AOL Time Warner chairman Steve Case and CEO Gerald Levin say theres little to fear from the new media colossus they have created with the merger of America Online and Time Warner.
Here are excerpts from an interview:
QUESTION: It took more than a year to close the deal, which was approved by the Federal Communications Commission late last week. Can you set the scene Thursday night for us?
Levin: I was in my office in New York, and we received word (of the approval) from the Federal Communications Commission. We got the official order itself. And we deployed our resources. We filed in Delaware and were able to close the transaction slightly before 9 p.m. We were mobilized, so we started to change the nameplate on the building.
Q: But there was no ceremony or champagne?
Levin: No. What youre basically doing is filing a certificate in the state of incorporation. In that sense, its kind of anticlimactic. But for those of us around, and through e-mail, there were a lot of high fives.
Case: I was home putting my kids to bed. We expected to get word from the FCC earlier, so we had a whole schedule of television interviews lined up. Then it got delayed, delayed and delayed. So we waited to do them in the morning.
Q: Are you satisfied that the final conditions from the FCC were fair?
Levin: Thereve been no surprises here. We dont see anything that will hamper conduct of our business.
Case: Were obviously pleased that the deal finally got approved. Its taken a year. Thats a long time in this market and with changing technologies.
Were pleased that the instant-messaging conditions do not affect our existing instant-messaging service. Its not exactly clear to us yet what impact it might have on the future.
But we recognize it was a complicated issue, and instant messaging will be an increasingly important part of our society. So we understand why there was concern.
Q: Should the requirements to open your cable lines to outside high-speed Internet service providers (ISPs) be extended to all cable operators?
Levin: Its not a question of the application of rules. One thing thats misperceived is (that) Im a real advocate of multiple ISPs, and I was even before we entered into our agreement. The consumer needs the choice. We have the technical capability; it needs to be developed.
Q: Other cable operators may see it differently.
Levin: Im many things, but Im also a traditional cable operator. Im not articulating anything thats different from what any other cable operator would say.
Case: I do think that people in the cable industry are going to embrace this model. Its better, if you make a significant investment to build out your broadband infrastructure, to get a lot of people selling it instead of just you selling it. Ive had a number of conversations · with key members of Congress, and theres a commitment on their part to make sure that this is really open across the board.
I think (regulations) wont be necessary, though, because I expect other cable companies to embrace the model of multiple ISPs.
Q: Some analysts say that, with open access, its in your long-term interest to spin off cable. Can you rule that out?
Levin: Yes. Ill categorically rule that out. We met with a lot of investors and analysts, and theres little question that the concept of providing multiple services in one of the highest margin areas of cable is going to enhance value.
Q: Some media companies have cut Internet investments. Are you swimming against the tide?
Levin: Not at all. Its quite illustrative. If Time Warner had not become AOL Time Warner, wed probably be spending money inefficiently and not succeeding the way some of these other companies are. What were talking about now is creating a new company that melds and blends the Internet capability as developed by AOL, which is totally unique. This is a company that is subscription-based, so its not like we have a digital division thats somewhere out here and we dont know how to plow that as a new business.
Q: You also make a lot from ads, and that business appears to be softening. Can you still deliver on your ambitious financial goals for the year?
Levin: In the budget for AOL Time Warner, while subscriptions are the largest single source of revenue, what were calling advertising and e-commerce is the fastest-growing part. And thats driven in part by AOL, which is the crown jewel here because it (doesnt depend on) traditional measured media advertising.
What AOL has done is address the direct marketing expenditures and needs of individual companies. Thats outside the area that has been affected, television advertising. So Im very comfortable with the street guidance weve given.
Q: Theres a lot of fear at the company now about cutbacks.
Levin: Thats not what this is about. This is all about enhanced opportunities, particularly revenue opportunities. With respect to some of the speculation, one area Id identify relates to the digital activities of the former Time Warner. Those expenditures and positions that havent been filled yet can be substantially changed because of AOLs infrastructure and network.
Case: We have 85,000 employees. Well have more than that a year from now because well be pursuing a variety of new initiatives. In the short run, well look for ways to be as efficient as possible. But the focus is not on cutting costs. Its on growing revenues.
Q: What is the future for CNNfn, which faces tough competition from CNBC?
Levin: You want a categorical statement? CNNfn fits neatly, and now even more so, into the broad range of financial services and information leading to transactions that we now have in the cable network, on the AOL service, at Money and Fortune. And I think you can look forward to announcements about how were going to enhance CNNfn.
Case: Its an important franchise, obviously a hot category. And theres an opportunity to expand cable distribution for CNNfn and have a dramatically expanded Internet presence. Its an example of the kind of opportunity the new company can capitalize on.
Q: Ted Turner has been notably absent from your recent presentations. Hes been busy trying to buy a stake in Russian television and launching a foundation to fight nuclear holocaust. How active will he be at the company?
Levin: Im very proud of what Ted has been doing. The new foundation he established with (former) Sen. Sam Nunn is really important. Its also a symbol for all of us about delivering on your own social commitment. · Weve said that Ted is going to be not only vice chairman but senior adviser because his wisdom and sparkle are very important. Were going to go around and do roadshows within the company. And the people doing it will be Steve and myself, (co-chief operating officers) Dick Parsons and Bob Pittman, and Ted.
[back to top]