Steve Case confident of better days ahead

By Frank Ahrens
Washington Post

Over the past decade, founder Steve Case watched the America Online service grow to dominate the industry, swallow a sprawling media empire and arc back to earth as a troubled business, wounded by falling ad revenue and deflated stocks.

AOL Time Warner chairman Steve Case is optimistic about the future. Advertiser library photo

He argues that it's happening already — people receive instant messages on cell phones and music on PCs. Soon, he says, the many parts of goliath AOL Time Warner — Warner Bros. music and motion pictures, Turner Broadcasting, Time Inc. magazines, Time Warner Cable, America Online, et al. — will overcome setbacks caused by the punctured Internet bubble, unrealized synergies and the pummeling his company has received from Wall Street.

AOL Time Warner has radically shuffled its top management over the past eight months. Former chief executive Gerald Levin and former chief operating officer Robert Pittman have been replaced by chief executive Richard Parsons and his deputies Don Logan and Jeffrey Bewkes, all of whom have deep Time Warner ties. Last week Jonathan Miller — who headed online activities at Barry Diller's USA Networks — took over management of the company's America Online division.

This all leaves Case as the last top man standing from America Online. It remains to be seen whether he continues to be engaged in the reconfigured company — which some analysts say would boost its stock simply by dropping "AOL" from its name — or grows isolated in the new Time Warner regime.

In an interview conducted last week, and presented in an edited transcript below, Case touched on several subjects affecting his company and his industry:

Q: What can be done about the online advertising slump America Online is experiencing and what does (Jonathan) Miller bring to the table?

A: He's overseen a number of businesses for Barry Diller and knows how to strike the balance (between customer service and revenue) on building new brands, whether it's travel or dating or things like that. He brings a fresh look at what can be done right away to generate additional revenues beyond basic subscription fees.

Q: How well has the company coordinated its different businesses, like migrating America Online dial-up users to high-speed Internet access offered by Time Warner Cable?

A: There's no question that I have been disappointed there hasn't been more collaboration across the whole of the company. One of the key priorities of Dick Parsons and Don Logan and Jeff Bewkes is to do more of that collaboration. One benefit of the structure of the place is that Don Logan oversees Time Warner Cable and Time Inc. (and America Online). Discussions will enable all the different businesses to move forward in a more strategic and more coordinated way.

Q: Will your role as chairman change in the coming months? You've called yourself the "five- to 10-year guy."

A: There is a tendency to caricature different positions, like saying I'm just the five- to 10-year guy. I have a partnership with Dick (Parsons). Of course, I have an interest in the success of the company now as well as in the future but I tend to be less focused on day-to-day and more focused on where the company is going — the strategic direction-and by definition that results in leaning into the future. I'm concerned with the overall well-being of the company and making sure AOL is back on track. Anything I can do to be helpful, I stand ready to do.

Q: The new top executives — Parsons, Logan, Bewkes, Miller — are all known as easier to get along with than (Gerald) Levin and (Robert) Pittman. Do they represent a change in tone of management? A more conciliatory style?

A: I do think the current environment requires a collaborative approach within the company; getting people to work together around common goals. Given that overall atmosphere as well as what Dick said — that we should have a bias toward under-promising and over-delivering — that makes sense. Clearly, a different environment does require a somewhat different tone. But that's not to say we're going to get too conservative. It's a matter of balance. ... Style shouldn't be confused with substance. We're focusing on revitalizing AOL, focused on stimulating collaborations across the whole company, trying to be a leader. The team that's in place has the right style but is also focused on the right substance that will enable us to capitalize on the promise of the merger even though so far there have been some disappointments.

Q: What about the ongoing Securities and Exchange Commission and Department of Justice probes into the company's accounting?

A: There currently exists a charged environment. Our accounting was appropriate, it was looked at by an outside firm and they reaffirmed it was appropriate. We welcome further inquiries and will answer anybody's questions so we can lift the cloud that's out there.

Q: German media giant Bertelsmann AG just fired chief executive Thomas Middelhoff (a friend of Case). What did he do wrong?

A: I'm not sure he did anything wrong at Bertelsmann. It was the conviction he had about the strategy the company needed. It needed to go more public and more transparent and more global and the controlling foundation preferred somewhat of a more conservative course. As I understand it, he was doing a fine job of running the company. At the end of the day, there was a difference of opinions.

Q: Will you hire him at AOL Time Warner?

A: I'm not going to comment on that (laughing).

Q: Vivendi Universal recently ousted chief executive Jean-Marie Messier, who had a dream of convergence like yours. Is his situation different from the one AOL Time Warner is in?

A: I think it's different. ... The Vivendi strategy was a little bit of a catch-up strategy: When we announced our merger, they needed to do something. I never understood having a water company and a movie company and an interest in a cell (phone) company. I never saw the business model for downloading music to cell phones, which seemed to be their principal example of convergence. The lesson learned in running a French company is it that doesn't make sense to move to Manhattan and buy a big apartment and trash the French media.

Q: What's your timeline for change at AOL Time Warner?

A: We're on a path but it's not going to happen overnight. In the coming months and years, we will demonstrate the underlying concepts and premises that made the merger interesting to us two years ago. We may have made mistakes along the way and it's a more difficult environment than we expected, but we've got great optimism and confidence.