The Turnaround of AOL

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Case Details:

Case Code : BSTR195
Case Length : 19 Pages
Pages Period : 2001-2005
Organization : AOL, Time Warner
Pub Date : 2006
Teaching Note :Not Available
Countries : China
Themes: Corporate Turnaround
Industry : Media, Entertainment, and Gaming

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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AOL - Back On Track Contd...

With the growth in demand for broadband, AOL lost several customers to broadband service providers. Under the leadership of Parsons and the CEO of AOL, Jon Miller (Miller), AOL regained its lost popularity, with several internet players including Google, Microsoft and Yahoo vying for partnership with it.

Background Note

In January 2000, AOL announced its merger with Time Warner, creating the largest media company in the world.5 The stock of the two companies was converted into the stock of the merged entity - AOL Time Warner. AOL shareholders received one share of the combined entity for each share of AOL held by them while the Time Warner shareholders received 1.5 shares of AOL Time Warner for each share held by them. While announcing the merger, Time Warner declared that, "The merger will combine Time Warner's vast array of world-class media, entertainment and news brands and its technologically advanced broadband delivery systems with America Online's extensive Internet franchises, technology and infrastructure, including the world's premier consumer online brands, the largest community in cyberspace, and unmatched e-commerce capabilities.

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AOL Time Warner's unparalleled resources of creative and journalistic talent, technology assets and expertise and management experience will enable the new company to dramatically enhance consumers' access to the broadest selection of high-quality content and interactive services."6

The relatively younger AOL took over Time Warner and controlled 55% of the new company's stock. Some analysts believed that the deal was a merger of equals which for tax and accounting purposes was structured as an acquisition of Time Warner by AOL. The sixteen member board of the new company had directors from both Time Warner and AOL. The company had two chief operating officers - Parsons and Robert W Pittman (Pittman). Gerald M Levin (Levin) was the CEO and Steve Case (Case) was the Chairman. The merger made sense to both the companies as Time Warner was looking at acquiring Internet presence. It was looking at entering the Internet arena, after it failed with its internet initiatives - Pathfinder and Entertainment.com7...

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5] A detailed description of AOL-Time Warner merger and its implications is covered in the ICMR case study, "AOL Time Warner: Merger Gone Wrong," ECCH Reference No 303-059-1.

6] "America Online and Time Warner Will Merge to Create World's First Internet-Age Media and Communications Company,", January 10, 2000.

7] TW first went online with Pathfinder, an umbrella brand, offering links to TW magazines and other media properties. Later on, it changed its online strategy and decided to launch a series of 'vertical hubs' that focused on issues such as news and personal finance. The first hub launched by TW was


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