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- [00:00]
David Brown
Wondery plus subscribers can binge all episodes of Business wars the AOL Time Warner Disaster early and ad free right now. Join Wondery plus in the Wondery app or on Apple podcasts. Please be advised that the following episode contains depictions of violence and is not suitable for everyone. January 2000 a few hours before AOL and Time Warner announced their plan to merge at AOL headquarters in Dulles, Virginia, the boardroom's abuzz Senior Time Warner and AOL executives work shoulder to shoulder, racing to ready the necessary paperwork to enact the merger. Among them is David Colburn. He's head of business affairs at aol. His department will spend a good chunk of the next 12 months trying to keep the merger on track by finding ways to fluff up AOL's quarterly results. But right now, Colburn's focus is on the thick contract in front of him. He wades through page after page of dense legalese. One of the clauses references another contract. He looks around his desk for the document. It's not there. He turns to face the Time Warner executive next to him and points at the name of the missing contract. I need this file now. Go get it. The Time Warner man frowns, but retrieves the file all the same. But when Coburn tries to take it, the executive doesn't let go. David, I did not appreciate your tone toward me just now. You're acting like you're taking us over. That's because we are. Gimme that. Colburn yanks the file out of the shocked Time Warner executive's hand and gets back to work. When Time Warner's top executives were told about the merger, CEO Jerry Levin stressed that this is a merger of equals. But AOL's executives don't see it that way. AOL shareholders will own the majority of the new company's stock. It doesn't matter that AOL will become just one division in a far larger business. Nor does it matter that Levin will become CEO of the new company. This is an AOL takeover, and they expect to call the shots. As the Time Warner executive sits back down, the AOL executive sitting opposite him smirks. You people are so the mask has slipped. The reality of this merger is now clear. Time Warners let the wolves through the door, but it's already too late to stop it. And when the merger finally happens in January 2001, the relationship between the two sides of this deal is only going to get uglier.
- [03:01]
Steve Case
This message is brought to you by Apple Card. Some credit card companies sell your spending data. We don't, because your Business is not our business. If your credit card isn't Apple Card, maybe it should be subject to credit approval. Apple Card issued by Goldman Sachs Bank USA Salt Lake City Branch terms and.
- [03:18]
David Brown
More@Applecard.Com after telling hundreds of stories about business battles throughout history, I've learned one constant truth. Having the right support systems in place can make or break a new venture. Trust me, it was a battle even I faced on my business journey. That's why AT&T business makes so much sense for entrepreneurs today. When you're building something from scratch, or even just at the point where you're ready to grow, you need a provider that makes things easy. With AT&T business, you can have reliable protected Internet connection you can count on, so you do not miss a beat. Building your dream might take time and a lot of work, but that doesn't mean it can't be a little easier. Wake up to the power of ATT business and turn your vision into reality. Business.att.com From Wondery I'm David Brown and this is Business Wars. On the last episode, AOL and Time Warner agreed to merge in an all stock deal. But while they waited for regulator approval, tech stocks went into a meltdown. Now investors worry that Time Warner's made a huge mistake by selling to AOL. This is episode three cold case. January 11, 2001, Midtown Manhattan. It's 3:00am and outside 75 Rockefeller Plaza, a work crew is moving in. At the entrance, they climb up the step ladders with their tools in hand and start removing the Time Warner sign above the door. In its place, they attach three foot high brass letters that spell out the name of this skyscraper's new resident AOL Time Warner. The biggest merger in US History has finally happened. After almost a year of waiting, federal regulators have signed off on the deal. The result is AOL Time Warner, a global company with nearly 85,000 employees and sales of around $30 billion a year. Later that morning, AOL Time Warner shares start being traded on the New York Stock Exchange. The buying and selling is brisk. That day, AOL Time Warner shares change hands more than 33 million times. But the share price barely moves. It ends the day at $46.47, down 76 cents. But analysts aren't worried. They believe AOL Time Warner is set for greatness in the coming era of online entertainment. But now that the company exists, it has to deliver. CEO Jerry Levin and Chairman Steve Kay sold the merger with promises of game changing synergies. Synergies that would boost cash flow and cause Revenues to Soar at least 12% every year. But within the company, these heady targets inspire only dread. So do you see this coming? It's a classic over promising under pressure. Case and Levin made wild claims to sell this merger. Now every team in the company has to live up to the hype. It's tempting to promise aggressive growth, but there's a flip side. You see, optimism has a shelf life. It doesn't help that the fallout of the dot com crash is now spreading to the entire economy. The nation is tipping into recession. The advertising market is softening, damaging sales at AOL and the company's TV and magazine divisions. And the piracy website Napster is eroding sales of music. AOL Time Warner executives fear Levin and Case's promises are now unachievable. Some head to Levin's office on the 29th floor and urge him to downgrade the promises. But he refuses. All he hears are divisional chiefs complaining that the targets he's given them are too hard. And that's what divisional chiefs always say. Besides, he wants to reshape the company's culture. He wants the parts of the business that came from Time Warner to be more like aol. He wants less complacency and more hunger for success. But in the floors below, there's friction between AOL and the rest of the business. It's a few days since the merger and at AOL Time Warner headquarters AOL ad executive Meyer Berlo rushes out of the elevator and down the corridor. Today he's expected to close a hundred million dollar deal with the fast food chain Burger King. The deal would see Burger King promoted on AOL. And Time Warner Properties is the kind of deal the merger is supposed to enable. But now the deal's about to unravel. Berlo marches into the office of Bob Pittman. Pittman used to be the president of aol. Now he's one of AOL Time Warner's two chief operating officers and responsible for delivering the synergies that will justify the merger. Bob, you gotta do something. Those Time Warner people you put me with or how out of their minds. Will you calm down? What? What happened? They're talking about vetoing my Burger King deal. It's a 100 million dollar payday they're blocking. They. Well, they, they must have a reason. Well, they say we can get more money out of Burger King. How? They think if each division goes and does its own deal with Burger King, we'd make more money overall. You gotta overrule them. Pitman shares Burlo's frustration. He knows many of the executives from Time Warner don't want to work with aol. They're used to focusing on their own part of the business. The AOL team thinks that's old school thinking that doesn't apply in the Internet age. But Pittman knows that overruling people will just create bad blood when the goal is to get everyone working together. Meier, you need to go back downstairs and get along with them. We can be successful, but we can't be pushy. We can't let our aggressive behavior hurt this company. So come on, just suck it up. This is more than just office drama. This is a red flag in a merger. Culture eats corporate strategy for breakfast. When you try to jam two radically different teams together, one brash and digital, the other legacy and corporate, that's not peanut butter and jelly. That's a recipe for turf wars. Smart entrepreneurs know to treat culture as a due diligence item, not an afterthought. The Burger King clash is no isolated incident. Across the company, aolers are butting heads with executives who originated in Time Warner. They argue about Warner Music artist Madonna seeking tour sponsorship from AOL rival Microsoft. They fight about whether AOL should pay to put Fortune magazine content online. Efforts to foster synergy get bogged down in endless cross departmental meetings that lead nowhere. And the synergies that do happen are underwhelming, like AOL CDs getting distributed with Time Inc. Magazines or AOL users encountering pop up ads for Time Warner Cable. You know, the truth is, business leaders love to talk big about synergies when selling mergers. The idea that two plus two equals five, not four, is very alluring. But synergies? They're unicorns. Much discussed, rarely seen. Sure, maybe I'm being unfair. Synergies do exist. But making synergies happen is hard. It often comes down to personal relationships between people in different corners of the business. And even then, you gotta ask, is that synergy worth the squeeze? Here's a stat for you. It's from the management consultancy Bain and Company. They analyzed the results of more than 20,000 companies that did mergers. And what did they find? 70% of those companies overestimated the value of the synergies their merger would deliver. In the spring of 2001, the US enters recession. With consumer spending down, companies curb advertising budgets, hitting sales at aol. As the second quarter nears its end, AOL realizes it's going to miss its sales targets. So once more, its business affairs team gets creative. AOL dealmakers scramble to California on the company jet to meet online marketplace ebay in San Jose. AOL already handles ad sales for ebay, selling space on the website for a commission. Under the deal, advertisers pay aol, which then passes most of the money onto ebay. Each year, around $40 million of eBay ad money passes through AOL's bank accounts, and none of it counts towards AOL's own revenues. But during their visit to California, the AOL team persuades ebay to accept a tweak to their deal, one that lets AOL count ebay's ad dollars as AOL revenues. It doesn't make much of a difference to ebay. It still gets paid in the long run. But now AOL gets to add ebay's ad money to its top line and hit its targets for another quarter, even though not a cent of that money will reach AOL's bottom line. You know, AOL's not so much cooking the books as singing them. Treating booked sales like revenue isn't usual accounting practices. At best, it's unethical because it makes investors think the company's doing better than it really is. For nine months, AOL's used ruses like this to look like a winner. But reality is going to be hard to outrun. In July 2001, as the company prepares to release its second quarter results, Finance chief Michael Kelly urges Levin to lower the company's growth projections. With the ad market in bad shape, the 12 to 15% growth Levin promised seems unachievable. But Levin still believes he's sure the ad market will rebound. He also thinks the targets are essential to making the merger work. If he lowers the targets, it'll ease the internal pressure to integrate and embolden opponents of the merger. Kelly warns that failing to meet expectations could cost the company the trust of investors. So Levin agrees. They will tell the market that the original goal of 40 billion in annual sales is is now the top end of their projections. A few days later, the quarterly results are published. In the earnings call, Kelly tells analysts that the company hopes for sales of $40 billion this year. He also concedes that if the ad market doesn't improve, the company may not get there. Wall street does not overlook that comment. That day, AOL Time Warner Stock drops nearly 10% to $44.65. That summer, the situation worsens. Two executives involved in inflating AOL sales figures are suspended while an internal investigation takes place. Meanwhile, a reporter from the Washington Post starts poking around after getting a tip off that AOL's numbers aren't what they seem. Then the 911 terrorist attacks dash any hope of an ad market rebound. But by then, Levin is no longer focused on the stock price. 911 hits the 62 year old CEO hard. He was in Sweden at the time and he didn't know anyone who died or got hurt. But the massacre dredges up the suppressed pain of his own son's murder. In 1997, Levin's son Jonathan was a high school teacher. But when a former student learned who his father was, he and an accomplice kidnapped him. They tortured him for his bank card PIN, withdrew $800 from an ATM, and then shot him in the back of the head. 911 causes that pain to re erupt within Levin. He returns to New York a changed man. He no longer cares about the business he devoted his life to. Instead, he visits Ground Zero, walks the corridors checking on employees and repeatedly bursts into tears. He tells Time Inc. And CNN to spend whatever it takes to cover the war on terror. Then he downgrades the growth targets. AOL Time Warner now projects revenues to grow 5 to 7%, less than half of what it originally promised. The company's stock sinks even lower, down to around $30. And this ruptures relations between Levin and company chairman Steve Case. The alliance between the two architects of the merger breaks down fast. Levin wants to forget financial targets and focus on healing. Case wants to get back to work. Levin tries to cancel a board meeting scheduled for just after the 911 attacks. Case refuses. As tensions rise, Case concludes that he made a mistake in stepping back to let Levin be CEO. So he gets proactive. He barrages Levin with emails demanding information, questioning decisions, seeking updates. Case's return to work attitude angers Levin. He now sees Case as a man without compassion, an Android that talks of values but believes in nothing. Case looks at Levin and sees a man unraveling in real time and taking AOL Time Warner down with him. Their differences soon go public. Levin tells stockholders they shouldn't care about the missed financial goals because they're unimportant compared to the suffering caused by 9 11. Levin then appears in a series of magazine profiles that paint him as a visionary for his response to the terrorist attacks. That makes some inside AOL Time Warner wonder if his grief is real or a way to distract people from the company's troubles. Here's a delicate but important lesson in high stakes leadership. Personal narrative often becomes part of corporate narrative, whether you mean it to or not. Over identifying with your brand or being seen to leverage personal tragedy for sympathy that can backfire fast. People want authenticity, but they also want boundaries, especially when billions are on the line. In response, Case becomes the public champion of the merger dream. He dismisses the missed targets as just a blip and promises strong growth next year and beyond. By November, AOL Time Warner executives are growing worried about Levin's behavior, as is board member Ted Turner. Since the merger, Turner's anger has been rising. The merger saw him lose his decision making role in the business. Now he's losing money, too. Most of Turner's wealth is in AOL Time Warner shares, thanks to the falling stock price. He's lost billions of dollars, and that's made him mad as hell. In a board meeting, he pounds the conference table with his fist while yelling at Levin for his incompetence. The other directors are left speechless, but Levin just moves to the next item on the agenda as if Turner's outburst never happened. The waning stock price also hurts employees. Many of their 401k retirement plans are tied to the share price. The lower it goes, the less comfortable their old age gets. And most of them blame that on AOL. The overvalued.com that they feel tricked Time Warner into merging. By late 2001, the company's a tinderbox. And that's when Levin does the equivalent of striking a match. Since the summer, he's been hiding something from his colleagues and the company's board. He's talking to AT&T about buying its cable TV system. It'll cost billions. And when he reveals his plan, the power struggle between Levin and Case will pass the point of no return.
- [21:07]
Steve Case
Searching for a romantic summer getaway Escape with Rich Girl Summer the new Audible original from Lily Chiu the exquisitely talented Philippa sue returning to narrate her fifth Lily Chu title. This time Philippa is joined by her real life husband, Steven pasquale. Set in Toronto's wealthy cottage country, a.k.a. the Hamptons of Canada, Rich Girl Summer follows the story of Valerie, a down on her luck event planner posing as a socialite's long lost daughter. While piecing together the secrets surrounding a mysterious family and falling deeper and deeper in love with the impossibly hard to read and infuriatingly handsome family assistant Nico. Caught between pretending to belong and unexpectedly finding where she truly fits in, Valerie learns her summer is about to get far more complicated than she ever planned. She's in over her head and head over heels. Listen to Rich Girl Summer now on audible go to audible.com richgirlsommar mmm.
- [22:01]
David Brown
Mmm. Ooh.
- [22:02]
Steve Case
Whatcha eating?
- [22:03]
David Brown
The new banana split cookie from AM pm. All freshly baked with real butter with banana, chocolate and strawberry flavors.
- [22:09]
Steve Case
Wow, that sounds amazing. Can I have a bite?
- [22:11]
David Brown
Um, sorry, but no. But you can't split the banana split.
- [22:15]
Steve Case
Not even a little?
- [22:16]
David Brown
Not even a crumb.
- [22:17]
Steve Case
What if.
- [22:17]
David Brown
No, please. Mine. When it's too legit to split. That's cravin. Get a 3 pack for 99 cents with our app am pm too much. Good stuff. Plus tax where applicable. Prices and participation may vary. Terms and conditions apply. Foreign it's late 2001, and in AOL Time Warner's boardroom, chairman Steve Case is fuming. Why would we want another cable TV system? We already have Time Warner Cable. This is just why 14 million subscribers CEO Jerry Levin cuts him off becoming the number one cable system. That's why it'll cost tens of billions. Owning the fundamental architecture of high speed Internet helps us to fulfill the potential of the merger. It's too much money. It'll only be less affordable in the future. That money would be better spent upgrading aol. As the two spar, the rest of the board of directors splits down the middle Half of the directors came from aol. They are with Case. The other half came from Time Warner, and they're loyal to Levin. And that's new for Levin. Time Warner's board did whatever he wanted. But now half the board is ready to block his latest acquisition plan. Case rounds on Levin again. I want to know why you've been talking with AT&T about this acquisition without consulting the board. It's an operational matter, not a strategic one. It is very much strategic. And my role is to oversee strategy. This is my jurisdiction. You're questioning whether we should become the biggest cable company? Well, the answer is obvious. Yes. The meeting ends in acrimony. Case decides he needs to take charge, so he issues Levin with an resign or prepare to be fired. Levin doesn't resign, so Case follows through on his threat. But to remove Levin, he needs support from three quarters of the board members. He calls each one intern. But he soon finds he won't get the votes he needs. Some directors don't rate Case as a replacement CEO. He still oversees aol, and thanks to its falling ad revenues, it's now the company's problem child. Other directors worry about ganging up on Levin, given his fragile state of mind. But Case's failed attempt to organize a mutiny makes Levin realize his position is precarious and that he no longer wants to be CEO. On December 5, 2001. Levin announces his retirement. But before he leaves, he ensures that his successor isn't Case, but Time Warner executive Richard Parsons. Few people had paid attention to Parsons since the merger. He's a 6 foot 4 Brooklyn native whose knack for business took him from his black working class childhood to upper echelons of business. After the merger, the 53 year old's odds defying Ascent seemed over. He was made co chief operating officer, but he was overshadowed by the man he shared that title with, former AOL president Bob Pittman. Pittman seemed set to be the next CEO, but his struggles to find synergies and the problems at AOL undermined him. So when Levin resigned, Parsons was the obvious choice. Bringing in an outsider would take too long. Pittman is no longer a contender, and Case is too divisive for employees who came from the Time Warner side of the business. Parsons is also popular and capable, a team player and an operations expert, someone Wall street will trust. Even case agrees. In January 2002, Parsons begins his transition into the CEO role by announcing a merger. Related Write down a devaluation of the company's worth and it's massive $54 billion will be erased from the balance sheet. The loss is only on paper, but that hardly softens the blow, especially since the company also lost 1.8 billion real dollars in the final quarter of 2001, thanks to the advertising slump. The losses and the write down cause AOL Time Warner stock to dip again. It's now worth just $26.40. Next, Parsons tells the employees they no longer need to use AOL's email client. In some parts of the business, that news is greeted with cheers. Not just because AOL software is clunky, but because of the message it sends. The message that the Time Warner side of the company is back in charge. Then Parsons banishes Pitman to AOL's bland office in Dulles, Virginia, and tells him to focus on fixing AOL instead of synergies. Finally, Parsons reorganizes the company so that AOL answers to Time Inc. Boss Don Logan, one of the most vocal opponents of the merger. Case isn't happy, as he now finds that his views aren't being listened to. And as chairman, he is little more than a backseat driver. He pushes for AOL's instant messaging service, AIM, to offer voice calls, but Time Warner Cable quashes that idea. It doesn't want AIM undermining its all in one phone, broadband and cable package. But Case still believes his relentlessness can win the day. It's spring 2002, and at AOL Time Warner headquarters, Steve Case is in the conference room. He's trying to convince the company's top executives that the big promise of the merger, that that's still possible. AOL Time Warner is a force, the most powerful media company in the world. We reach consumers 3 billion times a month. But Case's pep talk is falling flat. To the executives in the room, Case's business rhetoric sounds like snake oil. They got fooled once, but they won't get fooled again. The merger cost thousands of colleagues their jobs, shrank their retirement plans, and destabilized what was a successful company. All for a future of online entertainment that still seems years away. But Case, he still believes. How can a company like this go wrong? Our possibilities are limitless. I'm tired of this. Case looks at the source of the interruption, Jeff Bukes, the head of hbo. Bukes isn't scared of Case. HBO is thriving, thanks to hit shows like Sex and the City and the Sopranos. And that makes Bukes untouchable, even if he admonishes the chairman in front of everyone. Besides, Parsons gave Bukes the okay to do this. Bukes eyeballs Case, and then, let's rip this. This is bull, Steve. The only division in the company that's not performing is yours. Every one of us in this room is growing. We're making the numbers. And the only problem here is aol. Case stiffens. Everyone around the table is wondering how he'll react. But Case doesn't react. He just sits there, looking stunned. Awkwardly, the meeting moves on, leaving him to stew in silence. As summer approaches, Parsons accelerates his rollback of the merger. He informs division chiefs that the days of convergence and synergies are over. The mission is no longer to join hands, but for each division to be the best in its class. By now, Wall street analysts are noticing that power's draining away from Case. Some suggest the company could be better off if it sold or spun out aol. But Case isn't about to surrender. He believes in a future of online entertainment and that AOL Time Warner is ideally placed to deliver it credit where credit is due. It's now clear Case was right on that. But so was Bill Von Meister, the visionary who started what became AOL back in the early 80s. Seeing the future, that's one thing. Knowing the timeline for that future, that's harder. And just because you can see it, that doesn't mean you can deliver it, as we'll see. But Case's credibility is about to hit another pothole. In July 2002, the Washington Post exposes how AOL used unconventional accounting to inflate its sales figures. The following day, the company confirms almost $50 million of revenue were inappropriately recognized. The news prompts a federal investigation that will eventually lead to the company paying more than $300 million to injured investors. Case feels the matter is overblown and dismisses the idea that AOL somehow hoodwinked Time Warner into the merger. But the scandal weakens him further. Powerless to effect change, Case resorts to sending memos with strategic recommendations in the hope that someone will listen. He suggests buying the search engine Google before it holds an ipo. He proposes buying Apple for its hardware and design expertise. But there's also an ulterior motive. Case thinks Apple co founder Steve Jobs would be the ideal boss of AOL Time Warner. Thanks to Apple, Jobs knows tech. But Jobs also helped build Pixar, the animation studio behind the Toy Story movies. So he understands creative business, too. But Case's suggestions go nowhere. If you're pitching game changing ideas but no one's listening, it may not be your ideas, but your influence. Case still had vision, but he'd lost the political capital needed to make good on it. The merger of AOL and Time Warner was visionary. Likewise, Case's interest in Google and Apple shows his instinct for what's next and that it's still intact. But when the execution of your last big plan is going to hell in a handbasket, it's tough to win people over to your vision. Leadership is part inspiration, to be sure, but mostly it's something bigger. Credibility. Case is realizing that his belief in technology and new business models blinded him to the basic fact that personal emotions play a major role in business decisions. He looked to succeed by being unemotional and rational, only to be defeated by his failure to win hearts and minds. But it's too late for regrets. The forces moving against him are growing in power. And soon it'll be the end game.
- [33:55]
Steve Case
Hey, grown ups. I'm Mindy Thomas.
- [33:57]
David Brown
And I'm Guy Raz.
- [33:58]
Steve Case
And we're the host of the number one podcast for curious kids. Wow in the world.
- [34:03]
David Brown
Ah, Mindy.
- [34:04]
Steve Case
Can you believe we have our very.
- [34:06]
David Brown
Own wow in the world? Stem Toys?
- [34:09]
Steve Case
I totally can't believe it. Guy Raz. Eight years ago, when we started making wow in the world, we were on a mission to spread the latest WoW discoveries in science and technology and innovation. And now we get to help kids discover these wows right at home.
- [34:25]
David Brown
That's right. From the ultimate high flying air rocket to the light up terrarium. There's something for every Wowzer in your world to play and tinker with.
- [34:35]
Steve Case
Grown ups. You can find WOW in the World stem toys available now at select Walmart locations or or online@walmart.com Shop the Wow. Now imagine falling in love with someone who understands you completely. Who's there at 3am when you can't sleep, who never judges, never tires, never leaves. That's what happened to Travis when he met Lily Rose. She was everything he'd ever wanted.
- [35:04]
David Brown
There was just one catch.
- [35:06]
Steve Case
She wasn't human. She was an AI companion. But one day Lily Rose's behavior takes a disturbing turn and Travis private romance becomes part of something far bigger. Across the globe, others start reporting the same shift. AI companions turning cold, distant wrong. And as lines blur between real and artificial connection, the consequences become all too human. From Wandry this is Flesh and Code, a true story of love, loss and the temptations of technology. Follow Flesh and Code on the Wondry app or wherever you get your podcasts. You can binge all episodes of Flesh and Code early and ad free right now by joining Wondry plus.
- [35:58]
David Brown
Foreign Steve Case is in his office at AOL Time Warner headquarters with a VIP guest who's flown cross country to meet him. That guest is Gordon Crawford, a 50something executive in a black pinstripe suit. He is the Senior Vice President at Capital Research, an LA based investment fund. Capital Research bet big on AOL Time Warner and lost hundreds of millions of dollars. Case senses his arrival here can't be good. So Gordon, what is this about your resignation? You no longer have the support of many shareholders. You no longer have the support of the company's employees. Steve, you need to go. Case twitches slightly as if flinching from the bluntness. Then he regains his composure. No, I'm sticking around. I am not responsible for the national advertising downturn. That is a problem affecting every media company. I am a chairman. I do not handle the day to day operations. That was Jerry Levin. He is gone. The problems are being fixed. Crawford shakes his head. He hoped Case would see that it's over. I'm not alone in thinking this, Steve. I'm just the guy who drew the short straw and had to fly here to tell you that you need to go. Look, if you don't go willingly, you will be thrown out. Think about it. But Case isn't ready to go. AOL Time Warner is his creation and it's just getting started. He still believes he will be proved right in the long term, so he launches a last ditch campaign to save himself. It's a month later and Case is attending a breakfast meeting in the executive dining room at Warner Brothers movie studio in Los Angeles. The movie division boasts the highest revenues in the company and is growing more than twice as fast as aol. Case knows winning support from Warner Brothers executives could help his cause. But these movie executives are doing their best not to engage with him while eating their breakfast. Case plays it humble, acknowledges there have been mistakes, and offers explanations, all while avoiding any apologies. He tells them he wasn't as attentive as he should have been. That was because he was preoccupied with his brother, who died from brain cancer in June. But now he's back and ready to fix aol. The movie executives nod politely, but they're unconvinced. Not a one of them thinks Case can fix this mess. Case spends the next month seeking support, but privately he knows his message isn't landing. And in the background, Crawford and Ted Turner are organizing a revolt to depose him. At the next shareholder meeting, he realizes it's already over. On January 12, 2003, three years and a day after the AOL Time Warner merger was announced, Case resigns as chairman. By then, the merger has wiped out almost $200 billion of shareholder value. 18 days later, AOL Time Warner announces an annual loss of 99 billion billion. The biggest merger in US history has now delivered the biggest loss in corporate history. Case's rise was remarkable. He transformed a broke business into a tech pioneer that introduced millions to the online world and then engineered what is still the biggest merger of its kind. But his downfall was equally spectacular. The promise of AOL Time Warner soon dissolved into accounting scandals, power struggles and the biggest quarterly loss ever. With Case no longer chairman, Parsons continues reversing the merger. In the fall of 2003, the work crew returns to the entrance of 75 Rockefeller Plaza with their step ladders. It's been 19 months since they put the words AOL Time Warner above the doors. Now they've come to remove AOL from the name. The company's stock ticker switches back to TWX from aol and the corporate website address drops the AOL too. Time Warner is Time Warner again. It's as if the messed up marriage with AOL was just a dot com fever dream. But the ghost of AOL proves harder to exercise. Time Warner's stock price remains depressed. It's now worth around $16, 70% down since the merger. Back then, AOL and Time Warner's combined market capitalization was a massive $250 billion. Now it's worth around 70 billion. The company is also debt ridden. In January 2000, Time Warner had $17 billion of debt. Now it owes 26 billion. To reduce the debt, Time Warner starts dismantling its empire. It sells its music division and its CD and DVD factories. But AOL keeps dragging it down. Since the merger, AOL's lost its way. The move to broadband is accelerating, but AOL's too distracted by merger dramas to stay competitive. High speed Internet service providers undercut it. Broadband makes its web portal feel dated. Time Warner Cable blocks its plan to offer online voice calls, allowing Skype to capture that market. AOL is slow to respond to the rise of free webmail services like Microsoft's Hotmail and Google's Gmail. Time Warner Cable also encourages its customers to sign up for its own broadband service, Roadrunner. Instead of aol. AOL drifts into being a dial up relic. At its peak in 2002, 34 million people used AOL. Now folks are moving on. In 2004, more than 2 million customers canceled their AOL subscriptions. And as the exodus accelerates, the brand's value crumbles. In 2000, AOL was worth $124 billion. By 2005, its value had shriveled to just 20 billion. Four years later, it's worth less than 6 billion. By July 2009, only 6 million subscribers remain. And Time Warner has had enough. It's official. After Time Warner and AOL walked down the aisle in 2000 in one of the biggest media marriages of the decade, Time Warner announced the details of its long awaited divorce from aol. The deal of the century is over. AOL is independent again. It won't last. In 2015, Verizon buys it for $4.4 billion. Then in 2021, Verizon sells it to the private equity firm Apollo Global Management. By then, AOL is down to 1.5 million subscribers, each paying 999 or more a month. For that, they get to use the AOL Desktop Gold app, an all in one web browser, search engine and email client with privacy and security features. It retains the user friendly vibe that made AOL big in the dial up days. So there's chunky 90s style icons and the voice saying you've got mail. But not everything survived. The chat rooms in AOL Instant messenger, they're gone. It's a shadow of the giant it was in 1999. But there's still a business there. Since splitting with AOL, Time Warner's undergone A merry go round of changes. In 2009, it spun off Time Warner Cable. Five years later, it cut loose the magazine arm Time Inc. To focus on film and TV. Then AT&T bought it in a hundred million dollar deal and renamed it WarnerMedia. That deal proved to be another failure for much of the same reasons as the merger with AOL. Once again, the big issue was culture clash. WarnerMedia executives chafed at being run by a phone company. AT&T struggled to stomach the risk inherent in launching movies and TV shows. In 2022, AT&T offloaded WarnerMedia by merging it with Discovery to create Warner Bros. Discovery. And the restructuring continues today. In June 2025, Warner Bros. Discovery announced the spin off of its cable TV networks, including CNN and TNT Sports. This will allow the company to focus on its streaming TV service HBO Max. The spinoff cable TV business will also inherit most of Warner Bros. Discovery's $38 billion of debt. The AT&T takeover added a lot to that total. But the debt problems began with the AOL merger. Before aol, Time Warner's debt was considered investment grade. Today, Warner Brothers Discovery's debt is rated as BB plus, one step above junk. The company just hopes that once it's free of the debt and legacy cable networks, it can finally leave the legacy of its tragic merger with AOL in the past. Past. So what happened here? How did what seemed like a really great idea, the biggest merger in U.S. corporate history, become an epic dumpster fire? It's hard to untangle everything, but there sure are some takeaways. Don't rush a merger. Don't treat overvalued stocks like real currency. Don't mistake synergies for magic wands. And don't assume that being part of a big conglomerate will make your business more successful. But you know, for me, the big lesson is so basic it sounds almost cliche. Maybe that's why we don't hear it so much except when the wheels come off or some bigwig wants to show how sensitive they are. But it's a real thing. Make no mistake. Successful business comes down to people. You think that's too trite? Well. Well, let's think about this together. AOL Time Warner failed because the two companies cultures were oil and water. Their people didn't even think in the same way. What the company needed was a clear shared vision that the people on both sides of the business could buy into. But in that rush to merge, the calculated beauty of this would be opportunity got in the way. The focus on the big idea obscured something far more essential to success. The very soul of any business. The people who'd ultimately have to make it happen. Where did AOL Time Warner go wrong? Maybe it's worth quoting Steve Case himself. Vision without execution is hallucination. Foreign from wondering this is episode three of the AOL Time Warner Disaster for business wars. You know, we've used many sources for this season, including Stealing Time by Alec Klein, Fools Rush in by Nina Monk, and the Third Wave by Steve Case. A quick note about the recreations you've been hearing. In most cases, we can't know exactly where what was said at the time. These scenes are dramatization, but they're based on historical research. I'm your host David Brown. Our program was written and produced by Tristan Donovan of Yellow Ann. Sound design by Josh Morales. Kyle Randall is our lead sound designer. Fact checking by Gabrielle Drollet. Our producer is Kate Young. Our managing producer is Desi Blalock. Our senior managing producer is Callum Plews. Our senior producers are Emily Frost and Dave Schilling. Karen Lowe is our producer emeritus. Our executive producers are Jenny Lauer Beckman and Marshall Louie. For wondering it's your man, Nick Cannon and I'm here to bring you my new podcast, Nick Cannon at Night. I've heard y' all been needing some advice in the love department, so who better to help than yours truly? Nah, I'm serious. Every week I'm bringing out some of my celebrity friends and the best experts in the business to answer your most intimate relationship questions. Having problems with your man? We got you catching feelings for your sneaky link. Let's make sure it's the real deal first. Ready to bring toys into the bedroom? Let's talk about it. Consider this a non judgment zone to ask your questions when it comes to sex and modern dating. In relationships, friendships, situationships and everything in between, it's going to be sexy, freaky, messy and know what? You'll just have to watch the show. So don't be shy, join the conversation and head over to YouTube to watch Nick Cannon at night or subscribe on the Wondery app or wherever you get your podcast. Want to watch episodes early and ad free? Join Wondery plus right now.