Why Would John Malone Want AOL?8/15/2008 8:00 PM Eastern
Last week the wires were virtually blazing with the news that Liberty Media chairman John Malone was open to swapping his $1.8 billion equity interest in Time Warner Inc. for the media giant’s AOL dial-up access business.
Here are a couple of reasons why Malone would or wouldn’t want the asset.
WHY HE WOULD
AOL access is a cash cow. According to Time Warner’s second quarter earnings report, AOL generated about $491 million in subscription revenue in the period. In 2007, subscription revenue was $2.8 billion.
WHY HE WOULDN’T
AOL has 8.1 million subscribers. It used to have 35 million (in 2002). The access business has been in steady decline. And that $2.8 billion in 2007 subscription revenue? It’s a 52% decline from the $5.8 billion generated in 2006.
It just doesn’t fit. Janco Partners media analyst April Horace said that even if Liberty were willing to accept the AOL access business in a swap (she thinks the speculation is “totally overblown”), it has little in common with Liberty’s other businesses. “AOL could be of interest, but from a strategic standpoint, there is no fit there,” she said.
Greg Maffei doesn’t want it. At the Wachovia Nantucket Equity Conference in June, the Liberty CEO said that AOL “would not be a strategic business for us. It probably best combines with another guy, either NetZero or EarthLink.”