The Warner Story Gets Messy

So in our last episode, I talked about the founding of two major parts of Warner Media, which was a Time Incorporated, a magazine publisher, and Warner Brothers as in Warner Brothers Studios, the film and then later TV and record label studios. I focused a lot on Warner Brothers in that last episode for pretty obvious reasons, but it's time to go back to Time Incorporated. That is for

a moment anyway. Now. In the last episode, I said that Time grew as a publisher, adding more publications to its name as it evolved, and that it continued to do so right up to nine nine, when it would begin the process of merging with a company that at that point was called Warner Communications. And I'm not going to go all over that again because it's crazy complicated, and you know, I just did that in Monday's episode. But one thing I did not cover was Times own

multimedia empire. See, Time wasn't just in the business of publishing magazines or even those Time Life books. You might remember if you grew up in the seventies and eighties like I did, and you saw the commercials all the time. You know, I never did get that series about ghosts, but I always wanted it. Anyway, we're backtracking a bit to the nineteen sixties to talk about another element of the Warner Media empire, and it came to Warner Media

through Time Incorporated. And it's a very important piece of that empire. In fact, it's a composent that would end up being transformational, so much so that I've done a full series about this company, or rather this channel, and I'm talking about HBO or Home Box Office, the subscription cable channel best known today for like original series like

Game of Thrones and stuff. So since I did a full treatment of this company in the past in full episodes of tech stuff, and in fact have aired some of those episodes as classics, not not in the not too distant past, I'm not going to dive into excruciating detail, but we do need to cover some of it because HBO is a really important part of Warner Media today. Alright, so let's put ourselves in the mindset of the typical American consumer, uh, someone who watches television back in the

nineteen sixties. This person has spent a not insignificant amount of money to purchase a television set, and they most likely get their television using an end anna to tune into over the air broadcasts from nearby TV stations. Now, maybe if they live in a rural area, or if they're in a really dense urban area with lots of skyscrapers,

they would actually be using cable. It's more likely to be in a rural area in the nineteen sixties because see, over the air broadcasts have a limited range, and once you get far enough out from where there's a transmitter, the signal you pick up might be so weak that you can't see or hear anything on a given channel, or it's just you know, a really poor quality, like

a lot of static or whatever. So cable was a way to deliver television signals to distant locations over a physical wire or cable rather than over the air, and by the nineteen sixties there were more than six hundred cable systems in the United States. Mostly serving rural areas that were not or you know, small towns that were not close to transmitters. And the way most of these worked was that you would have a dedicated antenna in

a location that could get a pretty good signal. So you might build a really tall antenna at the top of a hill, for example, and then you would pick up signals using that antenna, and you'd send that signal down cables to various households, which had to pay a fee to access the cable feed. But the alternative was to either get really cruddy TV signals or go with nothing at all. So for some regions, cable TV was

really the only option if you actually wanted to watch television. Now, it was a guy named Charles Dolan who really pioneered cable for dense urban environments. Like I said, it was already being done out in rural areas, but Dolan was looking at places like New York City. Dolan had started out as a film editor. He was splicing together stuff like sports films and industrial films in Cleveland, Ohio. But he got a lucrative offer to sell his business and

he took it. Then he relocated to New York City, and that's where he saw the opportunity to potentially create a cable system to serve the needs of folks who were living in Downtown Manhattan and Lower Manhattan. Many of these people, because of skyscrapers, weren't able to get a good signal just using you know, antenna. Meanwhile, folks in New Jersey could pick up signals from Manhattan without a problem.

So it was really a disconnect, right. You had people living miles away who were picking up signals there were just a few blocks away from Lower Manhattan, and the folks at Lower Manhattan couldn't see anything. Well. Dolan decided to start up a business called Sterling Information Services in nineteen and the company's focus was to provide cable TV service for Lower Manhattan. But while the demand for television was there, the actual reality of wiring up customers was

another matter. Because after a mass of blizzard that happened in the late nineteenth century, the city of New York had made a decision regarding infrastructure. You know, back then, numerous utility poles were destroyed in that blizzard, so New York decided to install power lines underground rather than using utility poles, and stringing them above ground. Now that meant there were no utility poles for Dolan to use in order to wire up cable, so that meant he was

going to have to lay cable underground. That is incredibly expensive. The estimates were somewhere in the neighborhood of three hundred thousand dollars per mile of cable, and getting the cable to a customer's location was just part of the problem.

Manhattan residents largely lived in apartment buildings, so Dolan would not just have to get the cable to the building, he would then have to install cable into the buildings themselves, you know, snake it up through the structure itself, in order to wire up each of the apartments that would subscribe to his service. So by nineteen sixty seven, you know, two years into his endeavor, Dolan had only signed up four hundred customers and had spent more than two million

dollars in the process. And he was losing money at that time, Like he the costs were vastly outpacing the revenue. Dolan got an investor to help offset those costs, and that kept him afloat. And that investor was drumroll, please, Time incorporated. Time, the publisher was eyeing cable as a possible means of diversifying its portfolio of businesses, and the folks at Time had this feeling that cable TV could

become a really big thing. So Time bought a stake in Sterling, which gave Dolan the money he needed in order to stay in business. But Dolan was still having trouble convincing people to actually sign up for the cable service. The content that already existed for TV isn't always compelling enough to convince most folks to agree to a subscription

based model in order to access it. See. The main issue really was that TV content at that time was free quote unquote free Now I say free because it's free the same way this podcast is free, and that the content on television received revenue from advertisers. Content was ad supported. In other words, This also gave rise to companies like Nielsen, which created systems that could measure the

relative popularity of different programs. That popularity would then lead to estimates about how many people were watching any given show at any given time. Yeah, this was done by projecting numbers. You would distribute a number of devices that would essentially monitor what channel televisions were set at in a given time, and then you would multiply that number by a factor in order to kind of project that

out to the general public. Not the most precise way of doing things, but it was the only real way of handling it at the moment. So that popularity level would lead to, you know, estimates about how many people were watching at any given show at any given time, and that gave TV executives an idea of what their most popular programming was. That would lead to TV executives being able to negotiate bigger ad deals for the most

popular programs. And all of this makes sense, right, I mean, you can ask for a higher price to run an ad during a really popular show because presumably way more people are going to see ads that run on that show than they would if you had an episode of I don't know, Johnny tech boy talks about gadgets. Trust me, I should know. Anyway, this sort of set up a general expectation among viewers TV programming was quote unquote free.

And it's funny because the same sort of thing happened the Internet, right People got used to this idea that they could access content on the Internet for free, which meant when some companies try to generate revenue not through advertising, which has its own set of drawbacks, but rather through things like subscriptions or paid for content. A lot of people balked at that the so called paywall became a

barrier to entry, and I get it. You're asking people to pay out of pocket for something when there's tons of other stuff out there that does not require that kind of direct investment. It's one of the big reasons we don't go for paid subscription approaches with our podcasts in general. We feel that anytime you put a paywall in front of content, you're going to see a much smaller audience, and we would rather be able to reach a lot of people, because it turns out we like

people anyway. The landscape and TV was that most people were used to getting their programming for free, and so a lot of just didn't see the value in subscribing to a service to get something that other people got just by using an antenna. So Dolan would end up doing something that lots of other people and companies had tried before. He would create content that would not be available anywhere else, and the only way you would be able to get it is if you bought into the

cable subscription. Our c A essentially did this back in the day with radios. The company made radio sets, but it really got into the radio station business largely because it created the demand among consumers to buy the radios themselves. Right Like, you wouldn't buy a radio if there were no stations to tune into. So our c A had to get into the radio station business to create the content so that people would want to go out and

buy the radio sets. It's this kind of cyclical approach. Now, the story goes that Dolan went on vacation with his family and took a cruise to France aboard the ship the Queen Elizabeth the Second, and on that trip he came up with this idea for an exclusive channel that would only go to his cable subscribers, and his working name for the channel at that point was the Green Channel.

The Green Channel would have to have special programming on it, It had to have stuff that you just couldn't find on over the air broadcasts had to be set apart with premium content. And this was going to be a pretty big gamble because other people had attempted to create versions of pay TV in the past, and no one had really succeeded at it so far. Now. Some of

those schemes involved over the air transmissions. Those are kind of hard to do as a pay TV service because there's always a chance for people to try and pirate the air waves and thus watch that precious content without actually paying for it. And because it's over the air broadcasts, you would have no way of knowing as a broadcaster that people were doing that, right, I mean, you're just

sending a signal out. There's no return signal that tells you if people are, you know, legit paying for your service, or if they're just stealing it like the dirty TV thieves that they are. There were also encoding and decoding strategies, in other words, scrambling a signal, which in theory, on the other end, when you have a paying customer, would be de scrambled to play properly on the television. But a lot of those approaches were really limited and not

very good. So there were a lot of legit customers who were getting poor experiences on the other end, like they were actually paying for the service, but the results were subpar cable bypassed those types of issues, and it had another benefit because it wasn't broadcast over the air because the f c C was trailing behind technology, FCC restrictions that applied to over the air providers did not

apply to cable. Time surveyed potential customers. That is, Time Incorporated surveyed potential customers for this new cable service with a premium channel, and the results were not exactly promising. They looked pretty bad, and they actually did a couple of surveys and a lot of them looked bad. However, after Time suggested that the first month of service would be free and the installation charges would be refundable, they got a slightly better response, though it still wasn't like

overwhelmingly positive. It was essentially like a fift approval. Meanwhile, the Green Channel went through a name makeover. No one had really come up with a killer name yet, so they had a placeholder, a temporary name, and this was called Home Box Office, which everyone was absolutely sure would be changed before it launched, and it totally didn't. Interestingly, when HBO was finally ready to debut, it wouldn't do so on Sterling Communications. That is, it would not be

on Dolan's cable network UH. Instead, it was a community in Allentown, Pennsylvania that Time would choose as the debut spot for HBO, at least initially UH, and it was wired up on a totally different cable service that was created by a guy named John Walson. That's the man who actually gets the credit for inventing cable TV in the first place. However, Time then changed its mind decided

to actually pilot the service in Wilkes Bar, Pennsylvania. The reason for the shift was that some of the programming that HBO wanted to carry happened to be NBA basketball games. But the NBA, like a lot of sports organizations, has a blackout rule, and that blackout rule says you are not allowed to broadcast a game played within a certain radius of where that game is taking place unless that game happens to be sold out. This is a way to make sure that venues like stadiums are selling as

many tickets as possible. The idea being that if you can stay home and why the game on TV, you might not make the effort of buying a ticket and going to the stadium. I mean that would be much more expensive. So these blackouts meant that if you happened to be within a certain region, like a certain range from the stadium, you could not broadcast there. Well, Allentown was a little too close to Philadelphia for that to work out, So wilkes Bar was outside that range and

thus wouldn't have any issues. It wouldn't It would mean that HBO wouldn't have to go dark for certain types of programming. So Time moves the pilot program to wilkes Bar, and again that was outside of that that UH radius. Now, initially, the subscription for HBO to add HBO to your cable plan if you lived in wilkes Bar at this time

was six dollars a month. Fewer than four hundred people signed up for it when it launched on November eighth, ninety two, and the first two pieces of programming on HBO included a hockey game of the Rangers versus the Canucks, followed by a movie from nineteen seventy called Sometimes a Great Notion. The growth of HBO at first wasn't exactly inspiring.

Time incorporated oversaw deals with various regional cable companies, most of them in Pennsylvania, and got agreements for them to be able to carry the channel in return for subscriptions. Customers of those cable companies would still have to add a subscription to HBO in order to actually access that channel.

This would go on top of their normal cable subscription, so they're already paying their cable bill, they'd have to pay extra to get HBOS, something that I think most of us are familiar with because that's kind of how it operates now. And this was still a pretty hard

sell at that point. There were also other paid cable channels emerging around this time, including one that would be called Star Channel, which was part of Kenny National Company slash Warner Community Sans within a division of Warner Communications called Warner Cable. Meanwhile, the Sterling Cable Company was still struggling in New York and losing money. The subscriber base was modest, and the cost of installing cable in Manhattan

had not gotten any cheaper. Time acquired controlling Steak in Sterling and then renamed it Manhattan Cable Television in nineteen three. The growth in HBO largely came from a new method of distributing signals so early on the way that Time would broadcast HBO to cable stations. Is so they've got their starter signal. They would then send that signal to a microwave transmitter. And you have a tower, a radio

tower that can send out microwave transmissions. This tower would beam out of microwave signal that carries that channel to various cable stations in the region. These stations would receive that transmission using a microwave antenna, and then they would say and that signal through their cables to their customers. But this new approach would go much further. In fact,

it went all the way out into space. The new approach involved beaming the channel signal up to a communications satellite in orbit, which then could beam down that same signal to a receiving antenna connected to various cable stations. This removed the need to build out microwave transmission antenna

across the United States and helped HBO to go national. Now, when we come back, will transition over to some other elements that would become part of the Time Warner slash Warner Communications slash Warner Media Empire, and some that would not stand the test of time. But first let's take a quick break. HBO would continue to grow year over year, and of course it got into the business of creating original content on top of carrying stuff like sports events,

films that had recently left their theatrical runs. It also created a companion channel that was a slightly lower tier premium subscription channel. That channel was Cinemax, which launched in nineteen Cinemax would focus solely on carrying movies at first, while HBO continued to carry a variety of programming. The reason Time launched Cinemax was primarily to compete with the Movie Channel, which at that point was part of the

Warner Amex satellite entertainment venture. The Movie Channel, by the way, would merge with another channel called Showtime, and that new channel would just be called Showtime. Ultimately, Warner an American Express would sell off this joint venture to Viacom. Anyway, Cinemax would go on to experiment with various content over the years, and while from the outside it seemed like it was kind of a competing cable service to HBO, in reality, both entities fell under the umbrella of Time

and after nine Time Warner. Okay, so that's the basis of the HBO and Cinemax elements of what is now Warner Medium. I'm sure we're gonna come back because we're gonna have to talk about HBO Max later on that that's going to have to come in the next episode. And we've got a lot more to cover because there's just so much and it is exhausting. But let's let's

take quick stock before we move on. So we're up to about Time Warner has merged, So Time Incorporated and Warner Communications are now Time Warner, and we've got a true goliath of a multimedia company, one that would set the stage for other massive media companies in the future. So you had the assets of Time, which included a publishing company with several popular weekly magazine titles, plus books

and beyond. That also includes the pay cable channels and HBO and Cinemax, which we're now established entities, and they were solid revenue general raiders. By nine. You had the Warner Brothers movie and animation studios. UH Animation at this point was it was a little quiet, but they still had them. You also had the Warner Brothers television studios. You still had the Warner Music Group, which was kind of an umbrella for numerous music companies, not just Warner records.

Warner had sold off its stake in cable channels like MTV, Nickelodeon, and Showtime to Viacom, so those were gone, but the company still had actual cable operations as in cable service, that is, the ability to act as a cable service provider. That was Warner Cable. Oh and they also owned d

C Comics. Time had also acquired a cable service provider called American Television and Communications or a TC, back in nineteen seventy three, So Warner Cable became Time Warner Cable after the merger, and a t C became Time Warner Communications. Both of these divisions were then lumped in together into a collected division called Time Warner Cable Group. However, this part of the Time Warner would not stick around by

the time we get to Warner Media. This is a part of the company that would get spun off and sold off. The Time Warner Company would spend off Time Warner Cable as an independent company in two thousand nine. But let's just follow that bunny trail a bit more because it is interesting. So we're gonna flash forward to two thousand thirteen and in Time Warner Cable, which remember at this point is an independent company. It's no longer

part of Time Warner itself. Uh. It was looking at the possibility of finding a buyer to take over the company, and old t WC founded two suitors in Charter Communications

and Comcast. These two companies competed for the lovely hand of Time Warner Cable in proverbial marriage, and Comcast looked like it was going to win out, but then the US depart I'm gonna have justice stepped in and said, hang on, Comcast, if you buy out Time Warner Cable, then you're going to have control of more than half of all broadband connections in the United States, and that's just a bit too anti competitive for our tastes, which

was probably a good thing because Comcast was also building out its own ginormous media empire, which is a totally different story. By Comcast had enough with all the various inquiries and pushbacks and they jumped out of the picture. So Charter went on to acquire Time Warner Cable and eventually phased out the branding to merge it with Charters brand Spectrum, so that former part of Time Warner is now with Charter as Spectrum. Okay, so we've dealt with

that piece. What's next? Alright? Okay, Turner Broadcasting CALSA. All right, So Time Warner acquired Turner Broadcasting in NIX. But that means we need to learn at least a little bit about Turner Broadcasting. And this is kind of getting into my own backyard here as I live in Atlanta, Georgia. So this is largely the story of Ted Turner. Now,

Ted Turner came from money. His father owned an advertising company that actually was mostly focused on billboard advertising, and Ted, after some uh Shenanigan's in college that got him booted from college, he joined the family business in nineteen sixty. Tragically, Ted Turner's father committed suicide in nineteen sixty three, and at that point Ted took over the family business and the company was struggling at at that time, but Turner was able to move the business around, get it back

on its feet, and made it profitable again. Now having succeeded at rescuing one business, Turner saw a chance to do it again, but in a totally different industry. So there was this ultra high frequency or UHF television station out of Atlanta that was having its own financial struggles and was in danger of going on a business so Turner purchased this company and within three years turned it around. Two it was making a profit, and in nineteen seventy five,

Turner did something pretty forward thinking. He made a deal that allowed him to beam this station's signal up to a satellite and broadcast it to various keble television audiences. So not that different from what channels like HBO we're doing. Only Turner's station was ad supported, so it didn't require a special subscription. He called it w TBS or just TBS for Turner Broadcasting System, and Turner reorganized the parent company for TBS and named it Turner Communications Company later

on just changing that to Turner Broadcasting System Incorporated. He launched the first twenty four hour news channel that was CNN in nineteen eighty. He also launched t NT or the Turner Network Television station, in nine Um let's see. He bought the Atlanta Braves baseball team in nineteen seventy six. He bought the Atlanta Hawks basketball team in nineteen seventy seven. He bought the MGM Slash United Artists Entertainment Company in nineteen eighty six that included a library of more than

four thousand movies. He did not hold on too that, however, that story by itself MGM story that one also will make your head spend, but I'll not go into a lot of detail here. In ninetee, Turner entered a joint venture with Apollo Investment Fund to acquire the Hanna Barbera Studio. Hanna Barbara was in animation studio um known for producing tons of famous cartoons, including Johnny Quest, The Flint Stones, The Jetsons, Yogi Bear, Scooby Doo, tons of them. He

also acquired a lot of other studio libraries. He managed to acquire the pre nineteen fifty Warner Brothers Film Library, He got the a AP Library, which included some Warner Brothers animation in it, and the Fleischer Studios Library, which included Popeye cartoons plus lots of other stuff. So he was just acquiring all this content. He also purchased w c W, the Professional Wrestling Federation in nineteen eight nine.

But all these acquisitions accrued an enormous amount of debt for Turner, so he also sold off some of them pretty quickly. So MGM u A went fairly early on In fact, Turner sold it back to the guy who sold it to him, but Turner was holding onto the library of films, which is why the recently announced Amazon acquisition of MGM doesn't necessarily include all of the movies that MGM has made over the years, because a lot of those rights don't belong to MGM anymore. But again,

that's a story for another incredibly complicated podcast episode. Anyway, Turner also oversaw the creation of the Cartoon Network in nine and Turner Movie Classics in nineteen. He supervised the acquisition of both New Line Cinema and Castle Rock Entertainment, a pair of motion picture production companies, And then we get to nineteen six. So in nineties six, Time Warner

made Turner and offer he couldn't refuse. It was a seven point five billion dollar acquisition deal for Turner Broadcasting System. This meant the Time Warner and thus Warner Communications and thus Warner Brothers Studio had a lovelier reunion with the pre nineteen fifties Warner Brothers Film Library because Turner owned that.

So yeah, this particular acquisition also meant that some Warner Brothers rights which had been sold off years earlier to help cover debt came back to the entity that first created those works, sort of. I mean a lot had changed by then. The Warner of nine six was very different than pre nineteen fifties Warner, but TBS, TNT, CNN, New Line Cinema, Castle Rock Entertainment, Hanna Barbera, the Cartoon Network, et cetera. All of these things made their move over

to Time Warner, as did Ted Turner. He became an executive for Time Warner. While the acquisition of Turner Broadcasting System was taking hold, Time Warner also got involved in the launch of a new broadcast television network. That network was the w B, which launched on January eleven, nine, and this was a joint venture between Time Warner, specifically the Warner Brothers Entertainment division of Time Warner and a

company called Tribune Broadcasting. The WB would stick around a little more than a decade, during which time it served as the launchpad for shows like The Steve Harvey Show, Buffy the Vampire Slayer, Dawson's Creek, Felicity, and Charmed, among many many others. Oh yeah, Supernatural was one of the shows that debuted on the w B. Because I keep

forgetting that that show was on the air forever. That show, I think it ran fifteen seasons, which I mean, all it did was really teach me that if you hear the song carry on my Wayward Son, it means that one of two brothers is going to have a really terrible time, and possibly both of them. But as I said, uh, it only stuck around a little more than a decade. So by the mid two thousand's, the w b's numbers

were in decline. Meanwhile, over at Viacom CBS, there was another network called up N that was facing a similar situation. By the way, the story of Viacom and CBS is just as convoluted as this history of Warner Media is. Now, both channels w B and up N we're trying to compete with Fox, and Fox was performing far better than either of the other two channels. So both the w B and up N were losing money somewhere in the

neighborhood of like two billion dollars total between them. So CBS and Warner Brothers Entertainment decided to join forces rather than compete against each other. Both the w B and up N would shut down within a couple of days of each other and CBS and Warner would then launch a joint venture television network called the c W. I took the C from CBS and the w from Warner Brothers.

Some shows from both networks made the jump over to this new network, like Supernatural and Smallville came over from the w B to the c W, and to this day, Warner Media owns half of the c W, with the other half belonging to CBS, So we can put that in the big old bucket of Warner assets. Okay, we're zeroing in on what Warner Media is today, but we still have a lot of ground to cover, and part of that ground means going over what has frequently been

called one of the worst mergers of all time. So when we come back, it'll be time to get back online. But first, let's take another quick break. All right, time for yet another quick history lesson, and this time we're going to be talking about America Online a k A a O L. Now I've done episodes about A O L as well, so we're going to get the summarized account of its history, because again, uh, extra bonkers really, So, America Online started out as an online service provider or

OSP and Technically was founded in nine in Dulles, Virginia. Now. The company grew out of a couple of earlier ventures that focused on connecting computers with each other through modems and phone lines. And when I say an online service provider, I'm really talking about something that's sort of a predecessor to the Internet, or rather, it existed while the Internet existed, but it was something that was publicly accessible, and the Internet typically wasn't unless you were part of an academic

institution or research facility or something like that. So back in the day, OSPs had their own networks, their own contained, you know, closed off networks, so customers could use a modem and they would dial into an OSP and they would access various features. These typically included stuff like, you know, you could get news headlines or weather forecasts, or contact lists, assuming that your contacts were, you know, using the same service you were using, and also some messaging services like

email or early instant messages. But again, these tools only worked if the people you were chatting with were also on the same service you were on. There wasn't a lot of at least in the early days, there wasn't a lot of opportunities to send messages to someone who is on a different osph. Some of these OSPs also had online games and a few other applications, and this was before the debut of the World Wide Web, so

these were all kind of self contained islands. Now gradually some of these islands made connections with one another, and then the Web developed and these OSPs began to create ways to access the Internet at large. So what started off as a sort of walled off kingdom now became a portal to the Internet at large, and A o L was one of the big early players in the space.

This was helped considerably by the fact that at the time, telecommunications companies had to abide by restrictions that kept them from getting into the I s P business right away, So businesses like A o L became associated with the Internet, so much so that for some people A o L and the Internet were effectively synonymous. In the early days, A o L charged users on an hourly basis, so the more time you spent online, the more you had

to pay. Toward the end of nineteen a o L swapped over from hourly rates to a a monthly rate of nineteen dollars and cents, and the service grew very quickly after that. And it when I say grew very quickly, I mean it was like Gangbusters. Now, this was the heyday of the dot com bubble. Before the bubble would burst, internet based companies were proliferating and growing like crazy, at least on paper. A O L was flush with cash and a sky high stock price really was fueling this.

In nine, in China during the fiftieth anniversary of the establishment of the People's Republic of China, which I know it sounds like I'm doing a non secretary, but stick with me anyway. At this event, the celebration of the founding of the People's Republic of China, there happened to be two people important to our story. The then head of Time Warner, Gerald m. Levin, happened to be sitting right in front of a O L. Co founder Stephen Case,

and the two got chatting. Now, A O L was already kind of looking to make a big acquisition of a traditional company, with the goal being to form a company that would define future corporations like the new media meets the old world. So Time Warner popped up as a possibility. I mean Time Warner represented old media, film TV Music Publishing. Meanwhile, over at Time Warner, Levin was in discussions about how to move the company into the

next century. Levin and his team recognize that there was a digital revolution underway and that it would be good to evolve Time Warner and stay ahead of this curve. One possibility early on was a merger between Time Warner and Yahoo, but Yeah Who's founder Jerry Yang ultimately decided

not to pursue that opportunity. Case and Levin had a few more conversations with each other, and gradually the idea came about of merging Time Warner with a O L. Except really it was more more of an acquisition than a merger because a O L's stock price was just so incredibly high and Time Warners wasn't. So. This deal that they worked out stated that a O L would have fifty ownership of this new company and Time Warner

would have forty five percent ownership of it. The board would have an equal number of folks from directors on A O L side and directors from Time Warner side. Eleven of Time Warner would become the CEO of the company, and Case from a O L would be the chairman of the board, and they kept this deal pretty darn quiet. In fact, a lot of people in senior leadership positions for both companies didn't find out about the merger until

the companies announced it publicly in early two thousand. In a way, this sort of played right into the overall narrative of Time Warner. After all, the Warner properties were mostly focused on media like TV, film, music, publishing, and you know that was it. And then a O L would bring new media into the mix, adding in yet

another aspect to this already incredibly complex story. The combined value of the companies was estimated to be more than three fifty billion dollars, thus making this the largest merger up to that point. And while they begin the merger in two thousand, it would take a full year to complete. In the meantime, things took a very serious turn. Actually, it took a few turns, but one is one that I'm sure most of you are already familiar with, and that is the dot com bubble. In fact burst that

process was not instantaneous. I mean it sounds like it is, because you're talking about a bubble bursting, and you know when that happens, it's an instant that wasn't the case with this. This was more of a very slow, painful, dramatic decline and value. So the stock market value of the internet companies that were really going like crazy. It

peaked in the early spring of two thousand. Like March of two thousand, it was at its highest ever, but a confluence of events led to much of the market collapsing, with many companies going out of business as a result. Some of the problem was because of the overvaluation of companies that had yet to produce any revenue, and some

of them had no business plan whatsoever. So essentially these were companies that, again they were incredibly valuable on paper because people were pouring money into it from an investment standpoint, but they didn't really have any means of generating revenue. Uh. Some of this had to do with companies that were

over extending themselves. They got flush with cash, and then they started spending the cash like crazy, either in order to try and scale the business up as fast as possible or on you know, luxuries like penthouse offices and daily massages and all the kind of stuff you hear about from the dot com days. Some of it also had to do with economic recessions that happened in other parts of the world, such as Asia that had an impact on the tech sector. Some of it had to

do with proposed mergers that fell through. Not Time Warner in a O L. That one did go through, but other mergers that were planned fell flat, and that hurt the market too, and thus stock prices began to fall. By May of two thousand, a O L was having to make some pretty tough choices in order to stay on track with earnings in order to meet the requirements that were set by the merger that was already in progress. The market continued to go through a decline. Meanwhile, things

were not going smoothly between the two companies. There was a serious clash of cultures between Time Warner and A O L. And then there were some dealings of a somewhat shady nature. So one day Alec Klein, who was a reporter for the Washington Post, gets this anonymous tip from someone at A O L. And that leads Alec on this investigation, and that investigation uncovered that A O L had been misrepresenting its AD revenue numbers. Big no no for a publicly traded company. I mean that is fraud.

So Klein publishes a story, which then prompted the U. S. Securities and Exchange Commission or SEC, and the Department of Justice the good old d o J, to investigate another acronym, a O L. That investigation eventually led to a O L being required to pay some really big fines, which, as you know, another big blow to a company that

was seeing its stock price plummet. And it also had to post corrected past earnings, so, in other words, didn't just have to pay a fine, it had to publish earnings that that showed how they had fudged those numbers.

This was not a great moment for the new AO L Time Warner, though it did give folks over on the Time Warner side a little bit of a boost because they suddenly saw that they're part of the company was perhaps the more valuable piece In the meantime, The terrorist attacks on the United States on September eleven, two thousand one had obviously an enormous impact on all aspects

of life in America, and that included business. It also exacerbated the market troubles for the dot com industry, which continued to fall, and A O L, which had been in such a dominant position at the end of nineteen was in a very different state towards the end of two thousand one, just a year into the merger with Time Warner. Levin retired in December two thousand one. Case stayed on a bit longer, but ultimately decided to not run again for Chairman of the board in two thousand three.

He had received a pretty good deal of abuse from shareholders and leadership of both companies about the merger, about the falling stock price for the company, about the need to get things moving in a better direction. According to Ted Turner, who was once the largest shareholder of A o L. Time Warner, he had continued to sit on the board of directors for a while. According to him, it cost him around eighty percent of his worth, which

he said amounted to around eight billion dollars yikes. The executives on the Time Warner side were resentful, largely because A o L, which initially was seen as the juggernaut with huge momentum, was now viewed as a kind of anchor weighing down the rest of the company. The A O L. Time Warner years had to be really hard

ones for people at both companies. The period lasted for less than a decade, with the company announcing in two thousand nine the Time Warner, which remember was effectively acquired back in two thousand uh, that it was going to spin off a O L as an independent company. So now the acquired company has is acting like the parent company. So when we talk about Warner Media, one property that does not come up is a O L. That that

is not part of Warner Media any more. But we still have to talk about a O L because that merger was a transformative experience for both companies. I suspect a huge combination of things like culture clashes, the dot com market collapsing, poor communication, a failure to align the missions of both companies so that they supported one another. I think all of those are partly to blame for this mess. And the vision was to create the media company of the future, but the reality saw just chaos

that did not work. AOL. Time Warner was in a rough spot, and you know, in two thousand two it had reported a loss of ninety nine billion dollars billion. That was a third of the company's value lost in a year, and at that point it was the largest loss any company had ever reported in a single year. So there were a lot of executive shuffles there, with leaders shifting into new roles or taking on joint responsibilities for both companies, and it was a very messy time.

And one of those executive to try and hold things together, only to ultimately resign from the company in two thousand two was Bob Pittman, who today is the leader of I Heart Media. Howdy Boss. Anyway, Pittman was one of several executives who really tried to align the companies together but faced enormous hurdles along the way. And Pittman had a long history in media already. He was one of the co founders of MTV back in the day, and so he had worked on the Time Warner side before

the merger. Maybe one day I'll convince him to come onto the show and talk about his various experiences, because I'm sure that guy's got some stories. He has seen it all. He's the head of a big media company today, co founded MTV, he played an enormous part in the development of media in America over the last thirty years. So maybe I can get him on the show sometime. That brings us up to ten and we still have

a lot more story to get through. Heck, we haven't even mentioned A T and T yet, And in our next installment will learn where Time Warner would go next after parting ways with A O. L. And where Warner Media would come from and why A T and T, which currently holds Warner Media, is now looking to spend off the company so that it can merge with my old employer, Discovery Communications. So that'll be our episode on Monday next week, which is a holiday, so I'm gonna

have to get it recorded soon. Note to self, I promised, Harry. Anyway, that's it. If you have suggestions for topics you would like me to cover on future episodes of tech Stuff, reach out to me on Twitter. The handle for the show is tech Stuff H. S W and I'll talk to you again really soon. Tech Stuff is an I Heart Radio production. For more podcasts from Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows. H