Structure, exex shuffled while solons debate union

NEW YORK — Merger partners America Online and Time Warner unveiled their new executive lineup Thursday, even as the landmark deal — which the companies expect to close this fall — faces renewed scrutiny in Washington, D.C.

The new AOL Time Warner is to be carved into three divisions: advertising and commerce, subscription services and content. What’s striking is that the first two units will lump together AOL’s current business, plus Time Warner Cable, publisher Time Inc., HBO, Turner Broadcasting and the WB network. Time Warner chairman-CEO Gerald Levin defended the move, saying those Time Warner units either involve subscription services, buy programming from various sources or depend on advertising — as does AOL.

Division heads report directly to AOL’s Bob Pittman, who was named co-chief operating officer of AOL Time Warner. That surprised some on the West Coast, as did the delinking of the WB net with Warner Bros. studio, which seems to fly in the face of a trend toward vertical integration at other entertainment congloms.

‘Only upside’

But WB Network topper Jamie Kellner was upbeat about the restructuring. “There’s absolutely no downside. There’s only upside,” he said.

While the Frog will now be under a separate tent from Warner Bros. Television, insiders at both camps said the ties between the two have grown strong enough to survive the separation. “The relationship is one of mutual respect and mutual benefit, so I don’t think there’ll be any change in the way we do business,” said one exec.

And Pittman, who helped launch MTV, is certainly no stranger to entertainment.

“We put people in places that play to their strengths, regardless of their company of origin,” Levin told Daily Variety.

“Bob knows what we do, and he’s obviously been very successful with and understands what AOL can and should do. Having him put this together makes a lot of sense to all of us,” said HBO chief Jeff Bewkes, who said he’s itching to get some of HBO’s original content online.

Turner Broadcasting System topper Terry McGuirk also waxed enthusiastic. “I can’t envision a stronger more creative leader than Bob Pittman as we enter the Internet century,” he said.

Content — meaning strictly Warner Bros., New Line Cinema, Warner Music Group and Time Warner Trade Publishing — will report to Time Warner’s Richard Parsons, who will be the other co-chief operating officer.

AOL’s Steve Case will serve as chairman of the combined company to Levin’s CEO. Kenneth Novack from AOL and Time Warner’s Ted Turner will serve as vice-chairmen.

Little change at top

The top names don’t change much at individual divisions: Barry Meyer at Warner Bros., Bob Shaye at New Line, Roger Ames at Warner Music, Bewkes at HBO, Jamie Kellner at the WB, McGuirk at Turner Broadcasting, Don Logan at Time Inc., Joseph Collins at Time Warner Cable and Laurence Kirschbaum at Time Warner Trade Publishing.

Barry Schuler, currently head of AOL Interactive Services, will become chairman-CEO of America Online and assume Pittman’s current responsibilities.

AOL and Time Warner announced the appointments as members of Congress threaten hearings and public interest groups blast Time Warner’s decision to yank ABC off its cable systems in a number of cities for about 40 hours earlier this week. ABC went black after its parent Walt Disney and Time Warner hit another impasse in negotiating a retransmission consent agreement.

Fresh fuel

In flexing its muscles, Time Warner gave fresh fuel to the many opponents of media consolidation at a time when open access is a big issue and the FCC is examining the AOL/Time Warner merger.

Levin insisted the two issues are separate and that the tiff with Disney started well before the merger deal with AOL. He said it’s time to take a step back, cool off, tune down the rhetoric and try again.

Disney insiders said chief operating officer Bob Iger had called Time Warner’s Parsons to seek another round of talks.

According to Levin, Time Warner was required by law (the 1992 Cable Act) to drop ABC if the two sides couldn’t agree on a new deal or on the timing of another extension. The series of extensions, he said — and there have already been several — only served to draw the process out, not solve it.

Other appointments announced Thursday include:

  • Richard Bressler, currently head of Time Warner Digital Media, will become CEO of the AOL Time Warner Investment Corp., a new global equity investment and venture capital group.

  • J. Michael Kelly, AOL’s chief financial officer, will become the CFO of the combined company.

  • Kenneth Lerer, senior VP at AOL, will become executive VP at AOL Time Warner and work with Levin on company strategy and corporate positioning. Reporting to Lerer will be Time Warner’s head of corporate communications Edward Adler, who will hold the same position at the merged company, and AOL’s investor relations chief Richard Houston, who will head up investor relations for the combined AOL Time Warner.

  • AOL business affairs exec David Colburn will become president of business development for the new company’s subscription services and advertising and commerce business.

  • AOL’s General Counsel Paul Cappuccio will serve as general counsel to the combined company.

  • AOL’s chief technology officer William Raduchel will do the same.

  • AOL’s head of global and strategic policy will do the same.

  • Time Warner’s head of human resources Andrew Kaslow will become AOL Time Warner’s senior VP for people development.

(Paula Bernstein and John Dempsey in New York and Josef Adalian in Los Angeles contributed to this report.)

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