AOL TW’s new guard steps up

Jul 22, 2002  •  Post A Comment

The new buzzword at AOL Time Warner is content.
With television and print veterans Jeff Bewkes and Don Logan now leading the charge at AOL Time Warner, the media giant will focus on tapping existing Time Warner assets to develop new content and services for broadband platforms including cable and a revamped America Online.
Their promotions to newly created posts mark a virtual takeover by Time Warner forces of the embattled company, which has been in turmoil since its January 2000 merger. They capped a daylong board meeting last Thursday in Dulles, Va., where Chief Operating Officer Bob Pittman resigned. Mr. Pittman said he may consider joining another major media company such as Viacom, The Walt Disney Co. or Barry Diller’s USA Interactive after he takes a six-month break. Under his employment agreement, Mr. Pittman could remain a consultant to AOL Time Warner for as long as two years.
The moves were widely endorsed by top executives throughout the company, who have become increasingly concerned about demoralization interfering with productivity. “The Time Warner businesses have been the strongest and smartest-performing parts of the company,” said one top AOL Time Warner executive who asked not to be identified. “Everyone is feeling a lot better about the future now.”
Mr. Bewkes, who has had a successful run as HBO chairman and becomes chairman of the newly formed entertainment and networks group, is expected to instill a new sense of autonomy and creative freedom at Warner Bros., New Line Cinema, The WB and the Turner cable networks.
He is expected to heavily rely on the ideas and energy of proven Time Warner executives such as Jamie Kellner, chairman and CEO of Turner Broadcasting System, and Chris Albrecht, who succeeds him as HBO chairman.
Even AOL Time Warner Vice Chairman Ted Turner, who was welcomed back into the fold by new CEO Richard Parsons, could more actively contribute to brainstorming and developing new content and services, but he is not expected to play a role in daily operations.
Don Logan, a 10-year veteran of Time Inc. who is largely responsible for the dominance of many of the company’s magazines, is expected to place heavy emphasis on development of compelling new services to revitalize America Online. As chairman of the newly formed new media and communications group, he also will oversee the cable systems.
Despite AOL Time Warner’s lingering $28 billion debt, Mr. Logan is expected to restructure and expand its cable footprint, the nation’s second largest, through the opportunistic acquisition of additional systems (possibly from bankrupt and scandal-wracked Adelphia Communications) or entire companies (such as Cablevision Systems, which is facing a $1 billion funding gap), and through the restructuring of the Time Warner Entertainment unit.
The company also is expected to continue heavy downsizing and to fire top executives at the America Online unit this week, ahead of radically changing its structure.
Some insiders say Mr. Parsons, in putting his firm imprint on the troubled company, may seek to tap an insider such as Mr. Kellner to head the troubled America Online unit by helping to reshape it as a next-generation service and fully mine its 34 million-subscriber base. Mr. Kellner, who could not be reached for comment, has told higher-ups he does not want to move to New York or Washington.
The new mantra at AOL Time Warner, according to Mr. Parsons, will be a more decentralized operating of business units, which will be encouraged to work together when and where it makes sense-not a forced integration such as Mr. Pittman tried, and more like the management attitude at Viacom.
Mr. Parsons last week called the management changes “a healing move” that signals the “start of a new era.” But investors responded to the changes with concern, at one point sending AOL Time Warner stock down 13 percent to a new post-merger low of $10.85 a share on Friday, giving it a $52 billion market cap, which barely reflects all of the Time Warner assets.
The company faces the challenge of explaining its new corporate vision and responding to accounting questions raised by the Washington Post last week about how America Online advertising revenues were accounted for before those questions blow up into what could be a paralyzing, full-fledged outsider probe. AOL Time Warner officials said Friday they hope to accomplish that during a July 24 earnings call.
Late last Thursday, a shareholder filed a securities fraud lawsuit in Manhattan federal court alleging the world’s largest media company artificially inflated online advertising revenues.
There is growing concern among analysts and investors that the aggressive accounting practices revealed are indicative of questionable accounting that may have occurred elsewhere in the company and that could come back to haunt AOL Time Warner in the coming months in the form of a broader, deeper, more formal probe. The company denies any wrongdoing.
Although AOL Time Warner Chairman Steve Case last week said he will play a more active role in the company, many analysts question whether the only surviving top America Online executive really has any of the answers to make the hybrid work. Although Mr. Case and Mr. Pittman grew AOL into a global online force, they had been at odds in recent months over how to realign the business, sources said.