New York – The company responsible for introducing millions of people to the Internet is poised to undergo a transformation that would likely accelerate its decline as a gatekeeper of access to the information superhighway.
Time Warner Inc.’s board is expected to review on Thursday a proposal for its AOL LLC online unit to make even more services free, likely including the vaunted AOL.com e-mail accounts, in hopes of boosting advertising.
The strategy is risky: Millions of customers would likely drop their paid subscriptions, and AOL would lose hundreds of millions of dollars a year, perhaps even a billion or more, for the promise of an advertising payoff some time in the future.
But AOL has little choice. Its subscription business will keep eroding regardless. Internet advertising, meanwhile, is booming industrywide, and opportunities abound with ad-supported online video, where AOL is strong.
“It’s a risky game they’re playing, but it would be riskier not to play,” said David Hallerman, a senior analyst with research company eMarketer Inc.
After peaking in September 2002 with 26.7 million U.S. customers, AOL’s subscription base plummeted 30 percent, to 18.6 million in March.
