06.21.06

Stealing Time

Posted in books, business at 10:55 pm by mridley

I finally updated my current reading list - picked up Stealing Time : Steve Case, Jerry Levin, and the Collapse of AOL Time Warner. I always like business “biographies”, plus it has some interesting history about Jim Kimsey’s involvement. It’s funny cuz I used to be very plugged into the tech world, and nobody on the West Coast that I knew of had ever heard of Kimsey. I didn’t hear about him until I came back to the East Coast and met a girl he used to sleep with. And she was saying how he used to be the CEO of AOL which I had a hard time believing cuz nobody I knew ever heard of him. But it turns out he was. And apparently he also was the original owner (possibly current, don’t know) of the Madhatter in DC. Go figure.

On a more important note, I’m interested in hearing the author’s analysis (and presumably the input from involved players) in why the AOL/TW deal didn’t work out. I have my own opinions on the subject, but I’m interested to see if the people in the know agree or not.

Fundamentally I think the AOL/TW merger was a great idea. There were major financial issues with the transaction, extreme overvaluation of AOL’s market capitalization, etc. but the fundamental strategic synergies were there.

AOL, along with everyone else, realized that by the turn of the century the dialup Internet business was an uninteresting proposition. AOL had nowhere to go but down in its subscriber count, as people moved to cable modems and DSL lines. AOL’s traditional strengths of providing value added services like stock quotes, travel booking, wire news stories, etc. were all being provided on the web outside the walled garden of AOL.

What was the value proposition for an AOL subscriber? Pay more for an AOL account than a competing plain dialup Internet access account for…what? A marginally simpler user experience? There was no big future there.

Time Warner had two things critical to AOL’s continued success and growth. They had the Time Warner cable empire which provided a cable modem platform on which to provide an AOL branded service. And they had a vast library of media properties that could be licensed to AOL.

People would have paid for on-demand HBO programs through their AOL cable broadband connection. It would have driven the subscriber growth, as well as elevated AOL’s brand image from an ISP for the “lowest common denominator” computer user up to a high speed media rich savvy ISP choice.

But they never executed, there was no synergy, and the deal didn’t work. That’s my analysis. We’ll see what the experts say.

Tags: AOL, Time Warner