Time Warner (TWX)

With advertising revenue increasingly coming from online sources, Time Warner's traditional print magazines, like Time and Sports Illustrated, are going to see a loss of advertising revenue. For example, in Q4 2008 TWX's revenue from its publishing segment decreased by 7% mainly because of drops in ad dollars. TWX needs to better adopt to online advertising to mitigate the secular shift away from print advertising.

Time Warner sees falling value in its cable, publishing, and AOL segments. Time Warner Cable represented about $15 billion of the write-down. Besides its disastrous merger with AOL, Time Warner definitely over paid for its rash acquisitions.

Net income in 2008, for the second consecutive year, decreased; in 2007 net income fell from $6.5 billion to $4.3 billion, a 33 percent drop, while in 2008 it fell by more than 400 percent resulting in a loss of $13.4 billion. The large loss was due to more than $ 19 billion in write-downs, more than half relating to cable assets reflecting cable franchise values. Some of the write-downs also included declining values of its AOL and magazine businesses.

Since the company merged with AOL in 2000, it has struggled to keep AOL’s revenue afloat. Its revenue was primarily based on subscription fees, and as subscribers have been moving away from dial up internet services to broadband providers, AOL’s revenue has been hard hit; between 2002 and 2005, its subscriber base fell 30%. AOL’s business model was then changed from subscriptions to ads. The company hopes to increase advertising revenue with the increase of subscribers to its free internet services. However, AOL faces strong competition from search engines such as Google and Yahoo, and social media sites which have taken many of its users.

In February 2009 TWX hired former Yahoo exec Greg Coleman as head of AOL online advertising sales, the third person to hold the position in the last year. This move comes shortly before TWX announced that AOL's ad revenue dropped by 18% in 2008. TWX's failure to successfully advertise online may spell financial pains in the future, particularly as many of its other segments like film production falter.