Free is a Lousy Business Model

Can't make "free" up on volume...

clipped from www.iht.com NEW YORK: Time Warner said Wednesday that second-quarter profit had gained 5.2 percent on higher cable revenue, but shares dipped after sales at the AOL Internet unit plunged 38 percent. AOL reported its worst sales drop since adopting a strategy last year to replace paid subscribers with free e-mail messages and advertising. Revenue from divisions that include the Warner Bros. studios and the HBO cable network also declined. To counter declining Internet-access subscribers, AOL started offering e-mail and other services for free last year to lure users and advertisers. Parsons, 59, hired an NBC veteran, Randy Falco, as chief executive of AOL in November to carry out the free-service strategy. The division, based in Dulles, Virginia, has since upgraded products such as its instant messaging service.