HISTORY'S Moment in Media: AOL Time Warner Merger

This was at the height of the first internet bubble and anything internet was valued at crazy prices by the stock market amp160AOL was among the superstars of this periodamp160 With its 30 million subscribers the portal to the internet was made famous for its email services with movies like You39ve Got Mail a romantic comedy starring Tom Hanks and Meg RyanAOL39s hot valuation made it possible for it to acquire Time Warner even though it was a longestablished company with extensive holdings in cable movies and publishingamp160 Its iconic brands included Time magazine CNN and Warner Bros studiosamp160 The theory was that the two would combine into a 350 billion megacorporation with vast production capabilities and new technologyage distribution methodsamp160 It was to be the media model of the futureWhen the AOL Time Warner merger was completed in January 2001 AOL shareholders owned 55 percent of the new company while Time Warner shareholders owned 45 percentamp160 Steve Case CoFounder Chairman and Chief Executive Officer of AOL became Chairman of the new company Gerald Levin Chairman and CEO of Time Warner was named its CEOWhether real synergies and cost savings would have occurred is unclear because just months later in the spring of 2001 the stock market began an internet correctionamp160 Dotcom stocks tumbledamp160 AOL Time Warner39s losses on paper were formidableamp160 Infighting between management spilled out into the public as Levin complained that Time Warner was dragged down by an internet flash in the panamp160 He was replaced by the company39s president Richard Parsonsamp160 It was a surprise move many had expected the job to go to Chief Operating Officer Bob Pittmanamp160 His eventual departure created further chaos at the companyamp160 The problem was made worse by the fact that AOL continued to provide dialup services while emerging broadband technology was making it irrelevantBy 2002 investors had had enough and were selling off stock as fast as they couldamp160 In 2002 AOL Time Warner reported a quarterly loss of 54 billion the largest ever for a US company at the timeamp160 But nine months later it topped itself and announced a 98 billion annual lossamp160 At this point executives were headed for the door Case was forced to resign and Ted Turner voluntarily resigned from his post as Vice Chairman in disgustThe company which dropped AOL from its name took several years to stem its losses but it was still weakened from the mergeramp160 Vultures began to circle and famed corporate raider Carl Icahn acquired a stake in the companyamp160 By 2006 he was agitating to break up the company to create more value for shareholdersamp160 Icahn was temporarily held off but major restructuring ensuedIn 2009 AOL was spun off into its own companyamp160 It floundered and was eventually bought by Verizon in 2015amp160for 44 billionamp160a tiny fraction of its worth at the height of the internet bubbleamp160amp160Time Warner was also broken down into componentsamp160 In 2009 it successfully spun off its profitable cable division into its own company while a greatly weakened Time Inc was also spun off into a debtladen media propertyIn retrospect the plan to bring the two companies together has been dubbed by the press as quotthe worst merger in historyquotClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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HISTORY'S Moment in Media: AOL Time Warner Merger

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HISTORY'S Moment in Media: AOL Time Warner Merger

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