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Time Warner Inc.

TimeWarnerLogo

Type Public (NYSE: TWX)
Founded Merger between Time Inc. and Warner Communications (1990); subsequently purchased by AOL (2001)
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Time Warner Inc. or TimeWarner (AOL Time Warner Inc. from 2001–2003) is a massive American media conglomerate with major Internet, publishing, film, telecommunications and television divisions. The company is headquartered in New York City.

HistoryEdit

Warner Communications was established in 1972 when Kinney National Company spun off its non-entertainment assets, due to a financial scandal over its parking operations.

It was the parent company for Warner Bros. Pictures and Warner Music Group during the 1970s and 1980s. It also ownedDC Comics and Mad, as well as a majority stake in Garden State National Bank (an investment it was ultimately required to sell pursuant to requirements under the Bank Holding Company Act). Initial divestiture efforts led by Garden State CEO Charles A. Agemian were blocked by Garden State board member William A. Conway in 1978; a revised transaction was later completed in 1980. Warner made (and later lost) considerable profits with Atari, which it owned from 1976 to 1984.

In the 1970s, Warner expanded under the guidance of CEO Steve Ross (Time-Warner CEO) and formed a joint venture with American Express, named Warner-Amex Satellite Entertainment, which held cable channels including MTV, Nickelodeon and Showtime. Warner bought out American Express's half in 1984, and sold the venture a year later to Viacom, which renamed it MTV Networks.

In 1987, it was announced that Warner Communications and Time Inc. were to merge. The last thing Warner did before the merger closed in 1989 was to buy out Lorimar-Telepictures. In early 1990, the combined companies were named Time Warner. This company subsequently acquired Ted Turner's Turner Broadcasting System in October 1996.

America Online mergerEdit

In 2001, a new company called AOL Time Warner was created when AOL purchased Time Warner. The deal, announced in 2000, employed an unusual merger structure in which each original company merged into a newly created entity. The Federal Trade Commission approved the deal on December 14, 2000. It was then subject to a public comment period of 30 days, until January 16, 2001.

There has been some speculation about the motivations of each party. Some observers believed that Time Warner was struggling to integrate "new media" into its business. A merger with AOL provided a huge subscriber base of Internet users, along with online marketing know-how. Many business journalists have reported that AOL executives felt that AOL stock was severely overvalued and that a big merger was the only way to prevent a collapse in valuation. The merger faced immediate opposition by consumer groups and other media companies on antitrust grounds.

Media companies felt that the vertically integrated AOL Time Warner would unfairly promote its own content within its outlets. This fear existed before the merger, but Time Warner was thought to be a conglomeration of very independent divisions. It was feared that this would change with the influence of AOL executives.

Consumer advocates were concerned with the threat of product tying between Time Warner's cable TV systems and AOL's Internet service. Some consumer groups saw a possible attempt to corner the Internet-over-TV market, whereby AOL could force all of the Time Warner cable subscribers to use AOL branded Internet-TV. Smaller internet service providers feared that AOL would tie its Internet service to Time Warner's cable modem service. Some ISPs wanted the opportunity to use Time Warner's cable network as a common carrier for their services, which competed with AOL. AOL and Time Warner pledged not to violate any antitrust regulations.

Many observers were shocked that a large, diversified media conglomerate was being acquired by a much smaller company. Market conditions at the time of the merger placed a greater premium on Internet-related stocks than on traditional media stocks. AOL's high market capitalization relative to that of Time Warner made the acquisition possible. The deal has since become a symbol of the Dot com bubble and is widely regarded as a disaster, with a $2.4 billion shareholder settlement, a further $600 million set aside and a $5 billion price boosting share buyback program announced on August 3 2005.

AOL CEO Steve Case became executive chairman of the new company, while Time Warner CEO Gerald Levin retained the CEO title.

Post-mergerEdit

After the merger, the profitability of the ISP division (America Online) decreased. Meanwhile, the market valuation of similar independent internet companies fell dramatically. As a result, the value of the America Online division dropped significantly. This forced a goodwill write down, causing AOL Time Warner to report a loss of $99 billion in 2002 - at the time, the largest loss ever reported by a company.

In response to the huge loss in 2002, the company dropped the "AOL" from its name, and removed Steve Case as executive chairman in favour of Richard Parsons. Case resigned from the Time Warner board on October 31, 2005.[1]

Since the merger, a number of transactions have taken place:

  • The professional wrestling company WCW was sold to competitor WWE for $7 million.
  • The Atlanta Hawks, Atlanta Thrashers, and operating rights to Philips Arena were sold in mid-2003.
  • The fifty percent share in the cable channel Comedy Central was sold to Viacom.
  • Warner Music Group, a music company, was sold to a group of investors led by Edgar Bronfman, Jr. in late 2003.
  • AOL/Netscape's longrunning litigation against Microsoft was settled out of court.
  • Time Warner announced that it was shutting down its CNNfn financial information channel and disposing of its share in Google (2004).
  • On March 31, 2006 Time Warner sold the Time Warner Book Group to French publisher Hachette Livre, of the Lagardere group.
  • On February 7, 2006, a group led by corporate raider Carl Icahn and Lazard Frères CEO Bruce Wasserstein unveiled a 343-page proposal calling for the breakup of Time Warner into four companies and stock buybacks totaling approximately $20 billion. On February 17, 2006, the Icahn-lead group agreed with Time Warner to not contest the re-election of TW's slate of board members at the 2006 shareholders meeting. In exchange for the Icahn group's cooperation, Time Warner will buy back up $20 billion of stock, nominate more independent members to the board of directors, cut $1 billion of costs by 2007, and continue discussions with the Icahn group over their proposal, particularly on the future of Time Warner Cable.
  • On February 23, 2006, Time Warner announced that Turner South, a regional sports and entertainment network in the south, will be sold to News Corp.'s Fox Cable Networks group.

CW Television NetworkEdit

Starting on September 18, 2006, Time Warner, the Tribune Company (which owns The WB Television Network), and CBS Corporation (which owns UPN) will partner with The CW Television Network, although CBS and Time Warner will each own 50% of the network, and Tribune and CBS will have its stations become the network's affiliates.

ServicesEdit

Time Warner Cable has since expanded and offers the following services:

  • Road Runner High-Speed Online - Time Warner's residential- and commercial-grade high-speed Internet service provider
  • Time Warner Cable - features advanced video technologies such as Video On Demand and digital video recorders
  • Digital Phone - an unlimited local and long distance telephone service that runs over the Time Warner Cable hybrid fiber-coax network.

FinancialsEdit

In 2004, Time Warner's market capitalization was $84 billion (2004). When the AOL-Time Warner merger was announced in January 2000, the combined market capitalization was $280 billion.

For fiscal year 2002 the company reported a $99 billion loss on its income statement ([2]) because of $100 billion in non-recurring charges, almost all from a writedown of the goodwill (intangible asset) from the merger in 2000. (The value of the AOL portion of the company had dropped sharply with the collapse of the Internet boom, in the early 2000s.)

Commercial propertiesEdit

Time Warner Inc. owns several large properties in New York City; certain buildings in the Rockefeller Center complex and adjacent office towers house its main offices; one of which houses a CNN news studio. In late 2003, Time Warner finished construction of a new twin-tower complex, designed to serve as additional office space, facing Columbus Circle on the southwestern edge of Central Park. Originally called the AOL Time Warner Center, the 755-foot, 55-floor mixed-use property was renamed Time Warner Center when the company itself was renamed.

Board of directorsEdit

See alsoEdit

  • List of United States companies
  • List of assets owned by Time Warner
  • Time-Life - former direct marketing (books, music, video) subsidiary
  • Ted Turner
  • Steve Case

External linksEdit

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