AOL TIME WARNER, INC.
Asia
Ewa
Konrad
Michał
Presentation plan
żð The idea behind the merger
żð New Economy  America Online
Å›ð Company history & Business model
żð Old Economy  Time Warner
Å›ð Company history & Business model
żð The Merger
Å›ð Antitrust concerns
Å›ð Synergies & Possible benefits
żð Would the merger work?
Convergence of
the  old &  new economies?
żð 10.01.2000  merger announcement by America
Online (AOL) and Time Warner
żð 11.01.2000  merger completion
żð Stock price:
Å›ð AOL: $73,75 Ä…ð$72,63
Å›ð Time Warner: $64,75 Ä…ð$92
żð All-stock combination worth $350 billion
żð Strategic merger of equals to create the world s
first fully integrated media and communications
company for the Internet Century
Promise of multiple synergies&
Would you believe it?
żð Creation of żð Management
unparalleled resources differences
of creative and
żð Culture clashes
journalistic talent,
żð AOL adding $110
technology assets,
billion in  old economy
expertise and
assets, risking slower
management
growth
experience
We re kicking off the new Internet Century with
a unique company with unparalleled assets
and unprecedented ability to accelerate the
next Internet revolution.
 Steve Case, Chairman, AOL Time Warner
New Economy:
America Online, Inc.
żð 1985  Quantum Computer Services co-founded
by Steve Case
żð 1989  AOL rebranding
żð 1996  falling stock, low member retention rates
Ä…ðRobert Pittman  the  white knight
żð 1999  acquisition of 4 companies:
Å›ð Netscape Communications Corporation (browser
software to replace Microsoft Internet Explorer)
Å›ð MovieFone
Å›ð 2 Internet music companies (Spinner Networks &
Nullsoft)
Vision
żðBuilding a global medium as central to
people s lives as the telephone or television
and even more valuable
żðDeveloping a mass market for interactive
services and content
żðUnique people & culture:
Å›ð Fearless, always hungry, demanding the new
Å›ð Intense work ethic, team effort, unification
Å›ð Millionaires with modest salaries
Business Model
żð Flagship product  convenient and easy-to-use
package of online and interactive services
Å›ð Doing the everyday things online instead of offline
Å›ð More than 30 million users worldwide, daily volume of
194 million e-mails, 245 million stock quotes, 11 billion
Web URLs, 656 million instant messages
Å›ð Accessible by high-speed or dial-up connections from
anywhere in the world
Å›ð Various pricing plans
Hallmarks
żð Easy-to-use design
żð Intuitive navigation (keywords, Buddy List,
content organized in channels)
żð E-commerce: Partnerships with companies like
eBay ( walled garden , controlling customers),
Shopping Channel
żð Personalization (welcome screen with a personal
portfolio)
żð Interactive community (chat rooms, instant
messaging, bulletin boards, e-mail& )
żð AOL Anywhere (tv, telephone, wireless devices)
AOL in 2000
żð 4 divisions:
Å›ð Interactive Services Group
Å›ð Interactive Properties Group
Å›ð AOL International
Å›ð Netscape Enterprise
żð $7.7 billion in consolidated revenues (that more than
doubled in two years)
żð More than 30 million subscribers worldwide
żð Main provider of Internet access in the United States
żð World s leader in interactive services, Web brands,
Internet technologies and e-commerce services
Old Economy: Time Warner
żðTime Warner, Inc., founded as Time Inc. in
1922
żðTwo mergers
Å›ð 1989 with Warner Communications
Å›ð 1996 with Turner Broadcasting Systems
żðWorld`s largest media and entertainment
company  grossed $27.3 billion in 1999
Company History
żðMerger with TBS added $17.5 billion in debt
to TW`s balance sheet
żðGoal of this merger:  (& )to create new
products for the digital age (& )
żðFailed to produce envisioned synergies
żðTW   series of sharp, thought, profit-
oriented companies
Internet initiaitves
żð1994  launch of Pathfinder website (free
email and search engine)
żð1997  entertainment portal Go2 (never got
out of the planning stages)
żð1999  second try  Entertaindom
Cable Networks
żðIncluded CNN, TBS, TNT, HBO, Cartoon
Network and 50% interest in Comedy Central
żðHBO  most successful premium television
network in US
żð2000  35.7 million subscribers of HBO
Cable Systems
żðTime Warner Cable  second largest cable
operator  6.5 million subscribers
żð1999  significant increases in advertising
revenue
żðSince 1990 upgrading cable systems  more
channels, HD TV, video on demand, high-
speed internet, cable telephony
Filmed Entertainment
żð Warner Bros. and New Line Cinema composed the
Filmed Entertainment Divison at Time Warner
żð Time Warner had approximately 20 % of US box
office market
żð Matrix earned $450 million
żð Planned joint ventures: Harry Potter
and The Lord of the Rings
Music
żðWarner Music Group  diversified, vertically
integrated music company
żðWMG operated in 68 countries
żð18%  WMG`s market share in US
żðIntroduced distribution via internet
Publishing
żðHighest revenue of the 25 top media
companies
żðMore than 60 magazines, 268 million readers
żðProduced most popular magazines  Time,
People, Sports Illustrated
żð2000  Time Inc. acquired Times Mirror
Magazines publishing 26 magazines
The Merger
żðShareholders structure
The Merger
żðNew trend?
żðAntitrust concerns
Å›ð United States
ð Excessive size
ð Complaints filed to FCC and FTC
Å›ð Europe
ð Time Warner and EMI Group PLC merger
Synergies: The Possible Benefits
" Revenue enhancement
" Cost savings
Level 1
" Cable, Publishing, Music, Film
Level 2
" Future possibilities
Level 3
Synergies: The Possible Benefits
Level 1  Tactical Synergies
Revenue enhancement synergies = $400 million
Cost savings synergies = $600 million
Total = $1 billion on
Synergies: The Possible Benefits
Level 2  Strategic Opportunities
Cable
Publishing
Music
Film
Synergies: The Possible Benefits
Level 3  Transformational
żð Future benefits
Would the Merger Work ?
Would the Merger Work ?
How it really went ?
żðShort time for due diligence
żðDotcom bubble -> AOL lower revenue from
advertising and commerce
żðLevin  Case conflict
żðMany expected synergies between AOL and
Time Warner never materialized
żð2003  changed name back to Time Warner
żð2009  AOL spin off from Time Warner
The end
Thank you for your attention
Asia
Ewa
Konrad
Michał