AOL has abandoned plans to separate its Access and Programming businesses, a source close to the company tells us. AOL denies this, saying that the separation is on track to be completed by the end of Q2.
Our source says the company has had difficulty separating the Access business largely because of the challenge of allocating costs. Specifically, despite ongoing subscriber defections, the Access business is still apparently quite profitable. Although this fact would help make the Access business more saleable, separating it would also reveal just how low the profit margin is in AOL’s content business. Our source believes that, after struggling to figure out how to allocate costs between the two businesses, AOL has decided to end the process.
AOL denies this, says the spinoff is still on track, and provides CEO Jeff Bewkes’s comments from last quarter’s conference call:
[W]e also told you in February about our intention to separate the AOL access and audience businesses from both a financial and an operating perspective. By the end of the current quarter, we expect to have made all the key financial and operating decisions that will enable us to run the two units separately. Remember, we’re doing this for two reasons. First, to increase the accountability and operational focus of each of those businesses, and, second, and just as important, to enhance our strategic flexibility.
Jeff is speaking this afternoon at All Things D, so perhaps a D6er can buttonhole him in the corridor and get to the bottom of this.
Update: Jeff didn’t address this at D, but at Friday’s Bernstein conference, he took time to pee on our report. He insists he’s selling off the unit.