NEW YORK – Time Warner Inc. (TWX) estimates its AOL division would lose almost $1 billion in operating profit through 2009 under a plan to offer the unit's services free to some customers, The Wall Street Journal said on Tuesday.
Citing internal company forecasts, the Journal said Time Warner is also forecasting that growth in Internet advertising revenue will partially offset the expected decline in subscription revenue and ultimately leave the company more profitable.
The proposal would cut about in half profit from AOL's U.S. sale of Internet subscriptions to about $800 million in 2009 from $1.6 billion this year, the newspaper said.
According to the forecasts, AOL would end up with just over six million U.S. subscribers by the end of 2009, down from 18.6 million now.
But Time Warner believes it can continue to increase operating profit throughout the period, people familiar with the situation told the Journal.
The sources expect operating margins in the advertising business to jump to 42 percent in 2009 from 17 percent in 2006, the newspaper reported.
The proposal comes at the urging of Jeff Bewkes, Time Warner's chief operating officer and the leading candidate to succeed Chief Executive Richard Parsons, the Journal said.