AOL, Road Runner Do Broadband Cross-Promotion.
Corporate family members America Online and
high-speed ISP Road Runner announced a co-marketing deal this
week promoting each other's broadband offerings, as AOL
struggles to attract and keep broadband customers.
AOL will offer free music videos and other
samples of its broadband content to Road Runner subscribers in a
bid to sign up new customers for its "bring your own access"
plan. AOL will offer its members subscriptions to Road Runner
high-speed Internet access service. Neither division will
discount its services for customers of the other.
Still, it's significant that the two Time Warner
divisions have come together. Since the AOL-Time Warner merger
first happened, the much-touted synergies between the two
companies have largely failed to materialize. In light of this
background, the partnership seems like a promising development.
"It's about time," said a former AOL consultant.
"This is why the [AOL-Time Warner] merger happened in the first
place. When you looked at the assets in the merger, AOL could
get faster Internet service via Road Runner and Time Warner
Cable. And AOL could become the showcase for cool Time Warner
content like movies, music, games."
This didn't happen, the consultant said, because
Time Warner was "upset" about the merger's effect on the
company's value and did not want to cut deals with AOL, "despite
how much sense it really made."
The partnership is also significant, he said,
because "it's basically embracing the fact that AOL is doing
everything it can to bolster its broadband positioning."
The arrangement was trumpeted on the same day AOL
Chief Executive Jonathan Miller appeared at a Time Warner board
meeting to detail his strategy for keeping the company
financially viable in the wake of increasing subscriber losses.
AOL lost 399,000 subscribers in the fourth quarter of 2003,
ending that year with 24.3 million members.
Many of those subscriber losses are thought to be
due to an increasing migration to broadband ISPs. Fifty-five
percent of all adult Internet users now have high-speed access
either at home or at work, according to an April 2004 study by
Pew Internet & American Life Project. Home broadband adoption
has jumped 60 percent since March 2003, according to the study.
That's why AOL has increasingly focused on
creating affordable packages that put together its "bring your
own access" plan and others' broadband access. The deal with
Road Runner follows an earlier agreement with Covad
Communications, in which the DSL provider will offer bare-bones
access to AOL subscribers at a discounted price. AOL currently
has 3 million members using broadband.
AOL has actively marketed its broadband offerings
for some time, focusing mostly on the content assets -- music
and video made available through the Time Warner family -- that
take advantage of broadband. In December of 2002, AOL executives
touted AOL 9.0 to analysts as a unique, broadband-focused
service filled with original content.
The company has also been aggressive in creating
and offering exclusive broadband-oriented content, such as the
Dave Matthews Band concert to launch AOL 9.0, special pre-Grammy
award entertainment, and music videos from a number of artists.
The Road Runner partnership takes advantage of
this content by employing a "sampling" strategy, which AOL seems
to be emphasizing lately. Under the agreement, the company said,
"a sampling of original and exclusive programming" previously
only available on AOL for Broadband will be made available to
Road Runner subscribers. An aggregated "AOL Channel" will also
be available from the Road Runner homepage.
This jibes with comments made by Jim Bankoff,
AOL's executive VP for programming, earlier this month,
discussing the movement of AOL content to HTML from its
proprietary Rainman format. Bankoff said the ability to deliver
content to AOL non-members would be deployed largely as a
prospecting tool.
In the past, AOL has adhered to a "walled garden"
approach, offering strictly members-only content.
