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Public ( NYSE : TWX )
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Merger between Time Inc and Warner Communications (1990) subsequently purchased by AOL (2001)
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New York City , New York (incorporated in Wilmington , Delaware ) Corporate Governance , TimeWarner website
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Richard D Parsons , Chairman and CEO <br /> Wayne Pace , CFO <br /> Jeffrey L Bewkes , President and COO
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87,000 (2005)
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Broadcasting , Publishing , Internet , Telecommunication s
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See List Of Assets Owned By Time Warner
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$4470 billion USD (2006)
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() is the world's largest media and entertainment
Conglomerate headquartered in
New York City , with major operations in
Film ,
Television ,
Publishing ,
Internet Service and
Telecommunication s. Among its subsidiaries are
AOL ,
Home Box Office ,
New Line Cinema ,
Time Inc. ,
Time Warner Cable ,
Turner Broadcasting System , and
Warner Bros. Entertainment .
Warner Communications was established in 1972 when
Kinney National Company spun off its non-entertainment assets, due to a financial scandal over its parking operations.
It was the parent company for
Warner Bros. Pictures and
Warner Music Group during the 1970s and 1980s. It also owned
DC Comics and
''Mad'' , as well as a majority stake in
Garden State National Bank (an investment it was ultimately required to sell pursuant to requirements under the
Bank Holding Company Act ). Warner's initial divestiture efforts led by Garden State CEO
Charles A. Agemian were blocked by Garden State board member
William A. Conway in 1978; a revised transaction was later completed in 1980. Warner made considerable profits (and later losses) with
Atari , which it owned from 1976 to 1984. In 1976,
Nolan Bushnell sold his
Atari company to Warner Communications for an estimated $28 - $32 million. While part of Warner,
Atari achieved its greatest success, selling millions of
Atari 2600 s and computers. At its peak,
Atari accounted for a third of Warner's annual income and was the fastest-growing company in the history of the
United States at the time.
In the 1970s, Warner expanded under the guidance of CEO
Steve Ross and formed a joint venture with
American Express , named
Warner-Amex Satellite Entertainment , which held cable channels including
MTV ,
Nickelodeon and
Showtime . Warner bought out American Express's half in 1984, and sold the venture a year later to
Viacom , which renamed it
MTV Networks .
In February 1983, Warner expanded their interests to baseball. Under the direction of
In 1984, due to the
Video Game Crash Of 1983 , Warner sold the consumer division of
Atari to
Jack Tramiel . It kept the arcade division and renamed it
Atari Games . They sold
Atari Games to
Namco in 1985, and repurchased it in 1994, renaming it Time-Warner Interactive, until it was sold to
Midway Games in 1996. Meanwhile, In 1987, it was announced that Warner Communications and Time Inc. were to merge. The last thing Warner did before the merger closed in 1989 was to buy out
Lorimar-Telepictures . In early 1990, the combined companies were named Time Warner. This company subsequently acquired
Ted Turner 's
Turner Broadcasting System in October 1996.
Time Warner had also been owner of the
Six Flags Theme Parks chain during the 1990s after near bankruptcy. It sold all Six Flags parks and properties to Oklahoma based Premier Parks on April 1st, 1998. Some theme park insiders argue that Six Flags was much better off under Time Warner ownership.
In 2000, a new company called was created when
AOL purchased Time Warner for
US$ 164bn.
1 The deal, announced on 10 January 2000
2 and officially filed on 11 February 2000,
3 employed a merger structure in which each original company merged into a newly created entity. The
Federal Trade Commission cleared the deal on
December 14 ,
2000 ,
4 and gave final approval on
January 11 ,
2001 ; the company completed the merger later that day.
5 The deal was approved on the same day by the
Federal Communications Commission , and had already been cleared the
European Commission on 11 October 2000.
6 The shareholders of AOL owned 55% of the new company while Time Warner shareholders owned only 45%, meaning that the smaller AOL had in fact bought out the far larger Time Warner.
There has been some speculation about the motivations of each party. Some observers believed that Time Warner was struggling to integrate "
New Media " into its business. At the time of the announcement, Time Warner executives spoke of the need to "digitize their business." They were also eager to be attached to a
Dot-com Company , as the
Dot-com Bubble was near its peak. A merger with AOL provided a huge subscriber base of Internet users, along with
Online marketing know-how. While some business journalists have reported that AOL executives felt that AOL stock was severely overvalued and that a big merger was the only way to avoid a collapse in valuation,
7 it this could merely have been a small part of AOL executives' desire to diversify the assets of the company beyond the Internet and online sectors. In addition, executives at AOL were quite concerned about the prospect of increased competition with Microsoft and sought to enlarge the company as a defensive measure. Finally, AOL executives believed that the integration of AOL's Internet distribution and Time Warner's content would create a tremendous amount of value for both sides of the company.
Media companies felt that the
Vertically Integrated AOL Time Warner would unfairly promote its own content within its outlets. This fear existed before the merger, but Time Warner was thought to be a conglomeration of very independent divisions. It was feared that this would change with the influence of AOL executives.
Consumer advocates were concerned with the threat of
Product Tying between Time Warner's
Cable TV systems and AOL's
Internet Service . Some consumer groups saw a possible attempt to corner the Internet-over-TV market, whereby AOL could force all of the Time Warner cable subscribers to use AOL branded Internet-TV. Smaller
Internet Service Provider s feared that AOL would tie its Internet service to Time Warner's
Cable Modem service. Some ISPs wanted the opportunity to use Time Warner's cable network as a
Common Carrier for their services, which competed with AOL. AOL and Time Warner pledged not to violate any antitrust regulations.
Many observers were shocked that a large, diversified media conglomerate was being acquired by a much smaller company. Market conditions at the time of the merger placed a greater premium on Internet-related stocks than on traditional media stocks. AOL's high
Market Capitalization relative to that of Time Warner made the acquisition possible. The deal has since become a symbol of the
Dot Com Bubble and is widely regarded as a disaster for shareholders of the original Time Warner, with a $2.4 billion shareholder settlement, a further $600 million set aside and a $5 billion price boosting share buyback program announced on
August 3 2005 .
AOL
CEO Steve Case became executive chairman of the new company, while Time Warner CEO
Gerald Levin retained the CEO title.
After the merger, the profitability of the ISP division (America Online) decreased. Meanwhile, the market valuation of similar independent internet companies drastically fell. As a result, the value of the America Online division dropped significantly. This forced a
Goodwill Write Down , causing AOL Time Warner to report a loss of $99 billion in 2002 - at the time, the largest loss ever reported by a company.
In response to the huge loss in 2002, the company dropped the "AOL" from its name, and removed Steve Case as executive chairman in favor of
Richard Parsons , with AOL remaining a part of the company. Case resigned from the Time Warner board on
October 31 ,
2005 .
CNN.com
Since the merger, a number of transactions have taken place:
- The Professional Wrestling company WCW was sold to competitor WWE for $7 million.
- The Atlanta Hawks , Atlanta Thrashers , and operating rights to Philips Arena were sold in mid-2003.
- The fifty percent share in the cable channel Comedy Central was sold to Viacom .
- Warner Music Group was sold to a group of investors led by Edgar Bronfman Jr. in March 2004.
- AOL/ Netscape 's longrunning litigation against Microsoft was settled out of court.
- Time Warner announced that it was shutting down its CNNfn financial information channel and disposing of its share in Google (2004).
- On March 31 , 2006 Time Warner sold the Time Warner Book Group to French publisher Hachette Livre , of the Lagardere group.
- On February 7 , 2006 , a group led by corporate raider Carl Icahn and Lazard Frères CEO Bruce Wasserstein unveiled a 343-page proposal calling for the breakup of Time Warner into four companies and stock buybacks totaling approximately $20 billion. On February 17 , 2006 , the Icahn-lead group agreed with Time Warner to not contest the re-election of TW's slate of board members at the 2006 shareholders meeting. In exchange for the Icahn group's cooperation, Time Warner will buy back up to $20 billion of stock, nominate more independent members to the board of directors, cut $1 billion of costs by 2007, and continue discussions with the Icahn group over their proposal, particularly on the future of Time Warner Cable.
- On February 23 , 2006 , Time Warner announced that Turner South , a regional sports and entertainment network in the south, will be sold to News Corp. 's Fox Cable Networks group.
- On September 12 , 2006 , Time Inc. announced that Time4 Media, a group of men's interest magazines including Popular Science and Outdoor Life was to be put up for sale. The sale will include 18 publications (including three parenting-related titles).
- In the fall of 2006, the Atlanta Braves were sold to Liberty Media in a deal that returned vast amounts of Liberty-owned Time Warner stock back into the company's folds.
See Also: The CW Television Network
On
January 24 ,
2006 , CBS Corporation and Time Warner announced that they were to create a new broadcast network,
The CW Television Network . The network officially debuted on
September 18 , 2006. The network formally debuted on
September 20 with the 2 hour premiere of
America's Next Top Model .
The network is the result of a merger of
The WB Television Network (a Time Warner holding) and
UPN (a CBS Corporation holding). CBS Corporation and Time Warner each own 50% of the network.
Tribune Broadcasting (previously owned a 25% stake on
The WB ) and CBS Corporation contributed its stations as new network affiliates.
Time Warner Cable has since reexpanded and offers the following services:
The agreed to acquire 18 magazines that Time Inc. was divesting. The magazines in the package employed 550 people and included
Field & Stream ,
Outdoor Life ,
Ski ,
Yachting , and
TransWorld Snowboarding , as well as 11 other titles that were part of Time Inc.'s
Time4Media Group . Also included were
Parenting , and
Baby Talk , which were part of the Parenting Group.
NY Post
In 2004, Time Warner's
Market Capitalization was $84 billion. When the AOL-Time Warner merger was announced in January 2000, the combined market capitalization was $280 billion.
For fiscal year 2002 the company reported a $99 billion loss on its , almost all from a writedown of the goodwill (
Intangible Asset ) from the merger in 2000. (The value of the AOL portion of the company had dropped sharply with the collapse of the Internet boom, in the early 2000s.)
Time Warner Inc. owns several large properties in New York City; certain buildings in the Rockefeller Center complex and adjacent office towers house its main offices; one of which houses a
CNN news studio. In late 2003, Time Warner finished construction of a new twin-tower complex, designed to serve as additional office space, facing
Columbus Circle on the southwestern edge of
Central Park . Originally called the AOL Time Warner Center, the 755-foot, 55-floor mixed-use property was renamed
Time Warner Center when the company itself was renamed.
As of Jan 2007.
Time Warner faces industry competition from traditional media companies such as
AOL's subscriber base is declining, and declines are expected to continue, adversely affecting subscription and advertising revenue. As more individuals are using non-PC devices to access the Internet, AOL is under pressure to secure placement of its services and applications on mobile devices.
Box office receipts and the growth rate of DVD sales have recently been declining, which adversely affects Warner Brothers' growth prospects and revenues.
Recent 10Q Report
