Profits Plunge at Time Warner After AOL-Time Ad Drought

08 January 2009

NEW YORK: "The economic environment has proved somewhat more challenging than the company previously expected, particularly for the advertising businesses at the AOL and Time Inc publishing segments," reads a statement released today (Thursday) by Time Warner, the planet's largest media conglomerate.

TW admitted to an accelerated deterioration of its magazine and internet divisions in the fourth quarter of 2008, forcing a $25 billion (€18.39bn; £16.63bn) writedown on the value of its media properties.

The media mammoth attributed the writedown to a decline in the value of Time Warner Cable's regional franchise rights, in turn prompted by a fall in the company's stock price.

Although an eyewatering sum, the writedown pales into insignificance alongside the near-$100bn hit it took in 2002 after devaluing AOL.

The group now predicts 2008 growth of only one percent in adjusted operating income before depreciation and amortisation – a massive decline from its previous 5% growth forecast just nine weeks ago. The latest data reinforces TW's plan to slim its non-content assets.

However, ready cash does not appear to be one of the group's problems. Time Warner continues to expect full year 2008 free cash flow of $5.5bn, according to the company's statement.

Meantime, according to chairman/ceo Jeff Bewkes, TW is exploring all avenues to boost AOL or merge it with a rival such as Yahoo – with whom discussions continue.

Data sourced from Financial Times; additional content by WARC staff