It's Time To Shut Up:
How to Read between the Lines of Steve Case's Washington Post Opinion
There has been a lot of speculation about what Time Warner should do to increase its lagging stock price (thanks to the disastrous merger I engineered with that spineless Gerald Levin), and the media giant appears to be nearing a decision on the future of one of the Washington area's most significant enterprises: AOL. Although I played a key role in bringing AOL and Time Warner together six years ago (for which I should have been jailed or at a minimum beaten severely by anyone holding Time Inc options), it's now my view (trying to pretend that I really matter anymore) that it would be best to "undo" the merger by splitting Time Warner into several independent companies and allowing AOL to set off on its own path. Here's why.
When the merger was announced, analysts (hey, let's blame THEM instead of my idiocy, shall we?) believed that Time Warner's music, movies and magazines along with its cable systems would speed up AOL's transition from phone dial-up to broadband, and that AOL's Internet mentality (not to mention its massively fraudulent accounting practices) would accelerate growth at Time Warner. Neither has occurred.
While most criticism of the merger has focused on how it has failed to yield the expected benefits for Time Warner, it is worth noting that the combination has not helped AOL much either (but what the hell, we made most of our millions before the merger). Some benefits that AOL expected--such as replacing Road Runner, Time Warner's broadband cable service--did not materialize. Meanwhile, unexpected roadblocks--such as internal pressures slowing AOL's efforts to make Internet telephone service commercially available--unfortunately did (and believe me when I tell you, I could see that VoIP thing coming a mile off). Instead of propelling AOL to new heights, the association with Time Warner has weighed AOL down, while its competitors, such as Google and Yahoo, have made important strides forward (and just because it took years and millions in fines to undue all the fraud and ill-will within the ad community that we brought to the merger shouldn't be a major factor.)
As a result, the need for fundamental change at Time Warner became obvious long before investor Carl Icahn bought a big stake in Time Warner and began developing his own plans for the company's future. Icahn also has spoken out in favor of breaking up the company. (For the record, while the views I am expressing here will be no surprise to Time Warner's management or directors (who really hoped I had gone away and shut up for good), I have never spoken with Icahn or his advisers about Time Warner.)
How this widely heralded "merger of the century" (remember Gerry and me hugging one another?) quickly became widely derided as the "worst merger in history" has been the subject of considerable commentary. I have my own views (none of which, surprisingly, place the blame where it belongs, squarely on me), but now is not the time for that debate. Instead, it is time for everyone with a stake in Time Warner (mostESPECIALLY my $250 mil) to focus on putting this company on a better path.
At the time of the merger, there was great excitement about the innovation that would occur as the company's businesses collaborated to create new growth opportunities (or were we worried about AOL's nose-diving valuation, I just can't remember). Unfortunately, that "one company" strategy never got off the ground. Instead, each division "did its own thing." (why a company with a 75- year-old tradition of integrity and exceptional relations with the ad community would want to distance itself from AOL execs who trained on round tripping and arrogance, is a mystery to me) While that staved off turf wars, it did nothing to drive innovation. As a result, the company's growth has slowed, and the stock is now trading at about half what it was four years ago (uh, that was before we suggested the "merger of the century").
By early 2004, it was clear that Time Warner had to "integrate or liberate": make the divisions work together or set them free on separate paths to pursue their own opportunities. This past July, having concluded that integration would never happen, I proposed to the company's board that it was time to "liberate" and split the conglomerate into four freestanding companies--Time Warner Cable, Time Warner Entertainment, Time Inc. and AOL--each with its own strategy, stock, balance sheet, management team and board (not surprisingly, that's when they told me to take a hike, that they'd had quite enough of my brilliant business ideas).
(I go on for another tiresome 1,230 words of what the company should do to recover my initial blundering and suggest that AOL (surprise!) has the best future of all the Time Warner divisions, ending with...)
It is true that in each of these three areas, and many others, there are initiatives already underway at AOL (how they can manage without my help is just beyond me). My point, however, is that AOL must go beyond merely "doing" these things; it must reach for leadership in each area (Gerry and I ARE available). And to do that, it must be freed from its corporate shackles and return to its entrepreneurial roots (roots that came to TW rotten to the core), identifying ideas early and promoting their widespread acceptance.
It is time for a change at Time Warner (my shutting the hell up would be a great first step). For the sake of shareholders (let's not forget my $250 million smackers), employees (yeah, those chumps whose options are under about 5,000 feet of water and whose pension plan is shrinking like the rainforest) and customers (you know, those clients and agencies we abused in our go-go years at AOL), the best option now is to liberate the disparate businesses and let them compete on their own (just the opposite of what I said before... so I hope that doesn't hurt my credibility.)
George Simpson's column will appear next on Tuesday, Jan. 3.