Time Warner's America Online unit continued to struggle in the fourth quarter, suffering a 40 percent decline in advertising revenue from the previous year.
Expiring contracts accounted for a $550 million drop in ad revenue from the previous fourth quarter. Ad revenue from other Time Warner businesses declined $138 million.
AOL also continued to suffer subscriber defections, losing 399,000 members in the quarter. The number of paying subscribers declined 830,000, with 431,000 kept via “retention programs.” AOL ended the year with 24.3 million U.S. subscribers, a drop of 2.2 million from 2002. AOL has suffered subscriber defections to cheaper Internet services and broadband offerings for the past five quarters.
Overall, the AOL unit's revenue declined 7 percent to $2.2 billion. Operating income was $109,000.
The expiration of long-term ad deals reached during the dot-com boom has continued to haunt AOL. The Internet service's ad sales department has also suffered instability in leadership. Lisa Brown, brought in to turn around the department in May 2003, left her post this month, and AOL overhauled ad sales under Time Warner executive Michael Kelly.
AOL was the only area of Time Warner that did not grow in the fourth quarter, as the media conglomerate returned $10.9 billion in revenue and $638 million in earnings.