Time Warner

Time Warner Inc. {{NYSE|TWX}} (AOL Time Warner Inc. between 2001 and 2003) is the world's largest media company with major Internet, publishing, film, telecommunications and television divisions. The company is officially headquartered in New York, New York, United States.

History

Time Warner was created in 1989 by the merger of Time Inc. and Warner Communications. This company subsequently acquired Ted Turner's Turner Broadcasting System in 1996.

Related Topics:
Time Inc. - Warner Communications - Ted Turner - Turner Broadcasting System

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AOL Merger

In 2001, a new company called "AOL Time Warner" was created when AOL purchased Time Warner. The deal, announced in 2000, employed an unusual merger structure in which each original company merged into a newly created entity. The Federal Trade Commission approved the deal on January 11, 2001.

Related Topics:
2001 - AOL - 2000 - Federal Trade Commission - January 11

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There has been some speculation about the motivations of each party. Some observers believed that Time Warner was struggling to integrate "new media" into its business. A merger with AOL provided a huge subscriber base of Internet users, along with online marketing know-how. Many business journalists have reported that AOL executives felt that AOL stock was severely overvalued and that a big merger was the only way to prevent a collapse in valuation.

Related Topics:
New media - Online

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The merger faced immediate opposition by consumer groups and other media companies on antitrust grounds.

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Media companies felt that the vertically integrated AOL Time Warner would unfairly promote its own content within its outlets. This fear existed before the merger, but Time Warner was thought to be a conglomeration of very independent divisions. It was feared that this would change with the influence of AOL executives.

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Consumer advocates were concerned with the threat of product tying between Time Warner's cable TV systems and AOL's Internet service. Some consumer groups saw a possible attempt to corner the Internet-over-TV market, whereby AOL could force all of the Time Warner cable subscribers to use AOL branded Internet-TV. Smaller internet service providers feared that AOL would tie its Internet service to Time Warner's cable modem service. Some ISPs wanted the opportunity to use Time Warner's cable network as a common carrier for their services, which competed with AOL. AOL and Time Warner pledged not to violate any antitrust regulations.

Related Topics:
Product tying - Cable TV - Internet service - Cable modem - Common carrier

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Many observers were shocked that a large, diversified media conglomerate was being acquired by a much smaller company. Market conditions at the time of the merger placed a greater premium on Internet-related stocks than on traditional media stocks. AOL's high market capitalization relative to that of Time Warner made the acquisition possible. The deal has since become a symbol of the Internet Bubble and is widely regarded as a disaster, with a $2.4 billion shareholder settlement, a further $600 million set aside and a $5 billion price boosting share buyback program announced on 3 August 2005.

Related Topics:
Market capitalization - Internet Bubble - 3 August - 2005

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AOL CEO Steve Case became executive chairman of the new company, while Time Warner CEO Gerald Levin retained the CEO title.

Related Topics:
CEO - Steve Case - Gerald Levin

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Post-AOL Merger

After the merger, the profitabilty of the (America Online) ISP division decreased. Meanwhile, the market valuation of similar independent internet companies fell dramatically. As a result, the value of the America Online division dropped significantly. This forced a goodwill write down, causing AOL Time Warner to report a loss of 99 billion dollars in 2002--at the time, the largest loss ever reported by a company.

Related Topics:
Goodwill - Write down - 2002

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In response to the huge loss in 2002, the company dropped the "AOL" from its name, and removed Steve Case as executive chairman. Richard Parsons became the new CEO.

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A number of transactions have since taken place:

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• The professional wrestling federation WCW was sold to competitor WWE.
• The Atlanta Hawks, Atlanta Thrashers, and operating rights to Philips Arena were sold in mid-2003.
• The fifty percent share in the cable channel Comedy Central was sold to Viacom.
• Warner Music Group, a music company, was sold to a group of investors led by Edgar Bronfman, Jr. in late 2003.
• AOL/Netscape's longrunning litigation against Microsoft was settled out of court.
• Time Warner announced that it was shutting down its CNNfn financial information channel and disposing of its share in Google (2004).

Since 2003, the Time Warner text logo appears in CamelCase form (ala RadioShack).

Related Topics:
CamelCase - RadioShack

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