Digital Media

AOL, which has already told investors that it will spend up to $200 million firing a good chunk of its staff, has now told its employees. It is looking for "up to 2,500 volunteers," CEO Tim Armstrong told his staff Thursday. That's a third of the company's payroll.

The voluntary layoff program begins December 4, a few days before the company spins off from Time Warner. If AOL doesn't get enough volunteers, it will ax people on its own.

This is lousy news for employees, who are faced with a "jump now or wait to be pushed" decision, but it is designed to cheer investors: AOL says the cuts will drop its annual operating expenses by $300 million. Through the first nine months of this year, AOL's operating expenses ran around $1.8 billion.

Meanwhile, AOL is looking to shed some parts of its business altogether. It has hired bankers to sell off its ICQ messaging service and is considering dumping MapQuest, among other assets.

Armstrong's (expensive) goodwill gesture: He is giving up his 2009 bonus, which was to be at least $1.5 million. His explanation to employees: "As a member of our team and the person who takes accountability for the results of the company, I am making the decision to forgo my 2009 bonus. That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees."

Here's the text of the company's filing with the SEC:

On November 19, 2009, AOL Inc. (the "Company") informed its employees of proposed restructuring activities as part of its continuing cost reduction initiatives aimed at aligning the Company's organizational structure and costs with its strategy (the "Restructuring"). The Restructuring is conditioned upon the successful completion of the Company's previously announced spin-off from Time Warner Inc. (the "Spin-off"), as well as the approval of the Company's new Board of Directors that will begin service in connection with the Spin-off. It is anticipated that, if approved, the Restructuring will include the reduction of approximately a third of the Company's current employee base, which will be conducted on a voluntary and involuntary basis. The goal of the Restructuring is to reduce ongoing annual operating costs by approximately $300 million. If the Restructuring is approved, the Company expects to incur restructuring charges of up to $200 million, substantially all of which is expected to be incurred from the date of the Spin-off through the first half of 2010.

Story Copyright (c) 2009 AllThingsD. All rights reserved.

AOL will officially be spun off from Time Warner on December 9, with trading to begin the next day.

Shareholders of record at 2 p.m. PST on November 27 will get one share of AOL for every 11 shares of Time Warner on the day of the long-expected spinoff of the Internet service.

At Time Warner's current market cap of $38 billion, that gives AOL an implied value of $3.2 billion--a fraction of Google's $20 billion valuation of the portal in 2005, when it invested $1 billion in the property. And it's even lower than the $5.5 billion valuation Google gave the company last January, when it wrote down its investment.

(Credit: All Things Digital)

AOL will trade on the New York Stock Exchange as "AOL."

Ironically, before it merged with Time Warner at the dawn of the new century, AOL previously traded on the NYSE.

AOL went public on Nasdaq on March 19, 1992, under the ticker "AMER," and moved to the NYSE on Sept. 16, 1996, trading as "AOL."

(Fun fact: BoomTown actually attended both the fancy dinner the night before AOL moved to the NYSE from Nasdaq and the AOL party on Wall Street the next day.)

If you want to get really technical, AOL common stock will begin trading on a "when-issued" basis--you really don't want to know the confusing regulatory details of why--on the NYSE under the symbol "AOL WI" beginning on November 24.

On December 10, when-issued trading of AOL common stock will end and "regular-way" trading under the symbol "AOL" will begin.

After that, it will be up to CEO Tim Armstrong to make the long-suffering AOL into the little Internet company that could.

The separation of AOL and Time Warner is also symbolic, dismantling the most potent symbol of Web 1.0, when AOL essentially got control of the media giant, only to see the merger crash in disaster.

If at first you don't succeed...

Here's the full Time Warner press release on the transaction:

Time Warner Declares Spin-off Dividend of AOL Shares

Record and Distribution Dates and Final Distribution Ratio Announced

NEW YORK-(BUSINESS WIRE)-Nov. 16, 2009-Time Warner Inc. (NYSE:TWX) and AOL Inc. today announced the timing and details regarding the spin-off of AOL from Time Warner.

The Time Warner board of directors has approved the final distribution ratio and declared a pro rata dividend of the shares of AOL common stock owned by Time Warner that will result in the complete legal and structural separation of the two companies.

On the distribution date of December 9, 2009, Time Warner stockholders of record as of 5 p.m. on November 27, 2009, the record date for the distribution, will receive one share of AOL common stock for every eleven shares of Time Warner common stock they hold.

Fractional shares of AOL common stock will not be distributed to Time Warner stockholders. Instead, the fractional shares of AOL common stock will be aggregated and sold in the open market, with the net proceeds distributed pro rata in the form of cash payments to Time Warner stockholders who would otherwise be entitled to receive a fractional share of AOL common stock.

No action or payment is required by Time Warner stockholders to receive the shares of AOL common stock. Stockholders who hold Time Warner common stock on the record date will receive a book-entry account statement reflecting their ownership of AOL common stock or their brokerage account will be credited with the AOL shares. An Information Statement containing details regarding the distribution of the AOL common stock and AOL's business and management following the AOL spin-off will be mailed to Time Warner stockholders prior to the distribution date.

The AOL spin-off has been structured to qualify as a tax-free dividend to Time Warner stockholders for U.S. federal income tax purposes. Cash received in lieu of fractional shares, however, will be taxable. Time Warner stockholders are urged to consult with their tax advisors with respect to the U.S. federal, state, local and foreign tax consequences of the AOL spin-off.

Shares of Time Warner common stock will continue to trade "regular way" on the New York Stock Exchange ("NYSE") under the symbol "TWX" through the distribution date of December 9, 2009, and thereafter. Any holders of shares of Time Warner common stock who sell Time Warner shares regular way on or before December 9, 2009, will also be selling their right to receive shares of AOL common stock. Investors are encouraged to consult with their financial advisers regarding the specific implications of buying or selling Time Warner common stock on or before the distribution date.

AOL common stock will begin trading on a "when-issued" basis on the NYSE under the symbol "AOL WI" beginning on November 24, 2009. On December 10, 2009, when-issued trading of AOL common stock will end and "regular-way" trading under the symbol "AOL" will begin. The CUSIP number for the AOL common stock will be 00184X 105 when regular-way trading begins.

Time Warner and AOL have entered into a Separation and Distribution Agreement and several other agreements related to the AOL spin-off. The completion of the AOL spin-off is subject to the satisfaction or waiver of a number of conditions, including the Registration Statement on Form 10 for the AOL common stock being declared effective by the Securities and Exchange Commission ("SEC"), the AOL common stock being authorized for listing on the NYSE and certain other conditions described in the Information Statement included in the Form 10 and in the agreements filed as exhibits to the Form 10. The condition relating to the authorization of the AOL common stock for listing on the NYSE has been satisfied, and today AOL sent a letter to the SEC requesting that the Form 10 be declared effective. Time Warner and AOL expect all other conditions to the AOL spin-off to be satisfied on or before the distribution date.

Story Copyright (c) 2009 AllThingsD. All rights reserved.

Time Warner reported on Wednesday lower sales and earnings for its third quarter, with a drop in revenue across virtually all segments, including AOL.

Sales for the quarter dropped 6 percent to $7.1 billion from $7.5 billion in the year-ago quarter. Earnings fell to $661 million, or 55 cents a share, compared with $1.1 billion a year ago. Adjusted earnings per share was 61 cents, compared with analyst expectations of 53 cents, according to Thomson Reuters.

Time Warner also increased its full-year earnings per share outlook to at least $2.05. Previously, Reuters reported, the company had said the full-year figure would be similar to last year's $1.98 a share.

The company saw growth in its Networks unit, which includes Turner Broadcasting and HBO, with revenue climbing 5 percent to $2.9 billion. But sales fell in all other segments.

Lower movie ticket sales brought down revenue by 4 percent in the Filmed Entertainment division, while a decline in magazine subscriptions cut revenue by 18 percent in the Publishing segment.

Results were also weak at struggling AOL. The number of subscribers fleeing the service increased, while ad revenue decreased, contributing to a 23 percent drop in quarterly sales.

Time Warner sales fall in the third quarter. The figures above are in millions of dollars.

(Credit: Time Warner)

Back in May, Time Warner announced that it would jettison AOL by the end of the year, a goal that Time Warner CEO Jeff Bewkes reiterated Wednesday. AOL will spin off into a separate company led by former Google ad exec Tim Armstrong, who was appointed AOL's CEO in March.

The 2001 union between Time Warner and AOL never quite coalesced. AOL was supposed to be the high-tech jolt that would transform Time Warner. But almost from the start, AOL underperformed, running into financial setbacks less than a year after the merger.

As the Internet continued to take off, subscribers realized they didn't need AOL to hop onto the information superhighway. By the end of 2003, losses had mounted, many of the key players in the deal had left, and Time Warner had dropped AOL from its name.

Though Time Warner has been dragged down by most of its underperforming segments, especially its publishing division, the company is still hoping for a brighter future without AOL.

Time Warner is not interested in a bidding war for NBC Universal, according to Jeff Bewkes, CEO of the media conglomerate.

Bewkes, who was being interviewed Friday for The Atlantic's First Draft of History conference at the Newseum in Washington, D.C., said big media mergers hardly ever work.

Jeff Bewkes, Time Warner chairman and CEO

(Credit: Time Warner)

"Some deals work in media, but most have not," he added. "Over the past 10 to 15 years, there is a very low percentage of deals that have delivered what they would deliver, in terms of return on investment."

After the interview, which was streamed live online, Bewkes told a Reuters News service reporter why his company isn't interested in bidding for NBC Universal. Earlier this week, reports surfaced that Comcast, the largest cable operator in the United States, is in talks to buy a controlling stake in the media company, owned by General Electric and Vivendi.

"There's no real need or benefit for us to take on the various aspects of NBC," Bewkes told Reuters in an interview at the conference. "We have a lot of good things, and so we don't see that as particularly attractive."

Time Warner knows a thing or two about failed mergers. In 2000, it acquired AOL in a stock deal that was valued at the time at about $160 billion. When the merger was first announced, it was hailed as a major milestone, a historic marriage of online media and print and broadcast media. But only a few years into the merger, it became apparent that the deal was doomed. By 2008, Time Warner had confirmed that it was dumping AOL altogether.

Since taking the helm as CEO of Time Warner in 2008, Bewkes has tried to keep Time Warner focused on its core business of creating content. Instead of acquiring new properties and diversifying the business, Bewkes has made cuts. Besides spinning off AOL, he also shed the company of its cable division.

While Bewkes may not see a need to merge with another big media company, he does see the importance of partnering with other players, such as Comcast. Earlier this year, the companies announced that they were testing service that allows Comcast cable subscribers to view online TV shows and movies from several Time Warner cable channels, such as TNT and TBS.

Bewkes said expanding access to TV shows and movies online will actually grow the audience for its content.

"With HBO, we learned that putting shows on demand increased viewership," he said. "So viewership goes up, and viewers get to watch (what) they want, when they want. And they get to select their favorite shows from their favorite channels."

Other changes in the media business that Bewkes predicts includes the end of print magazines and newspapers. Instead, he envisions people using e-readers such as the Amazon.com Kindle to get access to periodicals. He said that soon, many manufacturers will have e-readers on the market and that these devices will be much more affordable for average consumers.

Separately, Bewkes told Bloomberg that the company was not interested in selling its Time Inc. magazine unit.

This was originally posted at ZDNet's Between the Lines.

Time Warner and YouTube said Wednesday that they have signed an online video distribution deal.

Under the pact, YouTube will distribute Time Warner short-form video content, including movie clips, television shows, and news. Time Warner properties--Warner Bros. and Turner Broadcasting System--will program YouTube videos via an embeddable player.

According to a statement, YouTube will get access to CNN news, the Cartoon Network, and shows such as "Gossip Girl." Time Warner video will appear across Google properties. Time Warner can also create separate channels on YouTube and sell ad time. The two parties will split ad revenue.

Time Warner CEO Jeff Bewkes said the YouTube deal was a good way to monetize short-form content.

The deal appears to be a win-win. YouTube gets more professional content and Time Warner is allowed to sell ads and control channels.

Also see: Disney, YouTube forge video distribution pact; YouTube: Uploads don't hurt our bottom line; Google moves to show YouTube has 'a very credible business model'; The cure for YouTube's ills: Charge for uploads.

This was originally posted at ZDNet's Between the Lines.

Time Warner's AOL, which is set to be spun off "around the end of the year," had a rocky second quarter as revenue fell 24 percent from a year ago amid a weak advertising market.

According to Time Warner's second-quarter release, AOL saw revenue skid 24 percent to $804 million for the three months ended June 30. Operating income fell 28 percent to $165 million. AOL and Time Warner filed documents detailing the spin-off plans on Monday.

By the numbers:

• AOL's subscription revenue fell 27 percent as the company lost 510,000 dial-up subscribers to end the quarter with 5.8 million customers.

• AOL's ad business fell 21 percent due to lower ad network, display, and paid-search revenue.

• The unit had 107 million average monthly unique visitors and 51 billion U.S. page views.

Overall, Time Warner reported second-quarter net income of $519 million, or 43 cents a share, on revenue of $6.81 billion, down 8.8 percent from a year ago. Time Warner presented its results to account for the spin-off of Time Warner Cable. Wall Street was expecting earnings of 37 cents a share.

Here's a snapshot of Time Warner's revenue picture overall:

(Credit: Larry Dignan/ZDNet )

The end result of Google's $1 billion investment in AOL in 2006? 28 cents on the dollar.

Time Warner, which is in the process of spinning out AOL as a separate company once again, confirmed that Google sold its 5 percent stake in AOL for $283 million on July 8, according to a filing with the U.S. Securities and Exchange Commission.

Both companies had signaled their intentions long ago regarding that stake: Google notified Time Warner in February that it was ready to make a move and wrote off more than $700 million of that investment in January, while Time Warner said it would buy back the stake in May when announcing plans to spin off AOL.

Still, the move closes a chapter in the relationship between Google and AOL. It also values the Time Warner unit at $5.7 billion, according to Reuters.

Comcast continues to sign up media partners to a trial program of the cable operator's On Demand Online service.

The service, which will make TV shows available for users to watch online, has signed 17 cable stations and has its first major broadcast network: CBS, parent company of CNET News, the cable operator said Tuesday. Comcast had previously signed Time Warner and Liberty Media's Starz.

Peter Kafka over at All Things Digital first reported last month that Comcast was wooing CBS.

Comcast's service comes at a time when mainstream consumers are catching on to the amount of material available online and as more cable customers drop their subscriptions.

This from Kafka: "The idea is to protect cable subscription revenues by giving pay TV customers--but only pay TV customers--Web access to all the shows they get on TV, and hoping this keeps them from canceling their subscriptions."

Not only is Comcast fighting back against the likes of Hulu and YouTube, which also offers a smattering of full-length TV shows and films, but Netflix is also offered a popular way to watch films and TV shows online with its streaming service.

CBS is the first broadcast network to sign on to the On Demand trial.

It's like a splashy celebrity drama: according to PaidContent, AOL subsidiary TMZ.com will no longer use AOL to sell its ads and instead will be taking those operations in-house. Television ads will be handled through Telepictures, the Time Warner division that teamed up with AOL to launch TMZ in the first place.

The reasoning, according to PaidContent, is that the Hollywood news and gossip site--which was the first to break the news of Michael Jackson's death--has simply gotten too big for AOL's Platform-A technology. TMZ has been one of AOL's foremost success stories of late, and has served as an indicator of how the once-mighty tech company could reinvent itself as a successful digital publishing power under the auspices of new CEO Tim Armstrong.

This could be a messy breakup on the ad sales front. AOL is in the midst of being spun off formally from Time Warner, with which it became joined at the hip in a massive 2000 merger. Platform-A has gone through one management change after another, and though it has significant reach across the Web, still struggles for legitimate industry cred when it comes to both Silicon Valley and Madison Avenue.

Losing a major player like TMZ will be another blow to Platform-A's image. The bigger question will be whether, as PaidContent suggests, TMZ itself may spin off from AOL--something that seems ludicrous, given AOL's plans to be a digital-age Conde Nast or Time Inc.

But things might actually be simpler: as a PaidContent commenter noted, TMZ might be hunting for advertisers willing to work with content a little bit racier than the family-friendly AOL norm. You know, like hard-hitting investigative reports about just how see-through Megan Fox's outfit was at some L.A. nightclub the other night.