AOL to 'open up exclusive content' - WSJ

Posted on 7 Jul 2006 at 10:40

AOL is considering throwing open the doors to all of its services to anyone who has broadband access according to a report in the Wall Street Journal.

The move would represent a serious turn around for the ISP which has for many years defended its 'walled garden' approach to providing exclusive services only to its subscribers.

However, with the number of subscribers falling steeply - a 30 per cent drop over the past four years - the board at Time Warner are pondering whether such a strategy is still valid at a time when almost anything held inside AOL is available for free on the Internet at large.

Recently, the Time Warner board have begun to position AOL away from being a value added ISP which, despite their best efforts, has become commoditised proposition. Instead, the company is concentrating on providing more services such as unique content from its stable of music, TV and films supported by advertising. When the company sold five per cent of AOL to Google, part of the deal was that AOL could begin to sell its own advertising slots on the service.

Even so, throwing open the wall garden will be a tremendous gamble. Currently around a third of AOL's 18.6 million customers in the US have broadband access and Time Warner estimates that another third of customers, who currently pay $25.90 monthly subscriptions, might defect and cost as much as $2bn in lost annual revenue. This is even more likely considering that the new 'free' content may not apply to dial up subscribers.

On the plus side, the lost subscriptions would be offset by increased advertising revenues and savings on the wage bill as the company made deep cuts in the head count in the subscription sales and marketing departments.

As AOL UK is currently up for sale, it is not clear to what extent any decision would affect British subscribers. Time Warner is refusing to comment on the report that says that a final decision would be taken later this month.