Time Warner will spin out its cable MSO next year. I recall, they expected to do that over 1� years ago but postponed that event to better build value. In June, Time Warner dismissed rumors that its AOL unit would be buddle with the cable assets.

Red Herring: "Time Warner is considering packaging America Online with Time Warner Cable when the latter goes public next year. Two separate sources told the New York Post that Time Warner's management is considering combining the two units in light of recent changes in AOL's business."

This just in: America Online launched a new video-on-demand search service to view music videos, news segments and other content from parent company Time Warner. It seems that Time Warner's mountain of media holdings gives AOL an advantage over rivals Google and Yahoo.

The beta service, called AOL Video, offers free access to search and playback for more than 15,000 licensed and originally produced video assets from Time Warner, including television programs and music videos, movie trailers from Warner Bros. and news clips from CNN, MSNBC and others.

AOL's Singingfish multimedia search engine, which the company acquired two years ago, will complement the new service by pointing visitors to audio and video from across the Web.

AOL is also expected to announce it is developing a video hub, which is a specialized page for watching the latest multimedia content. The company has retrenched with plans to migrate content and services to the Web in order to boost traffic and sell lucrative video advertisements.

Let's do a little math. When Comcast and Time Warner jointly purchased Adelphia, they paid over $3300 per subscriber. The Dolan's announcement to bring Cablevision private values each of their subscribers at $4400. Time Warner's cable subscriber base (14.4M after adding in 3.5M Adelphia subs) would be valued between $47.5 Billion and $63.4 Billion depending upon which end of the subscriber value range you tend toward.

Time Warner is the largest media empire on the planet and they own much more than the cable company and AOL. Valuation of the entire company as of today's stock market price of $16.57 per share: $77.6 Billion.

My conclusion: Time Warner is being honest; they will not combine the two entities into one. My thought is that AOL would probably fetch a higher valuation as a stand-alone tracking stock than it could bundled with the cable company. Note that while the cable company is the second largest provider of VOD to television, AOL Video is drawing upon value from other Time Warner assets; namely the cable networks.