Armstrong Pulls No Punches, Blackout Anniversary: Media Roundup

NEW YORK ( TheStreet) -- AOL ( AOL) CEO Tim Armstrong followed through on his infamous fiery phone call a week ago by actually firing roughly 500 employees at the media company's locally-focused news service, Patch.

Armstrong, who later apologized for the manner, though not the substance, of the firing of his former creative director Abel Lenz, nonetheless made official on Friday what had been indicated for more than a week: Patch eliminating half its workforce in hopes of finding a business model that works.

The one-time Google ( GOOG) executive, who came to AOL to save it, reportedly said 60% of Patch sites will remain, while 20% will hopefully find a partner in order to continue operating, and another 20% will be consolidated or closed.

In a statement from its media relations office, AOL said Patch "is taking steps to move to profitability," adding that "there are sites that we will be consolidating or closing." Indeed, Armstrong has been under increasing pressure to staunch the bleeding at the ambitious, though possibly ill-conceived, hyper-local news venture.

Patch, which focuses on covering neighborhood events and activities such as school board meetings and local affairs, has struggled to capture the advertising needed to support overhead of more than $125 million. Cutting staff may be the path to profitability, but then again, maybe not.

Either way, AOL shares have lost 6.3% since Armstrong made news himself by firing Lenz during a live on-air employee phone call held at a gathering of his New York-based staff. AOL was dropping 1% to $35.11 in Friday trading.

The recording was obtained by Romenseko, the all-purpose media industry blog: Armstrong Talks Patch, Fires Employee. It makes for rough or entertaining listening, depending on your view.

And today marks the two-week anniversary of Time Warner Cable's ( TWC) blackout of CBS ( CBS) programming for customers in New York, Los Angeles and Dallas, and a few other areas around the country.

At issue is a disagreement over retransmission rights whereby the cable-TV operator has balked at paying fees which the network asserts it is worth.

While the two sides do remain in talks, the opening of the NFL season looms as an ominous deadline three weeks from Sunday.

Hey, CBS, Time Warner Cable: Football Season Is Coming

The finger-pointing and arguably bad publicity for both companies may be a boon for Aereo, the online TV service which CBS and its rival networks would like to see shut down. Nonetheless, Aereo CEO Chet Kanojia told TheStreet that the blackout reflects the inherent problems in an industry that sells packages of disparate channels to consumers who want alternatives to the cable-TV bundle.

Aereo Stays Calm as CBS-TWC Squabble

"It is a commentary on the state of the industry and why alternatives should be recognized, embraced and permitted because it creates a vibrant market," Kanojia said.

Aereo faces the likelihood that the essence of its business, taking free-over-the-air broadcast signals and selling them to consumers for a monthly fee, will ultimately be decided in court. The case could go to a federal trial early next year in the Southern District of New York in Manhattan. Kanojia says the threat of that court case hasn't slowed Aereo's rollout. The company is planning on beginning service in Miami, Chicago, Houston and Dallas next month. Aereo can currently be accessed in New York, Boston, Atlanta and Utah.

"We believe that consumers have the ability to have an antennae, and Aereo is just a technologically fabulous way of a consumer having a remote antannae," he said. "Clearly a court case creates an impact, but if you look at the court's opinions thus far they are very detailed and comment on the merits of the technology and how we would prevail. So, we take good comfort in that and continue to invest in our buildout."

Meanwhile, Time Warner Cable has lost 6.3% since the blackout began while CBS has declined 4.9%.

Elsewhere, The Washington Post of the soon-to-be-renamed Washington Post Co. ( WPO) announced a promotional campaign of 99 cents for the first month of all-digital access followed by a $9.99 charge for every four weeks thereafter. The promotion is part of a wider metered-paywall the Post put into effect in mid-June, and not tied to the newspaper's recently announced sale to Amazon's ( AMZN) Jeff Bezos.

Nonetheless, we expect Bezos to take similar actions to increase traffic at The Washington Post's handsome and well-functioning Web site. If Bezos has taught us anything, it's that online businesses are most effective when fewer obstacles exist to getting eyeballs.

-- Written by Leon Lazaroff in New York

>To contact the writer of this article, click here: LeonLazaroff.>.

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