A (0:00)

Behind every successful business, there's a battle to get to the top. And sometimes that battle ends in disaster. Back in the year 2000, America Online, or AOL, was at the height of its power. Then it made a move that stunned Wall Street. It made a bid to buy Time Warner, one of the most powerful media companies in the world. It was supposed to be the merger of the century, but instead it turned into one of the messiest corporate disasters on record. The newest season of Business wars takes you into that moment when ambition, ego and emerging tech collided. Yet you'll hear how a deal meant to secure dominance in the digital age instead collapsed under its own weight. You're about to hear a clip from the latest season of business the AOL Time Warner Disaster. While you're listening, follow Business wars on the Wondery app or wherever you get your podcasts.

B (0:55)

It's September 27, 2000, and at AOL's head office in Dulles, Virginia, the end of the quarter is near. And that's got the business affairs team worried. When the merger with Time Warner was announced, AOL stock traded at more than $70. Now it's hovering just above 55. That's over a 20% decline, and that's a problem. The merger deal was agreed based on AOL's share price before the bottom fell out of tech stocks. And the lower AOL stock sinks, the more investors wonder if Time Warner might be wiser to abandon the merger. So far, Time Warner boss Jerry Levin has dismissed that idea and reiterated his commitment to the merger. But AOL chief Steve Case is worried all the same. He knows that if Wall street senses weakness at aol, there will be a sell off of its stock. And the lower that price gets, the more pressure there will be on Levin to rethink. Sometimes stock price isn't just a valuation, it's ammunition. In a stock for stock deal, every dollar your shares drop weakens your negotiating hand. Case knew it. It's why he moved to do the deal while AOL stock was flying high. When your stock is your currency, perception becomes reality in real time. And that's why Case now needs to prop up the price long enough to close this deal. Case pushes AOL's ad sales team to do all they can to ensure that the company's quarterly numbers meet Wall Street's lofty expectations. He thought the merger would be complete by now, but the negotiations with regulators are dragging on. But at this moment, with just three days until the third quarter ends, AOL looks set to fall short of expectations. So the business affairs team springs into action. The team is young, aggressive and driven. They know this is a crisis, one with the potential to derail the merger. Three days to fill the hole in AOL's ad revenue goal. They search for options and then someone in AOL tips them off about Wembley plc. Wembley is a British gambling business with interests in greyhound and horse racing. And all the way back in the pre web days of 1992, AOL and Wembley got into a legal fight. The particulars don't matter much here. What matters is that Wembley settled and agreed to pay AOL nearly $27 million. And it's not yet paid. So one of the AOL business affairs team members calls Wembley and offers them a deal. AOL will cut the amount it owes by $3 million if they agree to spend the rest on online ads. Wembley takes the deal not just because of the savings, but because it's about to launch a greyhound racing website, which it will need to advertise. But AOL's not out of the woods yet. If AOL is to include this money in its third quarter results, the ads have to run before the end of September and Wembley's website isn't ready. So it's in no rush to get the ads out. So the AOL team get creative. Without telling Wembley, they copy the artwork from its greyhounds website and use them to create a bunch of online ads. Then they flood AOL with more than $20 million of greyhound racing ads. Users log in to find AOL infested with greyhounds. Everywhere they go on the portal, there are greyhounds staring back at them. Meanwhile, in its head office in London, Wembley's tech team are left scrambling to cope with the avalanche of online traffic to a website they've not even started promoting yet. But at AOL head office, it's party time. The business affairs team are high fiving and dancing to the hip hop hit who Let the dogs out. AOL's going to deliver yet another set of impressive numbers. It's enough to keep the merger from derailing. But now AOL's massaging the numbers and misleading investors about how well it's doing, turning a legal settlement into a last minute ad buy. That's the kind of creativity that smells a bit like desperation, don't you think? AOL was selling ads. It was jamming invoices into the calendar to hit a target. Sure, the numbers look good for a quarter, but if you're just putting off the inevitable crash. Well, that's why founders need to build honest momentum, not magical math. And now that AOL has crossed that line, the idea of crossing it again and again for feels far less daunting. But while AOL's business affairs team conjures sales out of nowhere, the architects of the merger are getting angsty. Aol, Steve Case and Time Warner's Jerry Levin are growing worried about how long it's taking to reach a deal with the regulators. Every day brings more bad news for Internet stocks. In October 2000, AOL stock price sinks to its lowest level in a year, a situation that adds to the growing impression that Levin sold Time Warner for the stock market's answer to fool's gold. So Case and Levin order their attorneys to get an agreement done with the regulators fast. If that means agreeing to open up Time Warner cable systems to competitors, well, so be it. It's no longer about the long term. It's about saving the merger at all costs. And it can't happen soon enough.