AOL Time Warner’s Q3 revenues were up, but so were its net losses.
AOL Time Warner’s results came in slightly above revised expectations, but there was still a note of disappointment concerning the figures. Total subscription revenues moved up 13% to $4.2 billion as another 1.9 million people joined its Internet and cable services. Total revenues increased by 6% to $9.3 billion.
Some advertising problems were anticipated, but in Q2 AOL managed to achieve 1% growth in advertising and commerce revenues despite significant falls in its Publishing and Networks unit. In the latest quarter, advertising and commerce revenues slipped overall by 5% to $1.9 billion. Many investors were disappointed both by this drop and the discovery that subscription revenues had not been stronger.
At the time of the merger, AOL predicted that earnings before interest, taxes, depreciation and amortization would increase by 30% and revenues by 12-14%. Despite the declining advertising environment, AOL stuck by its predictions for most of the year. But advertisers pulled out in droves after the attacks and revenues went down at all of the company’s media groups. Two weeks later, AOL was forced to acknowledge that its optimism was misplaced. Ebitda growth is now expected to be nearer 20% while revenues increase by 5-7%; the company is reluctant to predict when the advertising market may turn around.
The net loss for the quarter was $996 million, compared to $902 million in Q3 last year. This included $134 million of merger-related expenses and $196 million from investment write-downs.
AOL Time Warner is in a better position than many media companies. Advertising revenues are down but AOL only generates around a quarter of its revenues from this source, compared to up to 50% for many of its competitors. However, while it might beat the growth rates of its rivals, it’s still going to have trouble doing anything impressive.
