This announcement is just the prelude to a mediocre earnings report. I believe that the costs will be higher than expected, and earnings lower than expected. Read below - he basically admits that the business model is not working (advertising costs are not enough to meet increased costs). This is not a surprise as I see no correlation between online minutes and advertising and commerce revenue because I would guess most of the increased usage is in chat rooms and web surfing.
I see the business model requiring ever increasing costs as the usage increases, with incremental revenues from advertising and commerce not providing significant profits.
What great timing for Yahoo!/MCI to come out with their service in March! I think they may offer service as low as $14.95 for unlimited usage so they have an immediate opportunity to pick up AOL users unwilling to pay more for their "premium" service.
In the announcement, Case said the following: ``Each additional minute our members spend online adds to our cost of delivering unlimited use service. Revenues from advertising, commerce and other sources continue to grow as anticipated, but they are not yet able to cover the growth in member usage.
``The price increase will help cover these costs and fund continued investments in network access, customer support, programming and technological innovation,'' said Case.