It was the corporate merger that was to set the tone for big business in the 21st century. It was advertised as a convergence of traditional and digital media. It was the marriage of the old Hollywood studio system with the young brash khaki-clad emperors of the dot.com revolution.
There was no shortage of hyperbole from the high tech world, Wall Street and the media when AOL announced it was taking over entertainment and communications giant Time Warner in 2000. Time Warner was in itself a product of a corporate consolidation of such products as Warner Brothers (movies and music), People and Sports Illustrated (magazine and book publishing) and Ted Turner (most everything cable).
Three years later, Ted Turner and company filed for divorce, kicking Steve Case out of Tara as the memories of skyrocketing AOL stock values are now gone with the wind.
Case, who co-founded AOL and headed its meteoric rise during the 1990s, announced he was resigning as chairman of AOL Time Warner this week following two years of falling stock prices in part because the mega-merger never lived up to expectations. At its peak, AOL was trading at more than $90 a share. It hovers around $15, today. There are even rumors floating around that, with the reduced presence of AOL clout in the board room, the company will drop “AOL” from its name.
No one can blame Case for his vision of blending the old media creations of Time Warner with the new media possibilities of his Internet empire. Perhaps everyone expected too much too soon from the combined companies. Similar to when 1950s America realized that the much hyped Ford Edsel had four tires and a steering wheel, the public is equally underwhelmed today at what has emerged from the AOL Time Warner relationship. Outside of sharing content, the average American has yet to notice much of a change.
The merger may have been a good idea during the high times of 1999 when anything high tech carried a high stock price. Reality, however, never kept pace with ambitions. Consumers who were expecting to watch AOL Time Warner’s movies or listen to its music from their computers have been greeted instead with millions of pop-up ads for the upcoming issue of “People Magazine.”
AOL’s place in history is secured. It almost singlehandidly invented the chat room and helped bring the average “Joe” online. In fact, more than 35 million average Joes are using AOL’s Internet service. But revenue generators such as online advertising and cross media marketing are at an ebb. There is also increasing competition working to pry those average Joes to other Internet service providers including high speed services. This means AOL’s continued presence in the market place may hinge on its ability to refocus on its Internet services rather than conquering the media world.
The departure of Case doesn’t mean the merger was a total bust and it may still prove valuable in years to come. For now, however, the over-hyped synergetic convergence of AOL Time Warner appears to have the corporate significance of one of those flickering pop-up ads. It’s there one minute and then it’s out of sight and out of mind with the click of a mouse.