Troubled internet giant America Online is set to cut hundreds of jobs in the US as part of a cost cutting drive to offset a sharp fall in advertising revenue.
Earlier this week, America Online revealed ad revenue was likely to be down by up to 50% next year as various deals signed during the dotcom boom came to an end.
Jonathan Miller, the recently appointed chief executive of America Online, is planning wholesale changes, including the introduction of a ”bring your own access” subscription product and an increased reliance on exclusive content from the AOL Time Warner music and film divisions.
Broadband users, for example, will be offered a version of CNN on their desktops while films such as Harry Potter and artists such as Madonna will be promoted heavily through the service.
America Online also plans to introduce a number of premium subscription services to increase the amount of revenue generated by each subscriber.
According to a report in today’s Washington Post, the vice chairman of America Online, Joseph Ripp, has told managers to expect heavy cuts in all divisions.
The cuts are part of a wider plan to restore the credibility of AOL Time Warner on Wall Street, where its reputation has been battered by disappointing financial results and a string of investigations into accounting irregularities around the time of the £67bn merger of AOL and Time Warner.
In an internal memo to staff, Mr Miller said there were hard times ahead as the company sought to regain the impetus of the late 90s.
”I want to be clear with you: even if this plan succeeds, 2003 will be a difficult year for AOL,” he said.
”There will be some down quarters and some hard choices to make. But if we execute? If all of us are accountable for doing our jobs to the best of our ability every day? AOL can return to substantial growth in the years to come.”
But analysts remain sceptical about whether, with subscriber growth levelling off in the US and a highly competitive broadband market, America Online can return to substantial growth.
”The strategic direction to address the challenges is sensible but our concern is the continued decline in the AOL division would be severe enough to offset the strength of other Time Warner businesses,” said a new research report by Goldman Sachs. – Guardian Unlimited (c) Guardian Newspapers Limited 2001