The Telegraph
Since 1st March, 1999
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Marriage of Old & New on rocks
- Mother of all media mergers delivers a sickly child

It took just two years for the King of all Media — AOL Time Warner — to go bust.

The monolith, which was formed in January 2000 through a $280-billion merger of Old Economy media giant Time Warner and the New Media upstart AOL, has floundered in losses estimated at a whopping $100 billion in 2002 — that’s slightly less than a quarter of India’s annual economic output.

The loss, the largest ever in US corporate history (See Business Telegraph), capped a year of turmoil at the world’s largest media company during which chairman Steve Case and CNN head Walter Isaacson quit and federal probes were ordered into accounting shenanigans in the online business.

The company received a further setback on the news that vice-chairman Ted Turner — one of the four major backers of the blockbuster merger and once husband of actress Jane Fonda — had also decided to step down.

With this, the Fab Four who cobbled the blockbuster merger two years ago have gone: Steve Case quit recently, Robert Pittman, AOL president and chief operating officer, left in July 2002 while Gerald Levin, Time Warner chairman and CEO who was anointed chief executive of the merged entity, retired in May last year.

The mega merger, which took place a couple of months before the dotcom debacle, had been touted as the mother of all digital content revolutions that would change the media landscape across the world.

Its content portfolio deployed over a range of delivery mechanisms would span from broadsheet newspapers to broadband cable access boxes.

It had looked a winner: it had a suit of big brands ranging from Warner Bros for movies, internet heavy-hitter America Online, Time, CNN, Fortune, HBO, TNT, Cartoon Network and Warner Music.

But when the merger was formed it was clear that the New Media would fuel the growth of the merged entity: one reason why the media giant traded under the stock symbol AOL on the New York Stock Exchange.

It’s a bet that went awfully sour: the media titan was forced to write down the value of its America Online unit in the fourth quarter ended December 2002 by $ 45.5 billion, an indicator of the loss in the value of the entity that was created when the New Media upstart wed the stodgy and solid revenue-driven Old Media.

The merger had spawned other big-ticket alliances: Paramount Pictures was swallowed by Viacom, RCA by Bertelsmann, Columbia by Sony and ABC by Disney. But since then there has been a lot of disillusionment with these mergers that saw fine old media icons lose their independence.

The strongest criticism was that the price paid for the New Media assets was often inflated by the hyped promise that they would deliver huge profits in the future.

That grand pie-in-the-sky dream is now an egg in the face for all those media executives who dared dream those internet-driven dreams. The emphasis is back on the old-fashioned stuff: movies, music, publishing and TV business.

“I had the honour and privilege of being the first to sign a piece of paper that cast a vote of my 100 million shares or so, and I did it with more excitement and enthusiasm than I did that first night I made love 42 years ago,” said Turner in a voice trembling with emotion after the deal was signed two years ago.

On Wednesday, Turner was out of the door -- and the brash and often-outspoken media baron had his lips zippered for a change.

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