Job Cuts by Time Warner

Due to the continuous downfall of the economy, Time Warner’s online unit AOL is cutting seven hundred, which makes ten percent of all employees. Now that advertising revenue is also severely on the downfall, this gives Time Warner a second reason to make the job cuts. In making these cuts, the company hopes to refocus on the structure of the online service. In a memo written by CEO Randy Falco he states, “We’re at a pivotal point in AOL’s transformation, and need to be even more strategically focused and operationally efficient as we weather the economic storm” (Falco). The elimination of merit raises will also be eliminated from Time Warner AOL.
By merit pay, we mean "if you pay high performing workers more than low-performing ones, the former will stay and keep producing at a high level, while the latter will leave or have incentive to improve"(Colter). Some question whether or not merit raises even work but the elimination of these will be regretfully dropped. The outlook of the AOL section is not good because Time Warner has been trying to sell AOL to Yahoo. In a recent report, AOL said its ad business dropped almost twenty percent year over year. According to GOOGLE, AOL has dropped from being valued at $20 billion in 2005, to $5 billion as of 2009. This drop is a huge decrease and cannot be overlooked.
I believe Time Warner must dump AOL from their backs in order to focus on the most important part of the company which is feature films and television. People use the movies as a form of escape which means cinema is pretty much recession-proof. AOL has been decreasing at an astounding rate and has been the “piano-on-the-back” of Time Warner. The job cuts must be made and I am actually surprised that 700 employees will be let go. I would expect a larger number to be cut considering the 7,000 employees nationwide.

Falco, Randy. "AOL CEO Randy Falco's Entire Memo to the Troops on Layoffs." Jan 28, 2009.
Colter, Carolee. "Does Merit Pay Really Work?" July-Aug, 2003.