Time Warner Again Seems a Perfect Match—How’d That Kind of Merger Work Out the First Time They Tried It?

AT&T to Buy Time Warner in $85.4 Billion Cash, Stock Deal

AT&T Inc. agreed to buy Time Warner Inc. for $85.4 billion, forming a telecommunications and media empire that will own many of the movies and TV shows it pumps through to subscribers of its wireless, internet and pay-TV services.

“This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works,” AT&T Chairman and Chief Executive Officer Randall Stephenson said in the statement.
Sixteen years ago Time Warner was involved in another deal—a perfect match—that looked to remake the media landscape. This excerpt from a 2013 post  suggests that such perfect matches may turn out to be anything but. That one, with AOL, ultimately cost Time Warner stockholders about 100 billion dollars.

A look back at the first hints of how the digital revolution was changing journalism: America Online had emerged in 1989 in the Northern Virginia suburbs of Washington and by the mid-90s was rapidly growing as an online service that let people who didn’t know much about computers go online.

In 1995 The Washingtonian created its website, and soon AOL was calling to ask if we wanted to explore how we could work together. They were trying to find content to build up local readership on their site and they said they’d pay us if they could use some of our coverage of the area’s best dining and nightlife.

So we set up a meeting and an AOL team came to the Washingtonian offices and offered us $2,000 a month for the right to use our dining-nightlife coverage. To the editors it seemed like found money and a way to begin to profit from this strange new online world. As we talked, the issue of the wall between ads and edit came up. The top AOL guy didn’t hesitate: “At AOL,” he said, “there’s no church and state.”

So media traditionalists can’t say we weren’t warned.
AOL paid us for about 18 months and then moved on to a new media strategy. We heard stories about AOL being a different kind of place to work, but most of the people they hired weren’t established journalists–those taking a chance on this new venture were mostly people without good jobs, including several people we had let go.

Then in January 2000 Time Warner made arguably the dumbest decision in corporate history by merging with AOL, making lots of AOL employees instant multimillionaires and costing Time Warner stockholders more than $100 billion as broadband destroyed the AOL dial-up business model.

One of the lucky ones was Ted Leonsis, who had joined AOL in 1993 and then in 1999 could sell enough stock to buy the Washington Capitals hockey team for $200 million. He’s parlayed that stake into now also owning the Washington Wizards NBA franchise and the Verizon Center sports arena in downtown DC.

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