The AOL-Time Warner Saga Bookends One Sorry Decade

The 21st century dawned with news that two media megaliths, AOL and Time Warner, were to merge. Critics howled that the vast tentacles of a combined AOL-TW would subsume us all. Today, Time Warner confirmed it's spinning off AOL, ending a business saga that defined whatever you're calling the 2000s.

In retrospect, AOL's deal to acquire — and then be run by — Time Warner marked the end of a century when old media conglomerates were at their peak. The merger, valued at $182 billion when it was announced, was the largest in U.S. history. It is also arguably the most disastrous in history. The combined value of the two companies — both inflated by the dot-com bubble — was $350 billion. Today, before the spin-off goes through, the whole shebang sports a market cap of just under $28 billion.

Now that the struggling old media company is parting ways with its fast-shrinking internet toy, the media's hand-wringing over the deal nine years ago looks absurdly hubristic in retrospect.

Here are some quotes from early 2000, after the deal was announced (and about a year before it was consummated):

  • New York Times: A "merger of tree-snapping behemoths... the Godzilla of the Internet... wed the King Kong of content. It is a natural time for the other denizens of the jungle to wonder what the future will hold for the colossal couple and the world they inhabit."
  • USA Today: "It's one of those rare events that seems to change the world overnight... We're shocked... "
  • Newsweek: "AOL Time Warner will be unchallenged in its online customer base and hold vast cable-television assets."
  • Regional telco SBC Communications, as quoted in CBS Marketwatch: "The merger will establish, through a web of equity and contractual interests, one interlocking conglomerate with control over both the high-speed pipes consumers use to connect to the Internet and the content they access once they're online."
  • Salon, April Fool's Day: "AOL Time Warner announced Friday that it had acquired France."


The AOL-Time Warner Saga Bookends One Sorry Decade

There were some pessimists; a columnist named Paul Krugman wrote that only time would tell about the wisdom of the deal, and that it's possible " some big businessmen have just made a very big mistake."

Instead of fearsome tentacles everywhere, Time Warner is now left with the old-line business it was in before the 2000 deal. Except those assets — cable networks, a movie studio, magazines — now face more obstacles to growth than they did eight years ago.

AOL chief Tim Armstrong, the former Google sales chief, finally has his own company to run; it remains to be seen whether he can reverse AOL's steadily declining advertising revenues. But it's Time Warner that's left with the tougher job: Proving media conglomerates can still post impressive growth amid the rise of online media consumption.