Perhaps the ousting of AOL Time Warner's COO Richard Pittman was not entirely unexpected. It is widely known that the media giant has been suffering from plummeting ad sales, slowed subscriber growth, and the lack of a broadband strategy at its AOL unit. As a result of all of these problems, AOL Time Warner shares are off more than 60% this year alone.
When the boardroom coup finally took place in mid-July, two Time Warner execs who had opposed the deal were promoted amid a restructuring of the company. The biggest takeaway the media interpreted from the management shakeup is that Time Warner has now asserted itself, and is effectively in control of the combined company, despite it having been the acquired company back in 2000.
Most coverage presented this interpretation of events as a positive development in terms of both the company's business strategy and its PR. Newsday (July 20) quoted media analyst John Tinkler of Blaylock & Partners as telling clients, "Now that the Time Warner folks have effectively taken back control of the company, we expect less negative publicity and more of a focus on the managing of the business."
The combined company's poor performance had prompted some revisionist history of a merger that was widely hailed when announced in January 2000. With the benefit of hindsight, USA Today (July 19) now suggests the AOL-Time Warner deal "might go down as the worst deal in history."
In particular, media reports viewed Pittman's resignation as a telling sign that the merger's raison d'etre - the promised synergies that would be achieved by combining Time Warner's content with AOL's distribution channels - came nowhere near achieving what had been hyped. The front page of The New York Times (July 19) told readers Pittman's ouster was "the most public repudiation yet of the promises behind the $165 million merger."
Furthermore, coverage explained that Pittman was the individual most closely identified with those promises. The reporting criticized Pittman, saying that he "drove expectations way too high, only then to be seen as compounding his error as he "continued to cling to those (expectations), even after it became pretty clear they weren't going to be able to live up to them (CNN, July 19).
A number of reports conveyed suggestions that Pittman was being used as a scapegoat for the company's troubles. There was some debate as to whether this was true or not, and if so, whether it was justified. Some saw Pittman as the personification of the company's woes, and suggested that the company would benefit from a fresh start under new management from the Time Warner side. Others who were sympathetic suggested Pittman was never given enough time to bring his vaunted synergies to fruition, and that no one could have foreseen the calamitous decline in ad spending following the September 11 attacks and the slumping economy.
Nearly half of the coverage analyzed reported that AOL Time Warner had suffered from a clash of cultures as the Old Economy and New Economy firms tried to integrate their operations. As a result, "there were a lot of people on the Time Warner side who wanted to knife (Pittman) in the back, The Washington Post (July 21) quoted a former AOL exec as saying.
While Pittman's ouster was heavy in symbolism, the consensus appears to be that the company will have to focus on the execution of its business plan before it can turn itself around.
- Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.