AOL Ups Monthly Premium Service Fee

23 May 2001

In a bid to boost cashflow and revenues, America Online yesterday hiked the price of its flagship unlimited access service. As of July, this will rise 9% from $21.95 a month to $23.90. The announcement boosted the share price of parent AOL Time Warner by 64 cents to $54.15.

The move will placate those investors and analysts who have pressed for a price increase in the hope that it will enable the online giant to hit its ambitious year-end financial targets. Said one entrail-raker at Credit Suisse First Boston: “Without a price increase, it would be more of a stretch. The fact that they are doing the price increase now gives investors a lot more confidence.”

But AOL chief executive Barry Shuler begged to differ; the price hike was unrelated to financial targets, he insisted. “We would be geniuses if we knew with absolute granularity that we needed another $150 million to meet the numbers," said Shuler. "It is way too early in the year for us to make a judgement call like that."

AOL has previously increased prices without incurring a serious level of customer defection It last raised prices stateside by $2 a month in 1998 when it had eleven million members – a move that preceded. a period of rapid growth. The ISP now claims 29 million members worldwide, the majority – some 23 million – indigenous Americans.

News source: Wall Street Journal