AOL Time Warner merger: Time to grow up, fast

Sprawling media empire can’t afford to sacrifice journalism on altar of corporate profits

By J.D. Lasica
Online Journalism Review

When I gaze upon the lumbering beast known as AOL Time Warner, I’m reminded of the parable of the elephant and the blind men who, inspecting only one part of the animal, alternately suggested that the elephant must be very much like a tree, a snake, a rope, a wall, a spear, a fan.

When it comes to AOL Time Warner, point of view is all. And so we interviewed an AOL TW corporate executive; AOL’s news director; a rank-and-file reporter at one of its publications; three students who follow the news on AOL; and a veteran media critic. Each has a different take on how this beast is shaping up.

To freshen our allegory a bit, what we have here is not really an elephant at all but a genetic experiment: the world’s first bioengineered mega-business — the corporate equivalent of a geep or zorse, an unnatural hybrid genetically engineered to sustain itself on a force-fed diet of synergy.

Except the experiment hasn’t gone as its progenitors predicted.

Consider: Since the merger was announced on Jan. 10, 2000, the company’s value has decreased by a mind-blowing $160 billion. Last month, AOL Time Warner took a $54 billion quarterly write-down — the biggest quarterly loss in U.S. history. (To put that in perspective, the entire U.S. newspaper industry is worth $55 billion.) Last week, as new CEO Richard Parsons assumed the company’s reins, he signaled that a back-to-basics approach was in order, one that would focus on improving the fundamentals of the company’s individual business units.

In recent weeks the news media have lavished saturation coverage upon the company’s woes. But almost all of the attention has focused on the its incredible shrinking stock price; the prospect of layoffs; or the new parlor game among analysts and pundits of predicting what the empire’s breakup might fetch.

Meantime, barely a column inch has been written about the impact of the merger and the company’s financial troubles on other key players: the public. The company’s tens of millions of customers. You and me.

Let’s forget our stock portfolios for a moment and focus on something that’s much more significant over the long haul: the vitality and independence of the news outlets at the world’s largest media company.

What impact has the merger had on the news operations of the world’s first Internet-powered media company? How is this game of media monopoly affecting the players — the journalists, the readers, the public?

The executive: “AOL is learning how to become a media company”

After seven attempts to line up interviews with AOL Time Warner executives through its corporate communications department — these folks make the Taliban look like slackers, says a reporter friend at a national newspaper — we threw up our hands.

Instead, we went through back channels and managed to obtain an interview on background with an executive at AOL Time Warner, who agreed to be quoted without attribution so that readers could get a fuller understanding of how the company’s media units are interacting.

“AOL, frankly, is learning a great deal of that from the Time Warner brands.”

“The interesting story is that people at the company — especially editorial but also the business folks — really get the idea that you have to have a quality product and not stuff crap down people’s throats,” the executive says. “One of the things I find heartening is that while there’s a great desire to have synergy and cross-promotion, it’s also a company with an awareness of how important it is to do a great job and don’t screw the audience and mess up the credibility of your product.

“AOL, frankly, is learning a great deal of that from the Time Warner brands. It’s a step forward in sophistication for AOL, which has never had a lot of people with a background in editorial. Remember, until 1995 the AOL service didn’t even have ads, and now we have all these editorial assets and advertising and services that need to be integrated into a good audience experience. And we’re figuring out how to do a good job for our audience while making money.

“For a long time, the AOL service saw itself as a promotional vehicle rather than an editorial experience. Now that things like e-mail and instant messaging have become a commonplace commodity, part of AOL’s value lies in giving people a fuller, richer experience. CNN and Warner Brothers and Time.com already knew how to do that, and AOL is learning how to become a media company, too.”

With 89,300 employees, the company has major holdings in the magazine, broadcast, cable, television, film, book, music and Internet industries. Behold the empire:

• AOL (including CompuServe, Netscape, Moviefone and MapQuest)

• Time Inc. (Time, Sports Illustrated, People, Fortune, Money, In Style, Entertainment Weekly, Business 2.0, Parenting, Teen People, Sunset)

• Turner Broadcasting (including CNN, TBS, TNT, the Atlanta Braves and Hawks)

• AOL Time Warner Book Group (Warner Books, Little, Brown and Co.)

• HBO and Cinemax

• Warner Brothers (Warner Bros. Pictures (“Harry Potter and the Sorcerer’s Stone”), the WB network, Castle Rock Entertainment)

• New Line Cinema (“The Lord of the Rings,” “Rush Hour 2”),

• Time Warner Cable (including TV news stations in New York, Tampa, Florida, and Austin, Texas)

• Warner Music Group (Atlantic, Elektra, Warner Bros. Records)

Facing such an embarrassment of riches presents opportunities but also a daunting challenge for the company’s online efforts. For a major event like the Super Bowl or the Academy Awards, it’s likely that many of those news organizations will send staffers and provide individual coverage.

“Last year, we had lots of separate Oscar efforts online, but we didn’t provide a unified package,” the executive says. “This year we had a much more thought-out threading scheme to highlight content on the different sites. We wound up with 10 times more traffic, 700 million page views and three times the revenues.

“Next year, instead of a team of 70 people from People.com and Entertainment Weekly and In Style all creating content, we hope that by setting up best practices we can find the synergy opportunities to provide the same great coverage with 20 people.”

Growing pains, but mutual respect

With all the different editorial and business silos involved, those kinds of efforts don’t always come easily. “There have been a lot of growing pains,” the executive adds. “But one of the surprising things is that the kinds of political bickering you read about in the press you don’t see on the operational level between the different brands. People appreciate the traffic that the AOL or Time Warner brands can bring, so there’s a high regard for the chance to have synergy across the different sites and expose millions of more readers to the journalism we have to offer.”

For those concerned that the AOL-Time Warner marriage would lead to a diminution of editorial independence, with 20something AOL hotshots making questionable demands of their Old Media counterparts, the evidence suggests the contrary.

“AOL Time Warner is still very much church and state, so everybody owns their own editorial decision-making process,” the executive says. “Editors from AOL and the Time Warner brands hold joint meetings to share and distribute content, but they’re not there to discuss creation of content. Throughout the company, content is very decentralized and each site or publication retains its own core autonomous editorial team.”

Convergence has gotten a bad rap in the press lately — deservedly so — with AOL Time Warner as the poster child for the difficulties of making convergence work.

But convergence, the executive says, is not about throwing everything into the same pot and creating a new kind of media stew. It’s about repackaging and streamlining and tailoring existing content for new audiences.

“A lot of thinking at AOL is about how to present these brands in a coherent way, with a growing awareness that we need to focus more on audience-driven programming. For example, television and radio have shows for different demographics, and we need to figure out better ways to get the right content in front of an audience of 60-year-olds and 21-year-olds and 12- to 14-year-olds.”

Three readers: Give us the news, hold the fluff

We asked three college students for their takes on the job AOL is doing in presenting the news and working with its media siblings.

Amy Johnson, a 22-year-old senior from Fairfax, Va., who attends George Mason University, has been an AOL member for more than six years. She uses the service for e-mail, news and research throughout the day.

“I like AOL news because my Welcome Screen gives me up-to-date local and national headlines,” Johnson says. “If something big has happened, AOL lets me know the minute I sign on. As I’ve gotten older, I’ve become more aware of the news and enjoy the one-stop shopping AOL has to offer for the news.”

A savvy news consumer, she likes the Web’s immediacy and sometimes checks both AOL and WashingtonPost.com for different angles on a story, as when the last Osama bin Laden videotape came out. She also likes AOL’s varying depths of coverage on a given subject: She can skim headlines, glimpse news summaries, read an entire article or dive in for even further depth with a related sidebar.

“What I don’t like about AOL news is that sometimes I don’t have any national news on my Welcome Screen,” Johnson says. “When I sign on, I’d much rather see a headline, picture and story about the fires in California than celebrity gossip about what Rachel is going to name her baby on ‘Friends.’ I want hard news, not soft news. It’s embarrassing that people consider Britney Spears smoking a cigarette to be news!”

Johnson and the other students interviewed seemed perplexed when I asked about the news sources they see on AOL. “I get the sense that AOL gets all of its stories from AP,” Johnson says. “I don’t see stories from CBS, CNN or Time on AOL.”

Nileah Shanti Bell, a 21-year-old from Alexandria, Va., who’s a classmate of Johnson, concurs. “I know that while I haven’t read anything from CNN or CBS on AOL, I always find celebrity stuff from People,” she says. “When I want real news, I’ll go to CNN, MSNBC or WashingtonPost.com. When I want things like horoscopes and fashion news, I’ll head to AOL.”

Clearly, synergy or convergence or whatever is the preferred jargon du jour has not yet trickled down to AOL’s readership.

Community and interactivity as key components

Shellie Branco, 21, just finishing her junior year at the University of Southern California, seems typical of manyyounger readers who rarely read the newspaper or watch television news. She turns to Yahoo! for news headlines and AOL for news, e-mail and instant messaging.

“The story that sticks out most in my head from the past month is the death of TLC singer Lisa Lopes,” she says. “I grew up with her music, so when I read the AOL headline saying she’s been killed in a car crash, I got up out of my desk chair and told my roommate, and we were both kind of shocked.

“It was the same with the death of the Queen Mother, and Arafat being stuck in his compound surrounded by Israeli troops. I read it on AOL and then ran to tell people about it. When Princess Diana died, I was one of millions who e-mailed a sympathy note to the royal family on a message board.”

Interactivity is a big AOL selling point to Branco. “I really love their special editions for elections and other important events, when I get a chance to jump into chat rooms and have my say among lots of people from across the country. You can get an awesome perspective by chatting with someone who’s close to the story’s action, like with a Florida resident after the 2000 election.”

“I know that bombings in the Middle East aren’t fun to read about, but it’s important news and should be more prominent on the main screen.”– Shellie Branco, 21

While AOL may not always promote a fully immersive interactive experience, it should get points for user-generated content. A Welcome Screen blurb the other day teased to a “soapbox commentary” by an AOL member on the Middle East crisis.

Branco doesn’t click on the news video feeds on AOL because she has a dial-up modem. And she mixes her praise for AOL news with some pointed criticism.

“I don’t like what they’ve done with the news section, which used to be more prominent,” she says. “Now the main focus of the Welcome Screen is devoted to some lame diet-of-the-week or Ozzy Osbourne’s show. I know that bombings in the Middle East aren’t fun to read about, but it’s important news and should be more prominent on the main screen.”

Ah, yes, the infamous Welcome Screen. AOL insiders say it’s the subject of never-ending discussion at company headquarters, for it serves multiple purposes: table of contents, marketing, advertising, news, entertainment, personal services.

But more often than not, it’s the fluff that receives the biggest play. Britney breaks up with Justin! Wedding Bells for Ally? Steamy Sex Scenes — Find our top picks to help spice up your bedroom!

Here’s another suggestion for a teaser:

Poll: Does AOL believe all 34 million of its members are morons?

Apparently editorial values haven’t seeped too far into this particular corner of the AOL empire. Check out, for example, the rotating blurb at the bottom of the Welcome Screen. Is it editorial, or is it advertising? The answer is: both! A teaser to AOL’s Careers & Work section rotates with ads for Citi Platinum Select Card and an ad for a Sharp Viecam Camcorder. If you’re a job-seeker, don’t click that mouse too slowly or you’ll wind up in ad land.

The manager: “Our users are telling us they want more news”

Gary Kebbel, news director at America Online since early 1999, is in charge of the News, Government, Politics, Elections and International areas on AOL. He directed the site’s coverage of the Sept. 11 terrorist attacks, headed AOL’s Election 2000 coverage and oversees a staff of 14 employees who update news on the AOL service, AOLTV and AOL.com. (A separate team programs the Welcome Screen.)

If you think the AOL news team is a gaggle of clueless Internet programmers, think again. Its editors and producers herald from WashingtonPost.com, USAToday.com, USNews.com, UPI, Reuters and other established news organizations. “All of our employees are experienced journalists,” Kebbel says in an e-mail interview.

AOL members can click on the News channel to see the handiwork of Kebbel’s team. The editors create news packages using AP and Reuters stories and photos, as well as stories or multimedia from AOL’s partners, which include CBS News, CNN, Time, The New York Times, NPR, PBS, the Weather Channel, the Christian Science Monitor, Court TV, CBS MarketWatch, Business Week, Money, E!, People, Rolling Stone, Entertainment Weekly and National Geographic, among others.

Like Yahoo! News, AOL has no on-staff reporters and doesn’t plan to get into the news-gathering business. “We have no reason to, when we have daily rights to the work of the best reporters and writers in the business,” Kebbel says. “But if what you’re asking is do we do journalism, the answer is a resounding yes.

“Our editors have a dream job of creating a one-stop-shop news package of the best of journalism’s best. They have the luxury of deciding who, at any given moment, has the better story or better audio or video or timeline. Sometimes it might be the New York Times, sometimes Time, sometimes CBS. AOL News editors add photos and graphics and write the headlines that entice millions of readers each day. Then we add the ‘AOL secret sauce’ of interactivity: polls, chat rooms and message boards.”

As a news aggregator, AOL practices what Kebbel calls “converged journalism” or the “one-stop shop,” and it doesn’t restrict its offerings to in-house material.

“It’s the HBO approach,” he says. “HBO did not become great by only showing Time-Warner movies. It became a winner by showing the best movies from any and all studios and making all the business deals and production processes invisible to the user, who simply tunes in for a great movie. The AOL News experience is analogous to that.”

Kebbel describes how the AOL Time Warner media divisions share content by citing AOL’s relationship with Time.com, which was an AOL News partner for years before the merger. “Editors at Time .com send us multiple e-mails daily — as do editors at CNN and many or our other partners — about what is new on their site. We use those e-mails to quickly find additional stories to add to our news packages.

“We also request stories from partners like Time. We’ll say that a given story has a missing angle and would they write a story about X. Usually the partner is very accommodating, because they know that such a story will get prominent play and a lot of traffic.”

“Yes, we do sit back and wait until a story develops more often than cable news does. We, for instance, have not killed Bob Hope, as so many news sites have.”– Gary Kebbel, AOL news director

Inside AOL, convergence and synergy are becoming a way of doing daily business, with AOL tapping into content from CNN, Time, People or other Time Warner publications but at the same Time recognizing each media unit’s individual identities, Kebbel says.

“Synergy is the relationship that our newsroom has with CNN.com’s newsroom and Time’s newsroom,” he says. “It’s the ability to trade ideas and make requests and realize that in the end, we will best serve the user by playing to, and then bringing together, the strengths of each of our separate units.

“That might mean that AOL News, CNN and Time all recognize that CNN is the best unit to do X story, Time is the best to do Y and AOL News is the best to bring it all together. On a smaller scale, it’s the same thing as a city editor assigning stories based on reporters’ talents or backgrounds. You play to each person’s strength to create a better, stronger whole.”

That’s a laudable goal. But the students made a valid point when they complained that they found little besides wire service reports and fluff from People magazine when they head to AOL for news. AOL still hasn’t found a way to surface some of its best journalism from its top-rate sister news organizations.

Here’s one suggestion: Offer members a rudimentary personalization tool, letting us create a top-level page that contains more journalism, less fluff. If you’re one of the millions of AOL members who prefer to hear about the latest events in the war on terrorism rather than the latest news about Britney’s belly button, you should be able to get a straight shot of hard news. Young people, especially, want deeper levels of personalization from their news experience.

As Johnson, the college senior, says, “I wish that I could totally set my Welcome Screen to give me the information and stories that I want.”

Kebbel says that in the weeks ahead, members will see significant changes in the look and content of the AOL home page. “In the past two years, the AOL Welcome Screen has focused a lot on entertainment and celebrities. Our users are telling us they also want more news, so you will be seeing a lot more news on the home page.”

Kebbel, who served as the home page editor at WashingtonPost.com during the Monica Lewinsky/President Clinton impeachment story, closes out our interview with a word about AOL’s editorial standards and the rush-to-publish temptation in today’s news media.

“Yes, we do sit back and wait until a story develops more often than cable news does. We, for instance, have not killed Bob Hope, as so many news sites have. With the story of the recent explosion in lower Manhattan, we did not report that the building collapsed, as some organizations did. Our motto is an old one modified from UPI: Publish it first, but first, publish it right.”

The employee: “A respected tradition of editorial strength and excellence”

Among Time Warner’s sleek fleet of publications, Time, Money, Fortune and Sports Illustrated get most of the ink. Often overlooked is Business 2.0 in San Francisco, whose ranks comprise a staffers from the original Business 2.0 magazine, the now-defunct eCompany Now, and a handful of new hires. The magazine has 550,000 paid subscribers.

An editorial staffer at Business 2.0, who agreed to be quoted on background, says, “Honestly, I have not noticed any stress over the AOL TW issues, including the recent record loss. I’m pretty sure our magazine is part of the ‘publishing’ breakout in the financials, which had very strong year over year growth.” (The company’s latest Form 10-Q quarterly report is on file with the SEC here.)

“I think a few things are at work. One, Time Inc. has a very strong culture and respected tradition of editorial strength and excellence. Two, the economy sucks, so in comparison to other outlets, B2/Time Inc./AOL TW look strong. Would you rather be at CNET? Or the Herring? Or MarketWatch?”

Synergy has slowly begun to take hold, the staffer says. “Writers cross-pollinate a lot, so there are people from SI and Money and from time to time Fortune and Time contributing to our site. There is some good synergy between AOL and our site. People on our Web team know what the AOL team likes to tease and so our site will get plenty of promotion from AOL. They pretty well knew AOL would like the Mariah Carey part of our 101 Dumbest Moments in Business list, because she looked hot in the picture and has mass pop appeal. So that got a promo on AOL, which in turn brought us lots of traffic.”

As for the print publication, the staffer says, “I know this might sound like bullshit, but I really like the magazine we put out. The editors are very sharp, with backgrounds at Fortune and WSJ and Wired and Outside and Time and so on. It is reasonably well staffed; there are enough editors and writers and fact checkers — yes, fact checkers. They say ‘no’ often when selecting story ideas and they demand a lot in terms of great fresh precise information to fill out a story. People work hard and stay late, but they also wear jeans and T-shirts to work.” (Apparently they haven’t taken the advice of a Business Week columnist who thinks AOL TW’s troubles stem from lack of suits and ties.)

So far, the magazine’s journalism hasn’t been adversely affected by the corporate parent’s merger with AOL, the staffer says. Published reports suggest the same holds true at other AOL Time Warner publications such as Time, Sports Illustrated and Fortune.

“There is internally a surprisingly strong understanding of what our mission is, best summed up in Brian Arthur’s essay for us on past tech bubbles and how long it took society to understand and integrate and reorient around new tech to truly exploit it. We understand that we need to be differentiated from Fortune in terms of story selection and covers. And now that the company has named new editors at People, Teen People, Sports Illustrated, In Style and now Business 2, it’s clear the company wants to see faster subscription growth and a stronger bottom line.”

Two months back, Time Inc. editor in chief Norman Pearlstein visited to the Business 2.0 offices and told the San Francisco Chronicle that the company was committing resources to building Business 2.0 because it believed in taking “the longer view,” despite the current tech slump.

Of course, Pearlstein also claimed he wasn’t in town to clean house, and the top editor of Business 2.0 was ousted a couple of weeks later.

The media critic: “News is a problem because it’s not recyclable”

Ben Bagdikian, 82-year-old former journalism dean at the University of California at Berkeley and author of the book “The Media Monopoly,” believes that the rise of media behemoths like AOL Time Warner and Viacom pose a threat to society and the nation’s democratic underpinnings.

“In the case of AOL Time Warner, we’re now seeing the fallout from an illusion that was widespread a few years ago that the future of media lay heavily in the dotcom industry,” he says in a phone interview.

“AOL was riding high on Wall Street, and Time Warner was seen as the Rust Belt of publishing, an old-fashioned media company that put out materials on paper and movies on film. Well, it turns out that’s the part of the business that is keeping AOL Time Warner alive today.

“In the process, the quality of news has suffered, because when one large company has a dominant position across all media, it’s in their economic interests to concentrate on media that can be recycled and self-promoted within the empire,” he says. “A movie provides a soundtrack that can be issued in a CD by the same company. The stars and singers can be featured on the company’s magazines and recycled on the company’s talk shows.

“In that formula, news is a problem because it’s not recyclable. So the company will concentrate on celebrity and entertainment, which are recyclable and can be used in synergistic fashion.”

When “The Media Monopoly” first appeared in 1983, Bagdikian was alarmed that more than half of the media outlets in this country were controlled by 50 corporations. By the 1997 edition of his book, that number had dropped to 10. Today it stands at six (AOL Time Warner, Viacom, News Corp., Disney, General Electric and Bertelsmann).

The result is a landscape of media giants whose political clout in Washington should raise alarm about their collective power as well as concerns about the independent watchdog role that the news media play in covering the federal government, he says.

“Diversity of channels does not give you diversity of content. You really need diversity of outlets to find a true diversity of voices and points of view.”– Ben Bagdikian

Bagdikian recalls the high-minded promises made by the architects of the AOL Time Warner merger two years ago that the union would not affect news coverage and would offer customers more content choices, not fewer.

“I know that speech by heart,” he says. “It’s made by every large corporate leader, but it’s just not true. News almost never escapes shareholders’ demands for maximum profits. As for promises not to interfere in the editorial process, when the stakes are high enough, there always is an intrusion. We’ve seen it with Disney clamping down on dissident voices and hard-nosed journalism, and we will see it at AOL Time Warner.”

While the corporate honchos talk about synergy, Bagdikian says, customers get shortchanged by the incredible shrinking diversity of content. Remember the AOL Time Warner executive at the top who sang the praises of reduced duplication of effort in covering events like the Oscars? That’s exactly what worries Bagdikian.

“Ultimately, what you’re talking about is fewer choices, fewer journalists in the field, fewer foreign news bureaus, fewer news stories, fewer programming choices available,” he says. “Diversity of channels does not give you diversity of content. You really need diversity of outlets to find a true diversity of voices and points of view.”

News organizations within these mega-corporations face several problems, Bagdikian says. The quality of the journalism suffers as shrinking resources are devoted to enterprises that contribute to the company’s bottom line. News gets dumbed-down by an emphasis on entertainment and fluff that can be recycled to attract bigger audiences. And the honesty of the journalism suffers as reporters and editors face the ethical minefield and formidable conflicts of interest inevitable in covering an enterprise with such far-flung business interests.

“Reporters and editors know which stories and which leads they’re not supposed to pursue,” he says. “Nobody needs to send them a memo.”

News, when it does appear on the corporate radar screen, is often an irritant or minor consideration. “When you look at the table of organization within these very large corporate entities, news is a very small box and very removed from the company leadership. When they do think about news, it’s supposed to do its part in producing profits.”

Bagdikian reminds us: “News has a high value within society. Even though we say nobody reads it, it’s not true.”

As for AOL Time Warner, which controls the news content for tens of millions of Americans, he says, “They have enormous power to inform and an ethical obligation to look beyond the demands of Wall Street to serve the public’s interest.”

The last word: Evolution of a media company

What we really have here are two stories, each important, each intersecting the other: the vitality of the AOL Time Warner media empire as it wrestles with the demons of convergence and profitability, and the resulting impact on the journalism put out by its news properties.

Today, it’s almost impossible to talk about news without talking about the corporate forces that shape it.

Since the merger between AOL and Time Warner was announced 26 months ago, one of the recurring leitmotifs in this Wagnerian drama has been: Who’s on top? Which culture — and whose values — will dominate?

Because AOL had the upper hand in the merger, it gained an early advantage. But in the months since then, the balance of power has shifted. As the company’s stock price crashed and burned, it has become clear that AOL Time Warner’s value reside in its traditional entertainment and media properties. The mantra on Wall Street has become, Buy Time Warner, get AOL for free.

One could make the case that the plummet in the company’s financial fortunes is good news, if only for its humbling effect on the company’s top brass.

In a way, AOL has gotten its poetic comeuppance. These were the folks who, back in 1994, tried to convince newspaper publishers that the Internet was evil, rife with copyright piracy. A few years later, they acted as if they invented the Internet.

These were the folks who displayed such galloping hubris after AOL’s 1998 purchase of Netscape, resulting in the top 15 percent of Netscape’s talent walking out the door.

As one former Netscape executive told me, “There was a vast cultural difference between the meritocracy that existed at Netscape and the know-it-all, superficial aspects of a wannabe media company. The AOL executives thought they were gods who walked the earth.”

It comes as little surprise, then, that the meshing of cultures between AOL and Time Warner is taking some time to sort out. AOL, as the executive said above, is still learning how to become a media company.

Pavia Rosati, former director of the entertainment channel for AOL, recalls the days before the merger: “I would get in fights with people over whether we were a media company or a software company. The merger with Time Warner lent AOL a bit more journalistic credibility and gave me a little more muscle.

“When someone asked to give better play to a story because they were an advertising partner and took out a lot of ads but the content sucked, it was easier to push back and say, This is not how a media company operates.”

Rosati, who was a journalist with News Corp., Mirabella and the Village Voice before her stint at AOL ended a year ago, says her experience was entirely positive. “I loved working there. It was fun and big and messy and challenging. But it’s a different place now. I still have friends there, and the low stock price has become an all-consuming nightmare for some people.”

She says the company is still grappling with a key underlying issue: “Does Time Warner get to drive because they’ve been a successful media company for so long? Or does AOL get to drive because they became a successful Internet company so quickly?”

That question continues to echo in the hallways of AOL Time Warner in Dulles, Va., and New York. Both last month and last week, the company announced another management reshuffling, as they bring in a slew of seasoned executives from old media properties to help its flagship online operations adapt to today’s grim business climate.

Says Rosati: “A lot of media people have been brought in to save the company, but if they don’t understand the medium, if they don’t know why a message board is important, your background and experience aren’t going to translate all that well. AOL is looking for saviors, and hiring media veterans won’t make their problems go away.”

The AOL brass has its work cut out. The service’s subscription rate has stalled, as it faces stiff competition from MSN, major ISPs and broadband providers. The division’s earnings plummeted 14.6 percent in the year’s first quarter. And its customers are getting fed up with the never-ending pop-up ads and marketing come-ons.

ChangeWave Investment Research, an investment and research firm, polled its clients who are current and former subscribers of America Online and released the results Tuesday, showing that 40 percent of respondents were dissatisfied with the AOL service. “This survey has the most overwhelming, and negative, response to a company or technology we have ever seen,” the firm’s director of research said.

Beyond synergy: Sound business practices, good journalism

Having said all that, keep in mind that AOL has proved remarkably buoyant through the years, earning the moniker “the cockroach of cyberspace” for its resiliency. In the mid-’90s, Net-savvy analysts and journalists were skeptical that AOL would survive. Why would people pay to join a closed network when the Web was free for the taking? With its relentless marketing drives (care for an AOL CD coaster, anyone?) and simple interface, AOL proved the skeptics wrong.

As for the AOL Time Warner empire, its troubles may be overstated. Earlier this month Parsons told the cable TV industry convention in New Orleans: “We’re the No. 1 movie company, the No. 1 online company, the No. 1 premium cable network company, the No. 1 cable network company, No. 2 cable company, No. 2 music company. What am I missing?”

Synergy has seen its share of wins. Time Inc. magazines are snagging about 100,000 new subscribers a month by selling subscriptions on AOL. Traffic to Time.com has soared from 1 million monthly visitors two years ago to 5.9 million visitors in March, thanks to the AOL firehose.

Despite those successes, the larger goal of synergy between the company’s new and old media divisions has proved mostly elusive so far. Parsons has already signaled that the company would shift attention away from some of its struggling convergence technologies, such as AOL-TV, and focus on each business division’s fundamentals.

Other bets, like transforming the flagging financial news cable channel CNNfn into CNN Money, are on hold. And CNNSI — the 1996 marriage of convergence between Time Warner’s corporate cousins Sports Illustrated and CNN — failed to find its rhythm. AOL Time Warner pulled the plug on the cable sports network last week. The show never got its arms around that elusive entity known as synergy.

As other companies have learned in recent years when they’ve bet on convergence or counted on the Internet to change the world, all of this stuff takes an awfully long time to happen.

Public needs to stay vigilant

It’s hard to figure AOL Time Warner. One moment, it seems clear that a corporate juggernaut that wields this much media power can only have deleterious effects on news and journalism. The next moment, the company’s holdings seem so dispersed and disconnected that the whole $83 billion enterprise seems little more than a paper tiger.

Yes, the news is alive and well at CNN, Time, Business 2.0 and the slew of other AOL Time Warner properties. The decades-old Time Inc. tradition of editorial independence remains intact. No major ethical breaches or editorial conflicts of interest have stained the company’s reputation.

But we’re still early in the game.

The public needs to keep vigilant watch that the company’s wide-ranging journalism operations are not sacrificed on the altar of Wall Street profits.

Inside the corporate offices, executives should resist the temptation for short-term bumps in its stock price by slashing costly news operations. Growing pains or not, it’s time for AOL TW to start behaving like a mature media company and exercising the public responsibility that accompanies a company this big and influential. We’ll see whether Parsons & Co. have the vision and the temperament to ride out the storm.

And AOL Time Warner’s journalists? They need to keep doing what they do best: Report and edit the news.

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JD Lasica
Written by JD Lasica
JD Lasica is an entrepreneur, author, journalist, photographer and blogger. | CONTACT