Today, Time Warner execs confirmed what ADOTAS first buzzed about in early July. AOL will now be offering more of its services for free, moving closer towards an entirely ad-supported model. AOL will give away free email accounts, software and other services that were previously only available to paid subscribers.
The move is designed to drive more AOL users to currently ad-supported AOL sites and keep users from moving to existing free services from other portals like Yahoo. “If we did nothing else and just this, this one move alone would increase earnings this year,” Time Warner president Jeff Bewkes told analysts in a conference call.
AOL, though, could lose up to $1 billion in revenue by losing the 6.2 million subscribers, who already pay about $15 a month for AOL’s premium services on top of existing broadband access. AOL intends to offset the short-term loss in profits by cutting marketing and other overhead costs.
The company has been gradually leaning towards providing ad supported content and other free broadband-based services. AOL still runs a waning dial-up ISP service, but has exercised few measures to retain its dial-up customers. Earlier this year, AOL actually raised the cost of its dial-up service to $25.90 per month to encourage customers to switch to broadband.