AOL Time Warner: The Stupidity of Greedy CEOs

BBC News  |  Why AOL Time Warner failed to change the world

More than ten years after a horribly ill-conceived and thoroughly fraudulent union between an old world entertainment company, Time-Warner, and new-age chimera, AOL, predictably failed, people are wasting ink trying to analyze why the venture failed in a feeble attempt to gloss over the naivete with which they welcomed this incredibly stupid business deal.

It was very clear to me and many others that this merger made absolutely no sense. Why would a content distributor like AOL limit the content that it can distribute and why would a content producer like Time-Warner limit the number of outlets through which it would distribute its content? There was no synergy to be had because these were fundamentally different companies fulfilling different roles that resulted in a conflict of interest.

So, why did the deal go through? So that the CEOs can give themselves a fat bonus. Steve Case of AOL ran away with hundreds of millions of dollars even though he was summarily fired, and Gerald Levin of Time-Warner rewarded himself similarly and retired.

Now everyone is blaming the different internet climate, the emergence of Google and YouTube and supposed mismanagement at AOL-Time-Warner. The truth remains that what killed AOL-Time-Warner was this conflict of interest that arises when distribution and production are combined. AOL could not compete with YouTube because the possibility of distributing content that competes with Time-Warner content was not desirable for Time-Warner.

Similarly, it was difficult for Time-Warner to enter into distribution deals with emerging online channels because of the obligations it had toward AOL by virtue of the merger. Consequently, the company was hampered–manifestly and predictably so given the fundamental conflict of interest–and new internet distribution channels ran away with their prize.

Let’s end this stupid naivete of the press. Let’s call the AOL-Time-Warner failure exactly what it was: a scam that enriched the CEOs and left the shareholders holding the bag.

You’ll never hear this truth from CNN. As a Time-Warner component, CNN will never publicize the scandalous behavior and the malfeasance of its corporate parent’s executives. In this day and age, it behooves everyone to rely on reason and sound judgment rather than any corporate news outlet. Obviously, they are out to fool everyone, especially their own shareholders.

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