AOL unveils $54bn loss

Harry Potter film did conjure up earnings

Media giant AOL Time Warner has reported one of the highest quarterly losses in history, after making a record $54bn (£37bn) write-down - reducing the book value of assets the company owns.

AOL Time Warner is a sprawling media giant, with interests ranging from cable channels like CNN to Time magazine and film studios making box office hits like Harry Potter.

The write-down at AOL reflects the decline of the value of its holdings since the bursting of the dot.com bubble two years ago.

The write-down, which had been expected, is equal to the gross national products of countries such as Uruguay or Bulgaria.

AOL paid $106.2bn for Time Warner in 2000.

Potter magic

Wednesday's report showed underlying earnings had charted a more healthy course, hitting $2.05bn, 3% up on the first quarter in 2001.

Earnings were supported by an "outstanding" performance by films such as Harry Potter and the Sorcerer's (or Philosopher's) Stone and the Tolkien adaptation "The Fellowship of the Ring", even though they had been released in the previous quarter.

Harry Potter's worldwide box office takings of $960m make it the second highest grossing film of all time, AOL said, with Fellowship of the Ring, which has taken $830m, ranked fifth.

"AOL studios set new international box office records in the quarter," Wednesday's statement said.

Web ads slide

News operation CNN also saw "dramatic" audience gains, with the number of total viewers rising by 55% year-on-year - in the aftermath of the 11 September terrorist attacks.

The rise also follows a revamp at the division which has seen hundreds of jobs go.

But performance was mixed at the America Online internet operation.

While the business attracted 1.4 million members worldwide during the quarter, taking its total subscriber base to 34.6 million, weak advertising revenues hit revenues.

"The weakness of the Internet advertising business is still a challenge," said chief executive Doc Parsons, revealing it had division boss Bob Pittman would "tackle the issue directly".

"Nobody knows more than Bob about marketing in the media business," Mr Parsons added.

"He will build on America Online's powerful foundation to make sure it achieves its full potential as the strongest brand on the internet."

Forecasts revised

The firm had overall made "important progress" in areas such as broadband services and subscriber growth which would "drive the future growth of AOL Time Warner", Mr Parsons said.

"Except for online advertising, the performance of our businesses remains at least as strong as we expected when we provided our earlier outlook."

But the firm nonetheless edged down its forecast for growth in full year earnings to 5-9%, from a range of 8-12%.

The report, published after the close of US share markets, was received cautiously on Wall Street.

"Overall they hit the numbers," said Paul Kim, analyst at Kaufman Brothers.

"But on the [earnings] line, they were a little below expectations on America Online, Time Warner Cable, and their television networks."