AOL’s not ready for prime Time

Company downplays synergy, Web

This article was corrected on July 23, 2002.

Will the world’s largest media conglom become the Company Formerly Known as AOL Time Warner?

That’s just one of the questions being raised throughout Hollywood in the wake of the company’s stunning corporate restructuring.

While there’s been no suggestion that the company plans to change its name, the idea has been raised in internal meetings at the conglom.

Not only is AOL TW chairman Steve Case the only remaining top exec who came from the Internet side of the biz, but the company has dropped its boilerplate description as “the world’s first Internet-powered media and communications company” in favor of a description as “the world’s leading media and entertainment company.”

And in the wake of the ascension of the two “old media” line operatives Jeffrey Bewkes and Don Logan as, in practice, co-chief operating officers of the company, synergy too could become as much of a dirty word as “Internet.”

Pushing such synergies too aggressively was one of the things that got former COO Bob Pittman into trouble and led to his resignation last week.

Warner Bros. chairman and CEO Barry Meyer has now admitted that AOL TW may have tried a little too hard to make all the parts work in perfect harmony.

Odd promos

Just how out of tune such moves were could be seen on Rosie O’Donnell’s “ick” face when she was obliged on her syndie show some months ago to extol the virtues of a new fast-food salad from Wendy’s.

That unfortunate promotion was a brainchild of the AOL-led Global Marketing Solutions Group, a division created a year ago to develop worldwide cross-platform advertising and marketing initiatives.

With the promotion of Bewkes to the new post of Entertainment & Networks Group chairman, the company will now likely return to old-fashioned notions of creation and cooperation.

Not only is Warner Bros. Pictures thrilled to have a homegrown creative exec like Bewkes at the helm, but it’s also the first time that an operations exec has been made responsible for running the company.

On the TV side, Turner Broadcasting CEO Jamie Kellner told Daily Variety that he expects to see less of a move toward trying to combine everything into one corporate structure.

“The company is going to head in a direction where the CEOs of the divisions will be more focused on operating their own businesses,” he said.

Bewkes a New Line backer

The division may have a new booster in Bewkes.

His wide-ranging sense of humor means he ought to appreciate pics as diverse as “Austin Powers in Goldmember” and “The Powerpuff Girls.”

Another unanswered question is whether the latest executive revamp will in any way affect the quantity (and quality) of pictures greenlit by the studio each year. At the moment the company is churning out 26 or 27 titles annually for its various pipelines.

The jury is out on that one.

Regarding the cable business, Kellner doesn’t expect the executive restructure to have much impact on the various Turner channels.

AOL TW’s entertainment units and networks had been moving toward more cohesiveness even before Bewkes took the reins, he said.

“We’ve already gotten that going,” Kellner said. “Bob (Pittman) started looking a long time ago at ways different parts of this company could work together.”

Thaw in unit relations

Indeed, the icy relations that once kept cousins like the WB netlet and Warner Bros. TV or HBO and Turner from working together had already started to thaw.

“What’s happened in the company since the merger is all the divisional CEOs have gotten to know each other a lot better,” Kellner said.

Kellner said the shuffle should clear up any confusion outside the company as to who’s running the ship.

“For the outsider today, you have a clear management structure, with Dick (Parsons) as leader of the company,” he said. “There’s no question the advertising side of AOL has come up short, and that’s been a burden for the whole company. But the rest of the company has been doing damn well.”

At this point, Kellner said, the mandate from above is clear: Stay focused on the creative side of the business.

Meanwhile, the future is considerably less rosy at AOL itself, which has been saddled with a double-barreled headache.

One barrel is trained on its bottom line, thanks to the slowing growth in new subscribers. The service expects to add perhaps 2.5 million subs this year and as few as 2 million next year. It added 4.1 million in 2000 and 3.7 million last year.

The second barrel is pointed at AOL’s weak ad sales. The dot-com collapse took out many large AOL advertisers, which often left unpaid bills. Furthermore, big ad deals were once supposed to make up for the slowing sub growth.

Post raised concerns

Wall Street was further spooked by last week’s lengthy article in the Washington Post detailing what it called “unconventional” accounting designed to boost AOL ad revenues since 2000.

Though the questioned amounts comprise only about 5% of AOL’s roughly $5 billion in ads and sales, that percentage is crucial when it comes to allowing the company to meet Wall Street revenue targets for the next couple of quarters.

Despite these woes, AOL continues to have some notable strengths, rivaled only by Yahoo! and eBay as the premier Internet blue-chip companies.

It still has more than 33 million subscribers, more than triple any direct competitor. It remains the choice for Internet newcomers who aren’t tech-savvy and want a simple, straightforward connection to the Net.

And it remains the choice for families and others concerned about excessive exposure to the seedier side of the Net, given its extensive child-protection controls on, for example, access to porn.

(Michael Schneider and David Bloom contributed to this report.)

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