AOL To Phase out Kids Sites KOL and RED; No Further Investment Or Sale Planned

So AOL is finally deciding on something…well, almost: AOL (NYSE: TWX) is phasing out its kids and teens businesses, KOL and Red, has learned. This comes six months after the company then decided to reinvest in the businesses, instead of spinning them off. No decision on imminent closure of the sites has been made, and couple of maintenance people will keep the sites alive, but no investment is being made into the division now. Not clear: whether this will involved any layoffs, or that the existing employees will be moved to other divisions. AOL PR has not returned calls and e-mails over this Labor day weekend.

Staci reported on two iterations of AOL’s thinking on the business in the last year: first was the idea to spin-off the division with an investor taking a stake (this was in Jon Miller era) and then as Ron Grant came in earlier this year, he decided against spin-off and decided to invest in the business, though not enough to grow it…the budget for kids & teens was cut substantially. Malcolm Bird, SVP- AOL Kids & Teens, left in March this year following the cuts, but not before an effort to try out to buy the business, sources say: some private equity investors were willing to buy out the business, with the idea being that AOL retains a large part, also invests in the business, and then gets regular royalties in return. The value of the business then was about $150 million and the investors were willing to put in close to $100 million. That didn’t happen…and now, it seems that bit of flirtation is also over, our sources tell us.

Meanwhile, Bird is now the co-CEO of a blank check media acquisition company called TM Entertainment and Media, according to SEC filings. TM has filed for an IPO on the American Stock Exchange to raise $72 million. Prior to AOL, Bird helped launch Nickelodeon UK, headed kids’ programming for USA Network station WAMI in Miami and led international programming for Cartoon Network, according to this USAT story. The other co-CEO in the venture is Ted Green, former CEO of Anchor Bay Entertainment, which then was a subsidiary of IDT Entertainment. Interestingly, Jon Miller is listed as a director of the blank-check company as well…Miller and Ross Levinsohn just announced a new media buyout fund (more on that here).