AOL-TW’s Pittman: Now the Fun Begins

By Erin Joyce

NEW YORK — Electricity producers tried a number of systems before the current delivery model took hold in the American home. Much like Internet access, consumers wanted the service and now view it as a necessity.

And now that access to the Internet has reached “critical mass” of about two-thirds of American homes online, “the real revolution begins,” said Robert Pittman, the chief operating officer of AOL Time Warner .

During his keynote address at the Streaming Media portion of the Internet World show at the Jacob Javits Convention Center, Pittman provided an optimistic outlook for the medium, including tips on how to make money on the Internet.

Not surprisingly, his comments started with subscriptions, which pulled in $4.2 billion, or close to half of AOL Time Warner’s revenues last quarter.

From there, you build on the relationship by selling more add-on services to the subscriber, and then you let others use them, as in advertising to that subscriber base, he said. As long as you make it easy.

“They will pay you money to make their life easier.”

Pittman’s comments, to a less-crowded audience this year, were his first in public since AOL Time Warner announced that Pittman’s co-chief operating officer, Richard Parsons, would succeed the retiring chief executive Gerald Levin, leaving Pittman in the role as sole COO.

Comparing the home PC to the “tell-me-a-story-box” of television from a generation ago, Pittman declared that consumers would eventually add more personal computers, or computing devices in their homes, leading to more networked homes and an opportunity to sell more subscription services.

Today, that one newfangled box from a generation ago has become about four boxes: television, stereo, telephone and PC, said Pittman.

What makes this all more complicated now, with the start of music subscriptions, including AOL Time Warner’s MusicNet subscription service, is that those lines “are starting to blur.”

Music is a big part of the company’s strategy, said Pittman, while sounding upbeat about the prospects for the music industry and the emerging use of the Internet for delivering music files.

The reason AOL’s radio services already have about two million unique users, Pittman said, is because the company made it easier.

“You could get radio online before (this service),” he told the audience. “But it wasn’t as easy as just going over and turning on your radio.”

In the converse, that’s one reason the company has not introduced its version of an AOL Phone, because “we couldn’t find a way to make it easier than picking up the phone and saying ‘hello.'”

DVD is the hottest selling consumer device right now, he continued. But the biggest trend within that interest is that homes are buying more than one player, part of the networking trend in many American homes right now.

During his 30 minute presentation, Pittman pointed to slides that detailed how, by adding on more services and forms of entertainment to the consumer’s networked home, the company is creating new revenues.

Whether it’s data services, multiple connections to the Internet on the yet-to-be released family subscription plan, video on demand, music services and more, the thing to remember is it’s happening now.

“We need innovators, start-ups and entrepreneurs. The new products must be displayed around consumers. The thing to realize is that it is happening now,” he said of the new forms of digital media services.

Pittman pointed to one chart that estimated an average revenue per user of about $53.83 per month had the potential to turn that into over $230 a month with all the add-on services that the company could upsell.

He went on in his FM-quality voice, discussing the possibilities with online music subscriptions.

Even during the technology downturn and amid the current bleak outlook for advertising, revenue from Internet shopping never missed a beat, he said. In this area, “the Internet revolution is still in full force.”

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