AOL, Time Warner Culture With

AOL, Time Warner Culture With leadership positions in the music, publishing, news, entertainment, cable and Internet industries, the merger of America Online and Time Warner produced unrivaled assets among other media and online companies. The combination of the nation's top internet service provider with the world's top media conglomerate was intended to validate the Internet's role as a leader in the new world economy, while redefining what the next generation of digital-based leaders will look like.

However, it soon became obvious that cultural differences between the two companies would pose significant barriers for meeting the goals of the merged company called AOL Time Warner. Time Inc. employees and executives felts threatened by the non-journalist culture of America Online and the pressure to meet AOL Time Warner's financial goals despite rapidly declining advertising revenues. One former Time Inc.

executive resigned because he began to feel that cuts advocated by executives from the AOL side were "eating into the muscle, not the fat of the company." In its cost cutting, AOL wiped out what it considered to be entitlements and privileges such as ample mastheads and lavish perks and salaries. AOL did not understand that Time Inc. employees viewed these measures as doing irreparable damage to the journalistic mission.

Further, AOL increased tensions by forcing all Time Warner companies to use their technology for their Internet needs; the technology caused so many issues that the companies were later told to go back using their old service providers. AOL was a streamlined, efficient company, while Time Inc. was composed of individual fiefdoms united by their dedication to tradition, contributing to the huge cultural gap between the two companies. When it came to making deals or launching new ventures, they moved at two different speeds.

According to Time CEO Don Logan, "AOL would say we're as entrepreneurial as a couple of 90-year-olds." The vision of the next generation of digital-based media was to completely reshape the future of news delivery. This required previously competing divisions at Time Warner to work with one another and with AOL. but, executives had trouble selling the six Time Warner divisions (interactive services and properties, networks, publishing, music, filmed entertainment, and cable systems) on the importance of collaboration.

Prior to the merger, Time Warner business units competed with each other for customers, advertisers and revenue. and, business unit heads received cash bonuses based only on their unit's performance. Now as part of AOL Time Warner, management requested that they work together as well as with their AOL colleagues to identify complementary advertising platforms -- such as the AOL start page and airtime on the WB network -- that might be bundled into packages for advertisers.

Management also asked the units to agree on how to identify customers who might subscribe to other AOL Time Warner services and develop joint marketing campaigns to target them. Finally, the company has to achieve consensus about how and where to advertise. Yet another significant factor in the culture clash between AOL and Time Warner was the power struggle that ensued after the merger with AOL executives grabbing majority control.

This happened even though AOL was only the size of one small Time Warner division and only had experience managing a centralized, younger company. Different management approached caused friction among top management. AOL management filled the majority of top management positions and critics charge that they were insensitive to the Time Warner culture. AOL President Bob Pittman became the merged company's co-chief operating officer, in charge of more than half the combined outfit's operations. In the merged company, Pittman served alongside COO Richard Parsons, the former president of Time Warner.

But Pittman took the lion's share of responsibility, overseeing cable, Time Inc., HBO, Turner Broadcasting, the WB Network, and AOL. Parsons got New Line Cinema and Warner Bros. movies, Warner Music, and trade publishing. Parsons and Pittman reported to Gerald Levin, former chairman and chief executive at Time Warner and AOL's Steve Case. Time Warner General Counsel Christopher Bogart lost the top legal job to AOL's Paul Cappuccio. Time Warner Chief Financial Officer Joseph Ripp lost his position to his AOL counterpart, CFO Michael Kelly.

The same was true for Time Warner Investor Relations Chief Joan Sumner. While AOL and Time Warner may have had market synergies, cultural differences made their realization too challenging. The organizations had little in common and the decimation of the Time Warner management team took away any hope of building a suitable bridge between the two. The result has been dubbed one of the industry's largest merger failures. Bibliography Combine and Conquer." Darwin Magazine Oct. 2001 http://www.darwinmag.com/read/100101/combine.html. Houston, Frank.

"AOL/TW Spells Big." Columbia Journalism Review 01 Jul 2001. http://archives.cjr.org/year/01/4/houston.asp. Johnson, Tom. "That's AOL Folks." CNN and Money Magazine. 2000, Jan. 10. http://money.cnn.com/2000/01/10/deals/aol_warner/. Kuczynski, Alex. "Time Inc. Staff.