The Investor

A Time to Live

If AOL threatens to ''whack'' some Time Warner assets, the family might survive.

By 12.4.02

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I recently bought a new humongous SUV. It's the color of a school bus and just as large. Even though I have mountains in my backyard and live in a desert, I haven't taken it off road. Still, I give it a little workout from time to time, just to prove that I know how to use it. When pulling out of the driveway, I will occasionally jump over a curb or "accidentally" run over one of my kids' old bicycles. The vehicle has a rear-mounted video camera to prevent these stunts, but I tell my wife it would be cowardly to own such a behemoth and not subject it to some tests.

I wish the poobahs at AOL Time Warner would show as much gumption. The company is under attack for failing to deliver on the promise that marrying AOL and Time Warner would make the combined company better than the sum of its parts. Of course, this unfulfilled promise of synergy has been behind all the media mergers of the last several years, and part of AOL Time Warner's bloodline since the days when Steve Ross merged funeral homes, parking lots, and Warner Brothers studios.

So where is the synergy in AOL Time Warner? Some of AOL's news content comes from CNN, but you can get CNN.com without AOL, or just by turning on your cable TV. The shareholders of AOL Time Warner have taken on billions in debt and had their ownership diluted in the name of synergy. I think they are entitled to see, once and for all, if the company's substantial media assets can bail AOL out of its doldrums.

On Monday, after four months of anticipation, marathon board meetings, rolling of heads, and reports of tantrums by Ted Turner, AOL Time Warner announced its plans for its most beleaguered, most expensive asset, America Online. It will make certain Time Inc. and CNN content available exclusively on AOL. Other content from People, Entertainment Weekly, InStyle, and other magazines would be restricted on the Internet but available to AOL members. The company was short on specifics, other than to say that advertising and e-commerce revenue will drop by as much as 50% next year.

The stock market's response was underwhelming. AOL Time Warner's already depressed stock dropped 14%. On the brighter side, there were no announcements that Warner Brothers would let Madonna make any more movies.

It is past time for AOL Time Warner CEO Richard Parsons or AOL President Jon Miller to take decisive action. If you want more people to sign up for AOL, or stay on AOL, or pay more for AOL, or advertise on AOL, making the Harry Potter trailer available a week early "exclusively" on AOL isn't going to cut it.

Here's how you test concepts like "synergy" and "brand uniqueness": pull CNN off the air. Dead air. CNN.com? It's history, a "404 authorization error."

Where did they go? Log on to AOL and find out. You can get to CNN.com only through AOL, or you can pop-up a video player on AOL and watch it live on your computer. Charge a couple bucks more for AOL and thread some ads through the stories and the live feed.

I can already hear the critics. Advertisers won't support a web-only CNN. AOL users won't tolerate heavier ad content.

Use synergy to fix it. AOL Time Warner owns a whole movie studio, for gosh sakes. Whenever I go into a movie theater, I always see great-looking trailers for dreadful movies. I actually enjoy watching those advertisements. Get your Steven Spielbergs and Clint Eastwoods and make some ads for toothpaste, deodorant, and cookies that AOL viewers can endure for a few seconds.

Even if it doesn't work and destroys CNN in the process, it would be fun to watch Ted Turner's large intestine leap from his body and attempt to strangle Steve Case when he learns of the plan. Coke toyed with its formula, failed, and lived to tell the tale. AOL Time Warner could take a shot with CNN.

But if that's too much for you to take, yank People from the newsstands and make people access it solely through AOL.

People has a lock on the market for the latest goings-on of the A List. If you want to find out what's happening with J-Lo, Ben, The Crows (Russell, Cameron, Sheryl, and Counting), and the Royal Family, you have to read People. Us is definitely lower wattage, focusing on Nicolas Cage, Lisa Marie Presley Keough Jackson Cage, the cast of Friends (minus Jennifer Aniston), and their ilk. InStyle is still available for those who consider People and Us too highbrow, but that's a Time Warner mag, so they can pull it as well if its continued availability interferes with this strategy.

Even this is probably just a pipedream. The scaredy-cat contingent at AOL Time Warner will claim that a newsstand edition of People is necessary for, at a minimum, people at hair salons, dental offices, and auto repair waiting rooms.

How about if AOL Time Warner made just a small gesture to demonstrate it is committed to getting some synergy out of the merger?

Say goodbye to The Sopranos on HBO. Say hello to The Sopranos on AOL.

This shouldn't be any more radical than the original decision to put the show on cable to begin with. It wasn't that long ago that the conventional wisdom was that a series on cable TV could never compete with a network series. Moving to broadband TV is the next step, and AOL is too heavily invested in that medium to not be the leader. If AOL doesn't want to sell ads to run during the webcasts, it could opt for "presenting sponsors" who don't interrupt the action with ads but who pay for "other promotional considerations."

SILVIO: Did you get a car for disposing of the body?

PAULIE WALNUTS: Relax, I got a Lincoln Town Car. We could whack five, six guys and fit them in the trunk, no problem.

SILVIO: The Ford Motor Company, a real friend of the family.

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About the Author

Michael Craig is a writer in Scottsdale, Arizona.