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Stealing Time: Steve Case, Jerry Levin, And The Collapse Of Aol Time Warner
When America Online bought Time Warner in 2000, it was not only the largest corporate merger in history but also the much vaunted marriage of new and old media. Questions began, however, on the day the merger was announced. The stock price started a long decline; and the Federal Trade Commission subjected the merger to intense scrutiny. Just two years later, once-triumphant AOL was under investigation by both the Securities and Exchange Commission and the Justic Department. One hundred billion dollars was lost in 2002, and four of the top executives resigned. This is how the deal of the century became an epic disaster.
336 pages, Hardcover
Published January 1, 2004
About the author
Alec Klein
11 books1 followerAlec Klein is an award-winning reporter at The Washington Post. His previous book, Stealing Time: Steve Case, Jerry Levin, and the Collapse of AOL Time Warner, was a national bestseller that The New York Times called "a compelling parable of greed and power and hubris." He lives in Washington, D.C., with his wife and daughter.
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September 17, 2024
A JOURNALIST'S ACCOUNT OF THIS CONTROVERSIAL AND CATASTROPHIC MERGER
Journalist Alec Klein wrote in the first chapter of this 2003 book, "The two companies would work together to forge a future when technology merged with media, creating unimagined consumer products... Convergence, [Steve Case] called it. One side of the corporate house would fuel the growth of the other. The buzzword: synergy. America Online would promote Warner Bros. movies. Time Inc. magazines would sell American Online subscriptions... The potential for what [Case] believed was the media company of the twenty-first century was limitless. Except for one thing. Somebody forgot to tell Case the dance was over." (Pg. 2)
He notes that as AOL grow, CEO Steve Case "became less accessible. Employee badges restricted who could open the elevator to his office on top... Always surrounded by attendants, Case seemed distant and removed from the ebb and flow of AOL's day-to-day operations. On the rare occasions when he was spotted on campus, employees were reluctant to approach him. He wasn't just the chief executive of AOL anymore. Steve Case had become an American icon." (Pg. 64-65)
Time-Warner head Jerry Levin and advisers "talked about the challenge of moving the company into the digital age. Maybe, they began to feel, it couldn't be done from within... the one company he kept coming back to was AOL... AOL was also the biggest name in the digital industry, and it reminded Levin of his own early career when he had built HBO... a venture that stretched the boundaries of media but relied on an established way of doing business---customer subscriptions. In AOL, Levin liked what he saw." (Pg. 71)
He observes, "The takeover of Time Warner was supposed to be the crowning achievement of AOL... And yet Case understood that there was another truth... in the end, Case knew that the hype could not be sustained, not even at AOL. What he didn't tell the gathering that day was that before the merger, signs of financial weakness were beginning to blip on AOL spreadsheets... as early as the fall of 1999... AOL's pipeline of future, big advertising deals was projected to slow in volume and revenue. That, combined with AOL's greatest asset, its stock price, gave Case all the incentive he needed to pull off the Time Warner deal." (Pg. 105-106)
He notes that "In June [2000], the European Union announced it would launch a detailed probe of the AOL-Time Warner merger. The Europeans were concerned about the company's ability to unfairly dominate the Internet... It was an ominous smoke signal from across the Atlantic... The regulators were coming out of the woodwork. Suddenly, the AOL-Time Warner merger didn't seem like such a sure thing anymore." (Pg. 132)
After the merger, he quotes a former executive, "I was watching the balance of power shifting depending on the success of the different divisions... You could feel who was consolidating their power and who was losing their power during each quarter, who was puffed up, who was beaten down. I think they thought that would breed a competitive spirit, but I'm not sure it did." (Pg. 231)
Klein adds, "Differences between the two parties were quickly becoming pronounced. AOL was new money, the Internet set. Time Warner was old money, the established class... When people thought about leaving Time Warner... they realized it was a stable company with a good retirement plan. AOL operated under a different work ethos... It was, by definition, a short-term mentality... Where AOL lived for the quick payday, Time Warner saved for retirement...
"Many at Time Warner didn't understand AOL... There was a feeling among many AOLers that their counterparts at Time Warner were a bunch of country clubbers who resented rich AOLers and considered them lower-class Internet guys. AOLers had taken lower salaries, betting on the success of the company's stock, and it was rocketing up, which meant that, through the merger, Time Warner was now latching on to a rising star." (Pg. 244-245)
He states, "In a talk at a cable-television convention, [Ted] Turner said that selling Turner Broadcasting to Time Warner was 'the biggest mistake I ever made.' ... Ted Turner had reason to be grouchy: His personal fortune, once more than $9 billion, mostly in company stock, was hemorrhaging millions by the day as AOL Time Warner's share price continued to sink... Turner was feeling the pain." (Pg. 268)
He concludes, "AOL Time Warner had finished 2002 with a historic bang: a loss of nearly $100 billion, the largest annual loss in U.S. corporate history. And yet it seemed almost anticlimactic. Over twenty years, AOL had withstood a withering array of challenges, surviving a cash-strapped on-line video firm, beating back mighty Microsoft, and overcoming the threat of the Web. Finally, AOL had succumbed to its own ambition." (Pg. 299-300)
While not necessarily the "last word" on this merger, this is a fascinating and engagingly-written book, that will be of keen interest to anyone wanting to know more about this matter.
Journalist Alec Klein wrote in the first chapter of this 2003 book, "The two companies would work together to forge a future when technology merged with media, creating unimagined consumer products... Convergence, [Steve Case] called it. One side of the corporate house would fuel the growth of the other. The buzzword: synergy. America Online would promote Warner Bros. movies. Time Inc. magazines would sell American Online subscriptions... The potential for what [Case] believed was the media company of the twenty-first century was limitless. Except for one thing. Somebody forgot to tell Case the dance was over." (Pg. 2)
He notes that as AOL grow, CEO Steve Case "became less accessible. Employee badges restricted who could open the elevator to his office on top... Always surrounded by attendants, Case seemed distant and removed from the ebb and flow of AOL's day-to-day operations. On the rare occasions when he was spotted on campus, employees were reluctant to approach him. He wasn't just the chief executive of AOL anymore. Steve Case had become an American icon." (Pg. 64-65)
Time-Warner head Jerry Levin and advisers "talked about the challenge of moving the company into the digital age. Maybe, they began to feel, it couldn't be done from within... the one company he kept coming back to was AOL... AOL was also the biggest name in the digital industry, and it reminded Levin of his own early career when he had built HBO... a venture that stretched the boundaries of media but relied on an established way of doing business---customer subscriptions. In AOL, Levin liked what he saw." (Pg. 71)
He observes, "The takeover of Time Warner was supposed to be the crowning achievement of AOL... And yet Case understood that there was another truth... in the end, Case knew that the hype could not be sustained, not even at AOL. What he didn't tell the gathering that day was that before the merger, signs of financial weakness were beginning to blip on AOL spreadsheets... as early as the fall of 1999... AOL's pipeline of future, big advertising deals was projected to slow in volume and revenue. That, combined with AOL's greatest asset, its stock price, gave Case all the incentive he needed to pull off the Time Warner deal." (Pg. 105-106)
He notes that "In June [2000], the European Union announced it would launch a detailed probe of the AOL-Time Warner merger. The Europeans were concerned about the company's ability to unfairly dominate the Internet... It was an ominous smoke signal from across the Atlantic... The regulators were coming out of the woodwork. Suddenly, the AOL-Time Warner merger didn't seem like such a sure thing anymore." (Pg. 132)
After the merger, he quotes a former executive, "I was watching the balance of power shifting depending on the success of the different divisions... You could feel who was consolidating their power and who was losing their power during each quarter, who was puffed up, who was beaten down. I think they thought that would breed a competitive spirit, but I'm not sure it did." (Pg. 231)
Klein adds, "Differences between the two parties were quickly becoming pronounced. AOL was new money, the Internet set. Time Warner was old money, the established class... When people thought about leaving Time Warner... they realized it was a stable company with a good retirement plan. AOL operated under a different work ethos... It was, by definition, a short-term mentality... Where AOL lived for the quick payday, Time Warner saved for retirement...
"Many at Time Warner didn't understand AOL... There was a feeling among many AOLers that their counterparts at Time Warner were a bunch of country clubbers who resented rich AOLers and considered them lower-class Internet guys. AOLers had taken lower salaries, betting on the success of the company's stock, and it was rocketing up, which meant that, through the merger, Time Warner was now latching on to a rising star." (Pg. 244-245)
He states, "In a talk at a cable-television convention, [Ted] Turner said that selling Turner Broadcasting to Time Warner was 'the biggest mistake I ever made.' ... Ted Turner had reason to be grouchy: His personal fortune, once more than $9 billion, mostly in company stock, was hemorrhaging millions by the day as AOL Time Warner's share price continued to sink... Turner was feeling the pain." (Pg. 268)
He concludes, "AOL Time Warner had finished 2002 with a historic bang: a loss of nearly $100 billion, the largest annual loss in U.S. corporate history. And yet it seemed almost anticlimactic. Over twenty years, AOL had withstood a withering array of challenges, surviving a cash-strapped on-line video firm, beating back mighty Microsoft, and overcoming the threat of the Web. Finally, AOL had succumbed to its own ambition." (Pg. 299-300)
While not necessarily the "last word" on this merger, this is a fascinating and engagingly-written book, that will be of keen interest to anyone wanting to know more about this matter.
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