December 11, 2001 11:00 AM PST
Pittman pins AOL's future on broadband
In a keynote speech delivered during the Internet World and Streaming Media East conventions here, Pittman offered a picture of wired households firmly linked to the company through the interactivity of its America Online division and the media and entertainment assets of its Time Warner unit. That idea begins with broadband, or high-speed Internet connections, delivered through AOL Time Warner's cable system.
"We think the future is that of broadband running the home network," Pittman said.
Once a fast Internet connection is in place, AOL plans to sell other services such as Net-enabled devices and home appliances, video-on-demand, voice technology, online music, and interactive TV. All of these services will be managed by a home networking device.
Although some of these services are already available, others are still being tested. For example, AOL on Tuesday launched a preview version of its online music service, MusicNet. The service, endorsed by RealNetworks, AOL Time Warner, EMI Group and Bertelsmann, will be offered for $9.95 a month.
Should the dream of the connected household turn into a reality, Pittman said, AOL Time Warner will be able to reap financial rewards. He estimated that the future revenue potential for selling broadband Internet access and related services could jump to $159 a month per household. Combining that with interactive services sold through its cable network, AOL Time Warner could conceivably receive $230 a month per household, he said.
That vision of AOL Time Warner's ubiquity in U.S. homes may have been represented by the company's omnipresence at the industry conferences Tuesday. The company's marketing employees spread out across New York City's Jacob K. Javits Convention Center, sporting Nascar-style racing uniforms.
The presence of conference attendees, however, was less impressive. Preregistrations were down 29 percent from last year, according to a representative of conference organizer Penton Media. The representative estimated that 25,000 to 30,000 people will appear at the joint Internet World and Streaming Media East conferences this year, a marked drop from last year's 36,000 Internet World attendees.
Although those numbers reflect the Internet's overall downturn, Pittman's speech seemed to temper ongoing scrutiny that the Internet's woes have affected the AOL unit. Many Wall Street analysts recently began raising warning flags that AOL's subscriber growth was slowing. Many also expect advertising and commerce revenue to continue to slide, potentially affecting financial earnings.
AOL Time Warner, however, has long promised that its merger will counteract financial uncertainty by combining AOL's interactive assets with Time Warner's cable network, the nation's second largest. Despite being hit with federal restrictions in exchange for approving the deal, AOL has begun introducing high-speed versions in Time Warner's cable markets.
AOL Time Warner has also put in a bid to acquire the nation's largest cable operator, AT&T Broadband. However, several AT&T executives and directors reportedly are lobbying to keep the company independent.
Last week, AOL Time Warner announced Pittman would take charge of the day-to-day management for all its businesses, including Time Warner Cable, Warner Bros. studios, Warner Music Group, magazine publisher Time Inc., its TV networks and America Online. Pittman's co-COO, Richard Parsons, will become chief executive of the company, a move that many observers viewed as a snub to Pittman, long expected to replace outgoing CEO Gerald Levin.
Still, Pittman made bold assertions Tuesday about the company's and Internet's longevity. He said that two-thirds of U.S. households have Internet access and that the AOL division will continue to promote the company's other businesses such as new movies and bands.
"The Internet revolution is in full force," Pittman said.