Bewkes confirms AOL split
Time Warner will indeed split its AOL access and media units starting next year, CEO Jeff Bewkes confirmed in a release announcing the company's second-quarter earnings. — It's the first time the executive has confirmed the split, though it's been widely talked about for months.
Context & Ripple Effects
Time Warner had been weighing AOL's direction since its 2007 commitment to make a year-end decision, while the company separately moved to split off its cable service in April 2008. The AOL confirmation turns an expected restructuring into an operating plan.
A report two days earlier said Time Warner was prepared to deal AOL's components, making the formal separation significant: the access and media businesses will no longer be treated as one unit.
First-order effects
- AOL's access and media operations will be separated starting in 2009, giving each business its own operating focus within Time Warner.
- Time Warner can assess the performance and strategic role of AOL's access and media units independently rather than through a combined AOL operation.
Second-order effects
- A clearer division makes it easier for Time Warner to pursue different management, investment, or transaction paths for the two AOL businesses; the August 4 report had already pointed to interest in dealing components.
- AOL's media operation faces a more direct test of whether its advertising and content strategy can stand apart from the access business, while the access unit is evaluated on its own economics.
Third-order effects
- Together with the cable separation, the AOL move points to a conglomerate strategy of breaking distinct operations into more legible businesses rather than managing them as a single bundled portfolio.
- If Time Warner continues this approach, corporate value and accountability will increasingly be assigned at the unit level, making divisions easier to compare, reorganize, or transact independently.
The trend: Time Warner is moving toward portfolio unbundling, separating businesses with different operating models so they can be managed and valued on their own terms.