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If you like Stephen Cases's story, you might also like:
Timothy Berners-Lee,
Jeffrey Bezos,
Michael Dell,
Lawrence Ellison,
Bill Gates,
Reid Hoffman,
Jeong Kim,
James Kimsey,
Pierre Omidyar,
Larry Page,
Carlos Slim
and Ted Turner

Stephen Cases's recommended reading: The Third Wave

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Steve Case
Steve Case
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Steve Case Interview (page: 6 / 8)

Co-Founder, America Online

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  Steve Case

Tell us about the merger of AOL and Time Warner. How did you see that opportunity and where do you think it could have gone better than it did?

Steve Case: Well, it certainly did not go as well as we were hoping. The merger has been difficult. Ultimately, about a year ago I stepped down as Chairman. I'm still on the board but not playing any active role and that was a disappointment. My view was it was then and even now, a logical strategic merger for both companies.

AOL -- five years ago it was growing rapidly. It was highly valued. It had a lot of things going for it, but the one area of risk and weakness was as it related to broadband technology and higher speed access. Time Warner owned one of the largest cable systems, Time Warner Cable, that provided broadband connectivity to homes and also owned the largest library of branded content, CNN and Warner Brothers and so forth. And so from my standpoint bringing these companies together would enable AOL to not just embrace broadband, but really become the leader in broadband by leveraging the distribution capabilities of the cable system and also the content assets to have a differentiated service offering. On the other side, from the Time Warner perspective, they had some great businesses that had been built over the last century by great entrepreneurs like Henry Luce, who built Time, Inc., and Jack Warner, who built Warner Brothers, and Ted Turner who built Turner and CNN. But it was being left behind, or ran the risk of being left behind, as the world became more digital and more interactive. The ability for AOL to provide sort of an Internet DNA and sort of a different perspective, that could help transition some of those businesses into a future where the growth rates were higher. Music, for example, embracing the concept of digital delivery of music as opposed to simply complaining about piracy, I thought would significantly advantage Time Warner.

[ Key to Success ] Vision

When we announced the deal, everybody agreed. They thought it was a wonderful deal and made a lot of sense. Several things then happened. One was the stock market started declining for all companies, particularly for Internet companies. So when you have a merger and suddenly the stock is reduced in value, people are disappointed and frustrated and angry. I thought it would be great to move the whole company to more of an equity-based compensation, which meant instead of having large salaries they'd have smaller salaries and have more stock. So if a company was successful they'd make a lot more money. Well, the stock went down and so as a result they were angry about that.

I also dramatically underestimated the complexity of bringing these different people, these different cultures, almost different tribes together. Even within Time Warner, which had been built over many years through acquisitions. Just four or five years prior they had acquired Turner, and five years prior Time, Inc. had merged with Warner Communications. Time Warner really was a series of relatively independent companies. It made sense to run it as one company and have a more integrated view. It's sort of like the United States of America. It's important for each state to have its own priorities and its own governor but what makes America great is when all 50 states come together, pool their resources, put some power in Washington and have a strong president leading the charge. That's what makes America great. That's one of the reasons why in Europe they're trying to replicate that model and create a European Union. France and Germany and the United Kingdom and are stronger by working together than they could be working separately. That's what I believed then and it's what I believe now. Most of the people in the company did not share that view. They preferred running these things as more autonomous, independent kind of things.

So it was a well intentioned strategic merger, but I underestimated some of the complexities and some of the people aspects. I certainly didn't predict some of the timing related to the stock market. It has been a disappointment, but that doesn't mean it might still not turn out to be a good idea. For the same reason that I mentioned before, these things sometimes take time. Even though it seems like a long time to people, AOL and Time Warner have only been merged for a little over three-and-a-half years. There's still many years to come and we'll see how it plays out.

My bet is that the predictions we have regarding the way the market would work -- and how convergence with technology and then industries -- will blur the lines so you won't think of the motion picture industry or the television industry as really totally separate. And similarly, some of the principles of the Internet, which allow people to decide what to get when they want to get it, will become more common in television. I am a big believer in personal television. A company like TIVO has popularized the notion that you pick shows and record them and watch them when you want, which is how you use the Internet. You pick web sites and peruse them when you want. I think that's the way television will evolve, and people will think about television more about shows, just like they think about web sites, and less about networks.

[ Key to Success ] Vision

I think some of those trends are still there. It's just going to be the efforts of a new team at Time Warner to carry some of those ideas forward.

Your analogy of the tribes suggests rival warlords who all have very powerful egos and are used to being the boss. Perhaps they didn't all have the teamwork attitude that you had cultivated at AOL.

Steve Case: I think it was a different mentality. We're now trying to instill some of that teamwork in the company now. Dick Parsons is the CEO. He's doing a good job of trying to get people to think more collaboratively. In retrospect, we probably were thinking people would change their perspectives and things could happen more quickly.

I was used to being CEO for many years and when we did the merger I was chairman. The chairman is an important job, but basically runs the board and the CEO runs the company. So I was in a position where I had a sense of where we should go, but none of the businesses reported to me, so I had limited ability to direct them day-to-day. I learned it's probably not a good thing to put yourself in a position where you can be held accountable for something that you really don't control. In new things I look , I'm trying to make sure that the alignment is right there.

Obviously this was a big blow, with your decision to step down, but it sounds like you retain some optimism that this idea can still work well in the long run.

Steve Case: There's an underlying strategic idea of what's happening with technology, what's happening with some of these consumer markets, how consumer trends are shifting, consumer habits are shifting, and people will be using things in different ways. I think there's already some evidence that that is happening. I think the jury is still out on exactly how this company can best capitalize on that, that but I continue to be hopeful that we'll be able to lead the pack, just as we did in the days when AOL emerged and led the pack in a new direction. I'm hopeful this company will be able to do that as well.

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This page last revised on May 01, 2008 16:05 EST
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