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Networks sag at AOL - Broadcasting & Cable

Networks sag at AOL

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The sad ad market flattened AOL Time Warner Inc.'s television operations,
which were able to squeeze out only meager growth in the fourth quarter.

In disclosing its results for 2001, AOL Time Warner said network revenue
increased 4 percent during the three months ended December, while cash flow rose
just 2 percent.

That's far less than the mid-teens percentage growth the programming units
had been generating a couple of years ago.

That the networks, including ad-free Home Box Office, had any growth at all
stems from license fees to cable operators. Ad sales for Turner Broadcasting
System Inc.'s cable networks and The WB Television Network dropped 6 percent
during the fourth quarter.

Chief operating officer Bob Pittman disclosed that the company is using a
startling amount of ad inventory to cross-promote its products -- for example,
all of those America Online Inc. commercials running on Turner Network
Television.

He added that the company used up $468 million in ad inventory for
cross-promotion. That means 5.2 percent of the ad revenues at AOL Time Warner
properties like Cable News Network and Time magazine went to promote
in-house product. The figure the prior year: a mere $14 million.

At the cable-systems unit, revenue increased a strong 18 percent, but
cash-flow growth came up short at just 13 percent. That's largely because of
programming and the cost of marketing new services.

But growth rates accelerated for sales of both digital cable (now at 3
million subscribers) and high-speed data (now at 2 million).

Time Warner Cable's basic-subscriber count increased a mere 1 percent to 12.8
million.

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