Time Warner

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Time Warner Inc.
Type	Public (NYSE: TWX)
Founded	Merger between Time Inc. and Warner Communications (1990); subsequently purchased by AOL (2001)
Headquarters	New York City, New York (incorporated in Wilmington, Delaware) [1]
Key people	Richard D. Parsons, Chairman and CEO Wayne Pace, CFO Jeffrey L. Bewkes, President and COO
Industry	Broadcasting, publishing, Internet, telecommunications
Products	See list of assets owned by Time Warner.
Revenue	$44.70 billion USD (2006)
Employees	87000 (2005)
Website	timewarner.com

Time Warner Inc. (NYSE: TWX) is the world's largest media and entertainment conglomerate headquartered in New York City, with major operations in film, television, publishing, Internet service and telecommunications. Among its subsidiaries are Time Inc., AOL, Warner Bros. Entertainment, Time Warner Cable, CNN, HBO, TBS, Turner Broadcasting System and The CW Television Network.

Contents 1 History 1.1 Origins 1.2 America Online merger 1.3 Post-merger 1.4 The CW Television Network 1.5 Services 2 Time Inc. 3 Financials 4 Commercial properties 5 Board of directors 6 Senior Executives 6.1 Time Warner Inc. 6.2 Subsidiaries 7 Competition 8 See also 9 Past names 10 Footnotes 11 External links

[edit] History

[edit] Origins

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). 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 2600s 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.

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 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 Ceasar P. Kimmel, executive vice president, bought 48 percent of the Pittsburgh Pirates for $10 million. It then put up its share for sale in November 1984 following losses of $6 million. The team's elderly majority owner, John W. Galbreath, soon followed suit after learning of Warner's actions. ^[2]

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.^{[citation needed]}

[edit] America Online merger

In 2000, a new company called AOL Time Warner was created when AOL purchased Time Warner for US$164bn.^[3] The deal, announced on 10 January 2000^[4] and officially filed on 11 February 2000,^[5] 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,^[6] and gave final approval on January 11, 2001;^{[citation needed]} the company completed the merger later that day.^[7] The deal was approved on the same day by the Federal Communications Commission,^[5] and had already been cleared the European Commission on 11 October 2000.^[8] The shareholders of AOL owned 55% of the new company while Time Warner shareholders owned only 45%,^[4] 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,^[9] 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 providers 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, 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.

[edit] Post-merger

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. Case resigned from the Time Warner board on October 31, 2005.^[10]

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.

[edit] The CW Television Network

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 will each own 50% of the network. Tribune Broadcasting (previously owned a 25% stake on The WB) and CBS Corporation will contribute its stations as new network affiliates.

[edit] Services

Time Warner Cable has since reexpanded and offers the following services:

• Road Runner High-Speed Online - Time Warner's residential- and commercial-grade high-speed Internet service provider
• Time Warner Cable - features advanced video technologies such as Video On Demand and digital video recorders
• Digital Phone - an unlimited local and long distance telephone service that runs over the Time Warner Cable hybrid fiber-coax network.

[edit] Time Inc.

The Time Inc. division publishes approximately 150 titles worldwide. It is the leading magazine publisher in the U.S. and UK, and is understood to be profitable at US$5 billion in annual revenues.^[11] As of January 2007, the unit is experiencing downsizing.^[12] In January 2007, the Bonnier Magazine Group 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.^[13]

[edit] Financials

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 income statement ^[14] because of $100 billion in non-recurring charges, 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.)

[edit] Commercial properties

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.

[edit] Board of directors

As of Jan 2007.

• James L. Barksdale - Barksdale Management
• Stephen F. Bollenbach - Hilton Hotels Corporation
• Frank J. Caufield - Kleiner Perkins Caufield & Byers
• Robert C. Clark - Harvard University
• Mathias Döpfner - CEO of Germany's Axel Springer AG
• Jessica P. Einhorn - Johns Hopkins University
• Reuben Mark - Colgate-Palmolive Company
• Michael A. Miles - Philip Morris Companies (now Altria Group)
• Ken Novack - former Time Warner - Affiliate Director
• Richard D. Parsons - Chairman of the Board & Chief Executive Officer
• Francis T. Vincent, Jr. - Vincent Enterprises
• Deborah C. Wright - Carver Bancorp
• Edward J. Zander - Chairman and CEO of Motorola Inc.

[edit] Senior Executives

[edit] Time Warner Inc.

• Richard D. Parsons, Chairman/CEO of Time Warner Inc.
• Jeffrey L. Bewkes, President/COO of Time Warner Inc.

[edit] Subsidiaries

• Randy Falco, Chairman and Chief Executive Officer of AOL LLC
• Glenn A. Britt, President and CEO of Time Warner Cable
• Barry M. Meyer, Chairman and CEO of Warner Bros. Entertainment Inc.
• Chris Albrecht, Chairman and CEO of Home Box Office
• Philip I. Kent, Chairman and CEO of Turner Broadcasting System
• Ann S. Moore, Chairman and CEO of Time Inc.
• Robert K. Shaye, Co-Chairman and Co-CEO of New Line Cinema
• Michael Lynne, Co-Chairman and Co-CEO of New Line Cinema

[edit] Competition

Time Warner faces competition from traditional media companies such as CBS Corporation, News Corporation, and Viacom, as well as online search portals such as Yahoo!, and Google. According to the recent 10Q, in order to remain competitive, Time Warner and AOL must keep pace with rapid technological changes on the internet. Time Warner's business may be severely impacted by the increasing piracy of feature films, television programming and other content which decreases company revenues.^[15]

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.^[16]

[edit] See also

• List of conglomerates
• List of United States companies;
• List of assets owned by Time Warner;
• Time-Life - former direct marketing (books, music, video) subsidiary;
• Ted Turner;
• Steve Case;
• Ubu Productions, a production company.
• Reel Works Teen Filmmaking - A documentary youth program that Time Warner Inc. sponsors

[edit] Past names

• National Cleaning Company;
• Kinney Parking Company;
• Kinney National Company (1966-1972);
• Warner Communications (1972-1990);
• Time Warner Entertainment (1990-?){This name was a subsidiary of TW, housing cable, HBO & Warner Bros. TWE had several small investors US West(Baby Bell) Toshiba, & one another Japanese firm;
• Time Warner (1990-2001);
• AOL Time Warner Inc. (2001-2003).

[edit] Footnotes

[edit] External links

• Time Warner corporate website
• A complete list of Time Warner media facilities and a detailed report on their campaign contributions and lobbying from the Center for Public Integrity
• Ketupa - Time Warner profile
• Columbia Journal Review's Who Owns What for Time Warner
• Early analysis of the Time Warner-AOL merger
• Interview process at Time Warner
• Yahoo! - Time Warner Inc. Company Profile
• Time Warner's most recent conference call transcripts