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Summary:

In a recent episode of Rome, an HBO series where Caesar is brutally murdered by the Senate. The killing blow coming from Brutus, the man whose life Julius Caesar forgave. The gruesome scene was running through my head…. Steve Case sold Time Warner a bill of […]

In a recent episode of Rome, an HBO series where Caesar is brutally murdered by the Senate. The killing blow coming from Brutus, the man whose life Julius Caesar forgave. The gruesome scene was running through my head….

Steve Case sold Time Warner a bill of goods, aka America Online, gift wrapped in a ribbon of whole bunch of shenanigans that resulted in hundreds of millions of dollars in fines from Securities & Exchange Commission. He personally made hundreds of millions from the sale of AOL to Time Warner. He still has more than a $250 million stake in the company. Now he wants to break Time Warner up. Mr. Case’s essay in the Washington Post shows the man has chutzpah. Hey anything to boost the short term value of his $250 million in stock!

Break-up, after the debris from the A-O-Hell has been finally swept! I laughed at the comparison between AOL and Apple. I know a whole bunch of people are laughing with me! Read the essay, and you get a sense that Mr. Case fast forwarded through the first half of the decade. Cynthia Brumfield so succinctly writes….

Here Case is engaging in a little bit of revisionist history. He claims Time Warner failed to capitalize on AOL’s potential, but in truth it was AOL that acquired Time Warner. For at least a good year following the merger, the AOL-ites were calling the shots at the merged company and none too smartly either. Part of the reason Time Warner Cable, for example, didn’t race to embrace its new corporate parent and hurry to integrate AOL into its high-speed service was the dismissive attitude emanating from Dulles toward Road Runner and the cable guys.

How can he be suggesting the break-up strategy by looking at the past, when the future is finally beginning to align with Time Warner. How many time does one have to point to at Rupert Murdoch and predict the future? Time Warner, despite AOL is the only company which has it all, and can basically benefit if it plays its cards right.

  • Time Inc. creates the content which is valuable real estate for online advertising, currently the only media business where advertising is on an upswing.
  • AOL, after being a walled garden and a mess that Case & Co had created, is finally beginning to find its footing.
  • Time Warner, the entertainment business is the single and the most important line of defense Time Warner Cable has against the encroachment from phone companies.
  • The phone companies would still need HBO, CNN or whatever TWE has to offer.
  • With four-play, Time Warner Cable can make quite a bit of traffic.

In short, Time Warner reminds me that childhood tale – where five sticks when bound together, are unbreakable. When separated the sticks can be broken into little pieces. I hope Time Warner folks don’t pay attention to these forces who want to break up the company. Last company that followed the advice of carpet baggers, AT&T, ended up as a footnote in history. Michael Armstrong’s vision of a four-play – phone, TV, broadband and wireless- was right, but he did not have the desire to stand up to the Wall Street and a few individuals. Now everyone is indulging in four play. I think TW learn from that.

Mr. Case, if he wants us to take him seriously, should start by returning the profits from the “worst merger ever.” Otherwise he should go and spend them on his New Age enterprises!

(Disclosure: I work for Business 2.0 magazine, which like AOL is owned by Time Warner.)

  1. I think Case is right on the mark. You have hardly addressed the points in his article. Instead you rip into him personally because he engineered the merger. The comparrison to Apple is valid. A faltering brand with good people and strong potential. AOL could emerge as a leader on par with Yahoo. It has the audience base with both AIM and AOL. AOL is strong with families and young kids. These kids will very soon be teens and strong drivers of technology. AIM is already one of the most used technologies for teens and 20’s. A few right moves and AOL will be right back in the game

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  2. I think you’re being a little hard on Steve, Om. I’m not saying he’s a candidate for sainthood, and much of what he did at AOL made things worse instead of better. But he didn’t manufacture the market value that allowed AOL to take over Time Warner, nor did he slip something into Gerald Levin’s coffee that made him or the board accept the deal. In a way, you seem to be arguing that the merger actually made sense (or is starting to). Why not give Steve some of the credit for that idea?

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  3. Does Steve Case want AOL back?

    Cynthia Brumfield over at IPDemocracy.com points to a fascinating opinion piece by AOL founder Steve Case that appears in Sunday’s Washington Post (which obviously appears on the website Saturday night). In the piece, Case argues that the merger…

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  4. Jake

    i think i addressed those issues pretty clearly – i think AOL is part of the whole TW turnaround. I don’t think it can become any better without Time Warner.

    The video assets of TW are showing up on AOL, increasing the value of the overall company. Even the roadrunner point case is trying to make has been addressed.

    the fact of the matter is the reason the merger did not work in the first place, it is because of the AOL folks. Secondly, the legal mess weighed down on the combined company.

    I think to break-up the giant now is driving with eyes only on the rear view mirror.

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  5. Regardless of history, those who argue for break-up have a harder case to prove (sorry), as the synergy among assets at Time Warner has really not even begun to be exploited. (The same holds true for the other large media players that combine some set of print, video, and audio-based assets.)

    So break-up advocates must prove that synergy among these assets cannot effectively be developed and commercialized — because, once the break-up has occurred, the option value of capturing the synergy is pretty much gone (at least for the Time Warner shareholder).

    But, for example, I can point to a number of published patent applications my company has filed that disclose methods of adaptive publishing (applied to print, audio, or video) based on historical on-line usage behaviors that could be uniquely exploited by a media asset holder like Time Warner, and could thereby generate synergy for the shareholder. Given the general market is not likely to credit the individual pieces of TW with that synergy value vis-a-vis alternative business combinations, my guess is the Time Warner shareholder would once again lose if there were to be a substantial break-up . . .

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  6. Case compares AOL to Apple

    Steve Case, who owns more than 250 million in company stock, writes that he thinks AOL should be split from Time Warner, able to be on its own and nimble with its own stock and own board so it can more easily buy up younger companies like Yahoo has be…

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  7. As a reporter you should know better than to call an opinion a “fact.” I disagree with your opinion about “the facts of the matter.”

    AOL didn’t sell TW anything. In fact it was TW that sold itself to AOL. That’s one of the few facts there are. the acquisition didn’t work because of lots of things. Anongst those are culture clash and in-fighting.

    Perhaps we can agree on one thing. The results are disappointing compared to the potential for great services that lots of consumes missed out on.

    Victor

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  8. [...] Mark Evans says the piece is part of Steve Case’s ongoing attempts at “reputation rehab.” And Om Malik writes a post in which he appears to be comparing Case to Brutus in Julius Caesar. As I mentioned in a comment on Om’s blog, I think he’s being a little hard on Case. I’m not saying he’s a candidate for sainthood, and much of what he did at AOL made things worse instead of better. But he didn’t manufacture the market value that allowed AOL to take over Time Warner, nor did he slip something into Gerald Levin’s coffee that made him or the board accept the deal. [...]

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  9. I’d expect MSFT and Time-Warner to confirm their partnership before mid-week, at least thats what all my sources indicate. I wonder if Google will take more than a $50 hit when/if this gets announced.

    As for the last couple of years, I think the the AOL team just got fat, rich, dump and happy thinking they had an exit strategy. The TW team really thought they were doing the right thing to avoid the Disney-Internet lack of strategy.

    Does anyone have a Google model that could estimate the loss of AOL as a distribution outlet? It probably equates to 1-2 quarters of Google’s growth.

    Ash

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  10. Jesse Kopelman Monday, December 12, 2005

    Sure Case is a self-serving huckster, but nobody does it better and that’s why I like him. Om, you are right on the money that this is a repeat of the AT&T situation, but I think you are wrong to be anti-breakup. I was an AT&T employee back then and even though it was obvious to me that the 4-play was a great strategy, it was equally obvious that AT&T could never pull it off. The problem was the rotten core of old-school AT&T and TCI that were resisting change and slowing down overall growth (albeit while acting as cash cow). TW has the same problem — they are just not built for speed. Having the right strategy is not going to win the decathalon if you are old and out of shape. To see how things should be done, look to Sprint. Over the last decade they have done a great job of morphing the company into a streamlined cutter, poised to outmanouver the delapidated dreadnots of Comcast, Verizon, and at&t.

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