AOL Time Warner Reports Strong Growth

Despite the troubled times most ISPs and tech concerns in general appear to
be experiencing, Internet and media behemoth AOL Time Warner Inc. seems to
be weathering the storm better than most, and it was buoyed Wednesday by
first quarter numbers that showed strong growth in subscriptions to the AOL
and Road Runner services as well as online advertising and commerce.

The company Monday reported worldwide subscriptions to the flagship America Online service
surpassed the 29 million mark; it remains the No. 1 ISP in the world many
times over. That number was attained by adding more than 2 million new
subscribers during the company’s first quarter.

While AOL failed to break out numbers for Europe and Latin America, the
company noted, “In addition to strong performance in the U.S., AOL
subscription growth included especially strong gains in Europe and Latin

Additionally, the company boasted that subscribers, on average, are staying
online longer than ever before. The company said average daily usage per AOL
member is now nearly 70 minutes, as opposed to the 64 minutes averaged by
users in the same quarter last year.

In addition, the company said Wednesday that its Road Runner high-speed
cable Internet service added 237,000 subscribers during the quarter,
bringing its total to a healthy 1.2 million subscribers. Meanwhile, AOL’s
economy service, CompuServe 2000, added 286,000 subscribers during the
quarter, bringing its total membership to more than 3 million.

Those numbers likely form the basis of other numbers AOL reported Wednesday
that at first glance seem out of step with the rest of the Internet economy.
The company said its America Online branch experienced year-over-year growth
of 37 percent in its advertising and commerce revenues (Time Warner Cable
topped out at 17 percent growth).

Meanwhile, the company has apparently been capitalizing on the possibilities
that emerged through the merger of AOL and Time Warner. The company said
cross promotion has yielded 1.1 million new Time Inc. magazine subscriptions
through the AOL service since June 2000. The company said it is also selling
Time Warner Cable subscriptions through AOL and acquiring new AOL members
through the distribution of AOL CDs with Time Inc. magazines, though it
failed to break out numbers in those areas.

AOL said it is also driving “substantially increased” traffic to People,
TIME, Sports Illustrated, Entertainment Weekly, CNN and other branded
content Web sites through AOL, Netscape and other America Online brands.
According to a report from Media Metrix this week, that strategy appears to
be having an effect. Media Metrix said Time Warner sites attracted 23
million unique visitors in March, up 69 percent year-over-year and up 10
percent from February’s total.

“Our businesses are working together as one, unified organization to deliver
shareholder value over the near- and long-term,” said Jerry Levin, chief
executive officer of AOL Time Warner. “We’re aggressively rolling out
next-generation products and services that will fuel continued growth
momentum in our subscription and advertising and commerce businesses. And
we’re continuing to develop high-quality entertainment that expands our
immensely valuable film, video and music libraries. At the same time, we’re
laying the groundwork for truly transformational businesses like digital
music, interactive television and broadband services.”

Levin’s promise was underscored by a deal AOL and Warner Music Group struck
with Bertelsmann, EMI and RealNetworks after the quarter closed. The
companies are developing MusicNet, which they describe as “a groundbreaking
platform for online music subscription services.” AOL said MusicNet is
scheduled to roll out on America Online brands and other distribution
networks later this year.

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