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Time Warner To Be Split Into Four Parts?
Shakrai writes "CNN Money is running a story titled Icahn eyes Time Warner break-up. Carl Icahn is a fairly well known investor who is pushing to break the Time Warner empire into at least four different business units. While his motivation seems to stem from business interests -- he thinks it will work out better for Time Warner in the long run -- I thought it raised an interesting point of discussion. Will the vertically integrated media empires that control content creation, content distribution, internet access and the news media become the Ma Bells of the 21st century? What can be done to protect consumers without stifling the technological innovation that we all know is so important?"
Does anyone else find it weird that just a few years ago, big mergers were all the rage and "synergy" was the magic buzzword in corporate America and on Wall Street. So why are so many companies now rushing to get unhitched? Also, is this outbreak of corporate divorces good for shareholders, or should I sell my stocks now?
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I guess if AOL is going to be set free, and probably aquired, Netscape will also suffer its final fait too... i can imagine that it will evntually get killed off , marking the end of a once great Internet company.
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They form AOL-Time-Warner-Tron!
(Ted Turner likes to play the head.)
This is just Catching up with the past isn't it? From what I've read the Aol merger never went very well and most folks thought they should have been blocked by the government anyway.
I've always thought they were putting too many different colored eggs in one basket
The larger a company is, the less it competes on quality and innovation, and the more it competes on price and muscle. Smaller companies are more agile and can change more quickly.
My personal opinion is that Icahn is pushing this for simply financial reasons. Quite simply, Time Warner has money making divisions, and others are dead weight that should jettisoned. By splitting them up, an investor ends up with some kind of stock split amongst the resulting companies. They then sell off the loser stocks and put that money back into the good portions. This would be a great way to kill off AOL once and for all. AOL is the only division I know of that's dead weight, but there could be others. I'm really just guessing here. MY point is that Icahn is doing this for money reasons. It's the only reason why he would, and neither the article nor the submitter make any mention of this, which is extremely short sighted.
However, regardless of the financial motivations, I completely support a break up of any company as large as this, purely because it benefits consumers with competition. Also, while a merger usually ends up in "eliminating redunancies" in jobs, a break up will usually put those "redundancies" back and open up at least a few new jobs to fill.
No brainer really... get the sledgehammers out and start breaking!
"All great wisdom is contained in .signature files"
I'm a former GTE customer. From a customer service and quality standpoint they were the worst company I've ever dealt with. Every time I had to deal with them they botched it.
Since they merged with Bell Atlantic and became Verizon, I'm fairly happy with them. They adopted the policy (for their customer service reps, anyway) that one way or another they wouldn't stop working until your problem was resolved.
Their prices are too high, but at least they fix whatever you tell them is wrong.
But Icahn is just trying to "flip" them, as you would a piece a furniture you got at a garage sale and put on Ebay.
Raise your children as if you were teaching them to raise your grandchildren, because you are.
Does anyone else find it weird that just a few years ago, big mergers were all the rage and "synergy" was the magic buzzword in corporate America and on Wall Street.
Not really so weird. Boards and execs have little to do but cook up a buy, merger or divestiture. It is self justification for their existance. But what a waste of money.
The truth is the rich at the top want to keep one part of the company and cash out another and now realize the merger was stupid. My guess is AOL has been loosing too many customers under the new management and instead of dealing with the synergy and management issues they are going to cut AOL back out on their own.
It is too bad short term greed and short sightedness were not the only traights you need on a good board of directors, if so America would be rich.
Split into four parts, eh?
Tim: for people called Tim
e w: for disgusting things
arn: the Access Research Network, apparently.
er: for uncertain things?
Guy asked me for a quarter for a cup of coffee. So I bit him.
...seem to suffer from the same problem - although they run the full range of medial production, none of them seem to be able to effectively merge the different parts of the company to produce any great result.After all, Time Warner have a huge back catalog of music and film sitting there, but they've provided no means for customers of AOL to access any of it. Maybe they're working on that, i dunno, but all these big merged conglomerates like Sony BMG, Time Warner, none of them are visibly making any real efforts to do things involving the full spectrum of business interests they cover.
:(
I always wonder if it's because despite being "merged" on paper, internally they still run as separate businesses with all the competing and territoriality that implies...
Game dev and music blog
There is no dependent public service on Time Warner. All they things they do, especially in media, can't be considered in the same way that the monopoly of AT&T and their FCC and PUC/state-governed telephony was.
These two aren't equal; they aren't congruent, they aren't even parallel.
Time Warner's broadband properties are not a utility, like water, sewer, electricity, or natural gas-- things you can't live without. They don't have the same history, the same economics, the same monopoly control, the same easement and right-of-way capital assets, and so on.
Therefore, garbage-in, garbage-out. The comparison is null, and it is, unfortunately moot.
---- Teach Peace. It's Cheaper Than War.
"What can be done to protect consumers without stifling the technological innovation that we all know is so important?"
Start by making fewer assumptions...
Assumption #1: Technological innovation as you perceive it actually happens.
Assumption #2: Consumers are protectable and/or need to be protected.
Assumption #3: Consumers want current content.
Assumption #4: Consumers are the ones being protected.
TV was called the 'boob' tube, for good reason, long before the phrase 'innovative technology' was coined. You seem to think content mega-control by corporations is new on the scene...it's not.
Consumers aren't quite the idiots you think they are - by your logic, a small group of people enjoying an ad-hoc musical performance in Central Park are neither consumers, nor are they being exposed to 'content'...wrong. Just one example - there are hundreds more. Point is, consumers can protect themselves, thank you very much.
As for protecting anyone...the corporations are the ones interested in protection.
Despite your fantasies, most technological innovation comes from good old fashioned war. Faster information gathering; better medical procedures; increased creature comforts...the biggest upswings in tech advances have always been associated with some type of major military activity.
Real innovations occur as distanced events in terms of any form of consumerism or content protectionism, and they will never be subject to any threat (first amendement or business model related) that is simply based in the marketplace. Just ain't gonna happen...
Not to defend AOL or anything but you are wrong that AOL is the only dead weight in Time-Warner. AOL supplies over a billion $ a year in profit back to Time Warner. Not to mention the 11% of Google's business they supply. Certainly, AOL is not the cash machine it once was but they are far from dead. They are now shifting their focus from a member-centric model to an ad supported model. If you don't think that will work out for them then you'd better sell all of your Google and Microsoft stock because that is exactly their plans for the future too.
The merger was probably never a good idea but it was made worse when the two architects of the new company lost their focus shortly after the merger. With those two out of the picture the suits took over and the results are history.
Who can say what would have happened if the merger hadn't taken place but I think Time Warner would have been in a lot of trouble. The magazine business was losing ad money to the internet and don't get me started about their movies... Little Nicky, that stoopid Eddie Murphy space movie, please... The only thing that was making money was music and even that went to hell a few years later. That company was and is run by a bunch of greedy old school suits who have no clue what the real public wants or needs. They finally did get lucky with the HP and LOTR movies but I doubt if they could have done those without the money AOL was kicking in.
The best thing that could happen would be for the company to be split up. Then each new company could stand or fall on it's own and not be held back or propped up by the losing divisions. Maybe AOL will get picked up by someone who actually knows what the internet is...
That's what SONY did, and they are constantly battling each other because their core interests directly conflict.
I suggest you read Slashdot
When the US monopoly decision on Microsoft was official, and the "remedy" phase was at hand, many of us discussed the merits of splitting MS into nonmonopoly units. The MS "vertical" monopoly, its stack of OS/app/dev/content that excluded competitors in fact and overwhelming advantage, was fundamentally anticompetitive. So we talked about the benefits of splitting it into at least those four units, (maybe a fifth for "other", or maybe a sixth for "networks" including Comcast shares and the like). Then requiring they make partnerships on a nonpreferential (to each other) basis. There was consensus that the resulting sum of the divided parts would be worth more in stockmarket capitalization, revenues and penetration of other markets, whicle leaving lots of large niches in which other companies could compete, even a chance for other (or new) companies to seize leadership, or for units to (gasp) go out of business if they couldn't compete on merit.
Instead, the most popular remedy suggested by the most influential spectators, the Wall Street Journal crowd, was "horizontal" split into smaller microcosms: MS1, MS2, MS3 - just cut them down to size, retaining all the same operations, and fight each other. FWIW, does anyone even know what the MS remedy actually was (is), other than oversight by a nanny judge? And how the new regime compares to the old in specific metrics accepted by the judge who determined MS was a monopoly? In any event, MS is still an anticompetitive juggernaut, as subsequent state monopoly lawsuits demonstrate, as well as the news in any given month, and especially to anyone trying to actually compete with MS even in their areas of vapor competence.
This is, of course, exactly the same pattern as the paradigmmatic monopoly breakup: AT&T. The "Baby Bells" were little "Ma Bells", regional monopolies which were smaller, but just as anticompetitive. Until cable companies like Time Warner recently started offering phone service, they continued their local service monopolies. Though long distance immediately became competitive - the AT&T monopoly action was brought by MCI, which found it couldn't compete with a monopoly, regardless of its merit. The MS monopoly decision also was the result of a competitor bringing action: Netscape, which claimed (correctly) that MS violation of a prior court consent decree not to bundle IE with Windows illegally interfered with its ability to compete. Netscape, of course, was bought up by AOL by the time of the monopoly decision, as the anticompetition took its toll, while AOL also bought Time Warner, as people believed (among other fantasies) that the AOL combination could compete with MS better than Time Warner could, especially if it was also Time Warner, and once MS was divested of its monopoly advantage. That turned out to be wrong, in several essential ways.
But recall that the vertical split was believed to offer greater collective return to shareholders. And that it would offer the benefits of competition to consumers, from price to quality, as well as market opportunities for vendors. Icahn apparently believes that is the case. Bill Gates, an even larger holder of MS shares than Icahn is of TW shares, has the benefit of a single manageable empire to compensate for the tradeoff of potentially more $billions in returns on his shares. Is there a good example of a monopoly, especially a tech one, that was split into its vertical components? Bundling is the most powerful competitive tool, short of IP monopoly, in the tech business. It seems clear to many people that vertical splits are the proper remedy to protect the market, and even benefit shareholders at the ego expense of executives. Which ones can we study for actual market results, and compare with these others, which have gone the other way - and usually remain monopolies in different guise?
--
make install -not war
This is may or may not be good for consumers -- but it will make Mr. Icahn some money. An understanding of who Carl Icahn is, and what he does, may help.
Carl Icahn is an old guy (born to a middle-class Jewish family in Queens, NY). He makes his money by buying controlling interests in firms and reorganizing them in ways that increase the share price. In this regard, he and other corporate raiders have made American capitalism work more the way it is supposed to (according to the law). Sometimes they've broken the law, and screwed over minority investors; clearly that's awful
The methods of someone like Carl Icahn produce anger, hatred and even anti-semitism -- even though what he does is consistent with American law.
The basic idea of "corporate raiding" is to get enough of a controlling interest in a firm that the raider can convince the board to let him break the "unwritten" rules of American capitalism, for the benefit of the shareholders.
For instance, at big firms, younger employees used to get paid less than at other firms, but had job security. When they got old, they still got paid, even though the company would have been better off without them. Also, often the pension funds for the workers contained more money than they were required to have by law. That money could instead go to shareholders.
Doing those things rubs a lot of folks the wrong way, but that's usually because they imagine that a company has a duty to its workers -- which, in America, is not the case. The company is only beholden to its owners. Until the law changes and the owning class is disposessed, that's the law (and please remember to call me when the revolution happens, guys). Carl Icahn's brilliant ideas, among others, were to fire the older workers and give the extra pension fund money to the shareholders. Perhaps a little "creative accounting" allowed him to give more and then some. This was great for shareholders.
The bosses running American companies had always been legally able to act like Carl; they just didn't have the chutzpah to do it. The American system was less meritocratic, chummy and run by whites.
The corporate raiding could have happened in the 60s or 70s, but banks wouldn't loan money to outsiders like Carl Icahn and his fellow corporate raiders. Without the money, they couldn't buy a controlling interest in a firm and reorganize things.
The banks didn't loan to folks like Carl partly out of self-preservation: by loaning money to people like Carl Icahn, they'd be alienating the other bosses of the companies they served, and that could result in them getting cut out of routine transactions that were their bread and butter.
E.g. if a bank helped Icahn to to a takeover, it would lose some business customers, because pissed off company bosses would withold their company's business -- even if the bank had low rates and not using them was bad for the shareholders!
The reluctance of bankers to loan money to corporate raiders changed in the 80s when Michael Milken, working at Drexel, Burnham and Lambert, appeared on the scene. With high yield bonds, he had the money from investors. Michael and his bank (Drexel, Burnham and Lambert) was willing to loan money to corporate raiders, because the Jewish bank (that's not meant to be "antisemitic" --- but just a statement of who owned, ran and staffed the bank) didn't have much corporate business to lose.
As documented in the book "Predator's Ball", by the Jewish journalist Connie Bruck, to a man, almost all of the corporate raiders and bankers who provided the money were Jews with roots in Poland or Russia. A number of things came together: they were intelligent, hard working, insensitive to criticism, full of love for money (I don't want to use the word "greedy" in connection with "Jews", lest I be accused of "antisemitism" by the hypersensitive), able to do business with each other (genetic relatedness helps people to establish trust) and uncaring about the needs/feelings o
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