The bigger it was, the harder it fell. News broke late last week that AOL and Time Warner are breaking up. Theirs was the largest merger in history, hailed as a monumental move, creating a powerhouse media entity. Instead, it turned into a lengthy exercise in corporate bulimia.
Remember when the news first broke about the merger? The two companies were already so big and unwieldy that at first nobody knew who was taking over whom. And that’s when AOL was AOL and web service meant a free trial CD in People.
It’s striking how frequently statements gloss over failure and paint them as success. AOL’s recently named chairman and CEO Tim Armstrong, formerly of Google’s ad unit, called the separation “a great opportunity for AOL. Becoming a standalone public company positions AOL to strengthen its core business, deliver new and innovative products and services, and enhance our strategic options.”
Remember when AOL was a core business with its own publicly traded stock? What would have been the shame in saying, “AOL Time Warner was a promising, tempting media experiment on a grand scale that gradually went sour. As you’ve seen, it has had some problems and we’re hitting the ‘Undo’ button to get back to our roots.” A) The press would have given him credit for treating them like they had gone through puberty and B) He is the umpteenth CEO that AOL has had in the last decade, so he could have said that credibly and without blame.
Time Warner’s chairman and CEO Jeff Bewkes said, “The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content business.” Fine, but this reshaping has been going on for way more than 6 months.
Corporate restructuring guru Dick Parsons did what he could to will AOL Time Warner’s survival when he headed it from 2001-2007. In the process, several long-publishing magazines were discontinued and thousands of people were laid off. Times change.
“The $147 billion deal in which AOL bought Time Warner in 2001 epitomized the mind-boggling wealth created during the dot-com boom and quickly became one of the worst corporate combinations in history,” The New York Times opined. It was so embarrassing that Time Warner eventually dropped AOL from its name!
Back then, a $147 billion used to mean something. Rescue packages and stimulus bills are numbing us a bit.
Upon reflection, the lifecycle of large business seems to be just that: a cycle of comings-together and splits. Its like zygosis followed by mitosis. Big combos do not a good merger make. Clear strategic goals and corporate culture must be cemented.
AOL remains a challenged organization from a sustainable revenue-generation perspective. It has been transitioning from a subscription model to an online-ad based business, and has made some strides, but you might say it has not quite gotten its sea legs. It simply isn’t the brand or industry player that it once was.
In any event, hopefully this separation will be for the best. After all, Viacom and CBS Corp. seem to be functioning better as separate entities.