The New Television: Case closed?

Feb 10, 2003  •  Post A Comment

Steve Case got his just desserts.
And now we know why.
Gerald Levin, the former CEO of AOL Time Warner, says that Case forced him to resign in late 2001. In an interview with The New York Times, Levin says his feud with Case was over differences with AOL’s strategy for “convergence.” Case, the AOL founder who engineered the merger with Time Warner, believed that the company should focus on emerging technologies, such as interactive television.
For Levin, a 30-year Time Warner veteran, Case’s vision seemed like a fool’s paradise.
“The AOL style is like an alien culture at Time Warner,” Levin told The Times. “The AOL people are not fully dimensional people. And they can’t be-if you’re driving that hard, something is bound to be missing.”
After orchestrating the Levin putsch, Case had to put up or shut up. Unfortunately for him, the combination of the down economy and the bursting of the Internet bubble sent the company’s revenues and stock price plunging. Case’s position was further weakened when he was forced to spend considerable time out of the office taking care of his brother, who was dying of cancer.
What comes around, goes around. And in the corporate world, what comes around goes around in your back. Time Warner veterans, still feeling a bit peeved at Levin’s unceremonial exit, effectively took control of the company. And the board of directors, which supported Case’s move on Levin, last month squeezed Case out as company chairman. Although Case will remain a director, company insiders say he will have little influence and could be forced to resign from the board as well.
AOL Time Warner, which has now lost Levin, Case, vice chairman Ted Turner and top exec Robert Pittman since the merger in 2000, is desperate to show Wall Street that it will turn things around-and soon. The company is shifting emphasis to old-school businesses such as pay television (HBO), broadcast channels (CNN, WB Network) and film (Warner Bros.). And it has announced plans to spin off its cable TV unit, Time Warner Cable.
Ted Leonsis, president of the online unit, represents more than 33 million AOL subscribers. But he might have trouble getting a decent Buddy Chat going with company CEO Richard Parsons. The interactive division now is as popular as a trial lawyer at a convention of the American Medical Association.
The company’s reaction is understandable. After all, AOL Time Warner just announced that it lost $100 billion in 2002. But I think that AOL Time Warner may be risking its long-term future by focusing so heavily on the past and the present. In fact, I think it may have lost any chance it had of developing new and exciting services by putting Steve Case on the sidelines.
Case’s vision is right. Emerging technologies, such as video-on-demand, digital video recorders, interactive TV features and high-speed Internet services, will generate billions of dollars in the coming years. AOL, which has a stake in everything from books to films to television to cable, is the perfect company to maximize the benefits of this revolution. For instance, AOL could take an episode of the WB’s “Buffy the Vampire Slayer” and repackage it as an on-demand program on cable, a broadband video stream on the Internet or even download it to a handheld device.
However, Case’s timing could not have been worse. By being the poster boy for interactive services during a down economy, he became an easy target. In 2002 new technologies were crippled by the recession and the aftermath of 9/11. But Time Warner execs, who are steeped in the traditions of old media, said the company’s woes were proof that Case’s vision didn’t work.
Case didn’t help his case, if you will, by arguing that it would take time. He didn’t fully appreciate that he was no longer the head of a start-up company, as he was in the early 1980s with America Online. Back then, he didn’t have shareholders to answer to.
In retrospect, Case should have listened to Levin.
“I told him he’d accomplish a lot more good by nudging, not hammering [on the issue of convergence],” Levin told The Times.
But now Case is all but out-and AOL Time Warner is racing in another direction. Although the company is aggressively rolling out VOD on cable, it’s not likely to invest heavily in developing new services.
This new philosophy may help AOL Time Warner in the short term, particularly on Wall Street. But the company would be wise to keep Case and his brain on board. As the economy improves and new technology reawakens, the Time Warner team may discover that it might need something more than “The Sopranos” to succeed.
Phillip Swann is president and publisher of TVPredictions.com. He can be reached at swann@TVPredictions.com.