AOL and Time Warner Finally Cooperate

It took five years, but AOL and Time Warner are finally doing what they should have done five minutes after the merger: working together.  Starting in January, AOL will make old Warner sitcoms available for free viewing online, with viewers having only to suffer through a fifteen-second commercial to stream them (details on MediaPost).

How many people will want to watch old sitcoms online?  Who knows.  Making some money from the shows, however, is better than making no money.  Owning and controlling the shows' point of online distribution, moreover, seems to preferable to letting someone else (Google) own and control it.  Most important, the deal demonstrates that AOL is focused on at least one of the two key strategies it must pursue if it is to survive.

Right now, AOL is bleeding to death.  Subscribers still generate most of the pageviews on AOL's web properties, and the company is losing subscribers at the rate of approximately 650,000 a quarter.  According to Time Warner, each subscriber represents about 2.5 unique users (in a household), and each subscriber unique user generates 2.5 times as many pageviews as the average web-only unique user.  So each time a subscriber quits, AOL loses the pageview equivalent of approximately 5 web-based users.  To staunch the bleed, therefore, AOL must do two things:

1) Find ways of retaining more subscribers.

2) Find ways to attract more people to the web site.

The Warner deal falls into the latter camp.

 

Comments

[Robert Young]

Henry, how did you come up with the subscriber vs. web visitor, relative to pageviews, formula? Very interesting...

[Henry Blodget]

The ratios came from Time Warner (I've added the attribution to the post). The logic makes sense: Each subscription tends to include multiple members of a household, and subscribers tend to be heavier users of AOL content than web visitors (many of whom are just IM users). I have not verified the ratios, although it is probably possible to do so with complete Comscore Media Metrix data. If anyone has seen any data that conflicts with this, please let me know.