo, a contextual targeting ad firm AOL acquired last fall. "It's an example of what we need to do across the board. It's definitely an iterative process and takes a lot of work to do that," Ms. Clarizio says.

By Emily Steel
Wall Street Journal; March 26, 2008

Comcast, Time Warner Cable in Wireless Talks

The two biggest U.S. cable providers, Comcast Corp. and Time Warner Cable Inc., are discussing a plan to provide funding for a new wireless company that would be operated by Sprint Nextel Corp. and Clearwire Corp., people familiar with the talks say.

The partnership would create a nationwide wireless network using WiMax technology, which is designed to provide high-speed Web access from laptops, cellphones and other mobile devices, as well as high-quality mobile video. Sprint and Clearwire have been working for months to cooperate on a WiMax rollout and are now trying to raise at least $3 billion for a joint venture.

Under the plan the parties are reviewing, Comcast -- the largest cable operator with 24 million subscribers -- would put as much as $1 billion into the venture, with No. 2 operator Time Warner Cable adding $500 million. The sixth- biggest cable operator, Bright House Networks, is also involved in the talks and would contribute between $100 million and $200 million, people familiar with the matter said. Comcast Chief Executive Brian Roberts has played a prominent role in the talks.

Sprint, of Overland Park, Kan., and Clearwire, a Kirkland, Wash., start-up founded by wireless pioneer Craig McCaw, are trying to line up other funding too. Intel Corp. has signaled a willingness to put in about $1 billion or more, depending on the terms, people familiar with the discussion say. And Google Inc. could provide hundreds of millions of dollars, the people say. The exact amount each would contribute could change, and people involved in the discussions said it is still possible the entire deal could fall through. Google and Intel both declined to comment.

Entering the wireless business is becoming a bigger priority for cable companies as they compete fiercely for customers with telecom giants AT&T Inc. and Verizon Communications Inc. Those phone companies have encroached on cable's turf by entering the pay-TV business and are positioning themselves to offer a " quadruple play" of services that includes landline phone, high-speed Web access, cellphone, and video. "That's obviously a concern, if Verizon can put together a converged service offering that starts to peel people away from cable operators, " said Mark Rowland, head of the wireless practice at IBB Consulting.

Cable companies' push into wireless would mark the next chapter in that escalating rivalry. It isn't clear precisely what wireless services the cable operators intend to offer via the WiMax venture. Executives at some of the operators feel the U.S. wireless market is already crowded, with 80% of U.S. consumers already owning a cellphone.

The companies are likely to try to distinguish themselves with advanced mobile data and video services that take advantage of the stockpiles of content they are already adept at licensing. People familiar with the discussions said some cable companies are looking at options to develop their own mobile devices in partnerships with manufacturers.

Sprint CEO Dan Hesse is pressing all parties to wrap up discussions in time for the wireless industry's trade show next week in Las Vegas, so Sprint can have something to present to investors. In addition to the $3 billion Sprint and Clearwire are trying to raise now to start rolling out WiMax, they will likely need more to complete a nationwide network. Sprint previously had told Wall Street the venture would cost $5 billion by 2010.

Mr. Hesse wants Sprint to begin building the WiMax network quickly so it can get a head-start over competitors AT&T and Verizon Wireless on advanced wireless broadband services. WiMax promises faster speeds than current technologies and a wider range of video and other services.

In exchange for funding the WiMax joint venture, the cable companies would get equity in the business and would be able to purchase wholesale access to the network to offer their own high-speed wireless data and voice services to customers, the people familiar with the discussions said.

The cable industry has been flirting with the idea of getting into wireless for years, but hasn't had a clear strategy. Investors have also discouraged cable companies from embarking on any big spending projects. A consortium of cable operators including Comcast, Time Warner Cable, Bright House Networks and Cox Communications Inc. bought more than $2 billion in radio spectrum in a 2006 government auction but never put it to use.

The same companies created a separate joint venture with Sprint in 2005, dubbed Pivot, that offered cellphone service in about 30 markets by the time it stopped marketing late last year amid low demand. One key problem was that cable providers didn't have significant control over pricing and marketing. They are asking for that control in the new WiMax venture. Comcast and other cable operators have also mulled acquiring a major wireless carrier.

Cox, the third-biggest cable operator, appears to be pursuing a separate wireless push. It acquired 22 radio spectrum licenses for $305 million last week, which would allow Cox to offer wireless service in its markets, predominantly in the south and southwest.

If cable operators dive into wireless, that will put more pressure on satellite TV providers, their other major competitors, to do the same. Satellite providers on their own can't offer high-speed Web access or voice services. Dish Network Corp. took a step into the wireless business through the FCC auction, winning 168 licenses throughout the country for $712 million. DirecTV Group Inc. hasn't announced any plans in wireless.

"This is like a game of three dimensional chess because the cable operators aren't just thinking about how this helps them compete with Verizon and AT&T, but how this helps them block potential threats from DirecTV and Dish," says Bernstein analyst Craig Moffett.


By Amol Sharma and Vishesh Kumar
The Wall Street JournalMarch 26, 2008