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An introduction to the history of the time warner cable

Today marks the 15th anniversary of one such calamity when media giants AOL and Time Warner combined their businesses in what is usually described as the worst merger of all time.

  • Leaders are convinced they have the answer and not willing to change course;
  • Time Warner continuously buys and sells companies, expanding its interests in one medium or market, while cutting back in others;
  • Its subsidiaries include Time Inc;
  • Leaders are convinced they have the answer and not willing to change course.

But what happened then will happen again, and ironically for the exact same reasons. A lot of people thought that the merger was a brilliant move and worried that their own companies would be left behind.

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Its sky-high stock market valuation, bid up by investors looking for a windfall, made the young company more valuable in market cap terms than many blue chips. On the other side, Time Warner anxiously tried, and failed, to establish an online presence before the merger. And here, in one fell swoop, was a solution. The strategy sounded compelling.

15 years later, lessons from the failed AOL-Time Warner merger

Had these initial assumptions been borne out, we might be talking today about what a visionary deal it was. Merging the cultures of the combined companies was problematic from the get go.

Certainly the lawyers and professionals involved with the merger did the conventional due diligence on the numbers. Cooperation and promised synergies failed to materialize as mutual disrespect came to color their relationships. A few scant months after the deal closed, the dot com bubble burst and the economy went into recession.

AOL was also losing subscribers and subscription revenue. The business was up against a phenomenon I refer to as transient advantage; namely when a combination of capabilities that at one point made a firm a leader, erodes and is replaced by the next form of competitive advantage.

AOL was indeed the king of the dial-up Internet world, but that world was rapidly being supplanted by always-on, much faster broadband. The eventual divorce of the two businesses was inevitable.

  • Certainly the lawyers and professionals involved with the merger did the conventional due diligence on the numbers;
  • Untested assumptions are taken as facts.

Moreover, these firms — not yet profitable, not yet stable and not yet assessed by normal market metrics — are burning through vast amounts of cash each month. Untested assumptions are taken as facts.

Few opportunities exist for inexpensive, low-commitment testing. Leaders are convinced they have the answer and not willing to change course. Huge up-front investment, rather than a staged or sequenced flow of resources.

  • AOL was indeed the king of the dial-up Internet world, but that world was rapidly being supplanted by always-on, much faster broadband;
  • Had these initial assumptions been borne out, we might be talking today about what a visionary deal it was.

Massive uncertainty and a sense of time pressure. Put these ingredients together and the result is often toxic.