While not exactly surprising news, but very ironic, Time Warner will spin off AOL into a separate company. Time Warner formally calls it a separation. “We believe that a separation will be the best outcome for both Time Warner and AOL. The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content businesses. The separation will also provide both companies with greater operational and strategic flexibility,” said Time Warner CEO Jeff Bewkes in a company statement.
One could have not predicted this outcome several years ago. I vividly remember when AOL bought Time Warner. At the time it was touted as the coming of age of the Internet as a serious business force. The deal almost created a sense of euphoria – a relatively new and small Internet company with the hutzpah and financial horsepower to buy a much larger ‘old’ media powerhouse. Just about everyone bought into the idea – this marriage of new and old media was going to create synergistic nirvana. Steve Case and the others who engineered the deal were seen as geniuses.
But we all now know the reality proved to be quite different. It didn’t take long for the wheels to start falling off and here we are today with a ‘separation.’ I have to admit conceptually, the idea made perfect sense. You had this ‘old’ media company with a ‘smorgasbord’ of compelling content coming together with the leading connector of the masses to the Internet. Find a way to leverage both assets and start printing money.
Why didn’t it work? Was it a deal ahead of its time? After all, in hindsight, how could AOL leverage all of that bandwidth heavy content through dial-up connections? Or is it a textbook example of how two very different corporate cultures can’t merge successfully, no matter how much perceived synergy there is or how much financial sense it makes? There is also a more cynical view of these types of mergers. There may be an element of perceived synergy, but perhaps a significant influencing factor is the compensation that the top execs who engineer them receive. Not to mention the ‘vanity factor’ that comes from all of the accolades and press coverage these major deals receive.
What do you think? Why did the AOL-Time Warner marriage come to this separation? Share your view using the comments tool below.