The entrance to the former headquarters of AOL Time Warner in 2001
So here's a bit of counterconventional wisdom: The only person who has consistently been right about the disastrous AOL–Time Warner merger was its architect, Steve Case.
I pause here to duck the shoes being hurled by my co-workers ... But it's true. Consider:
Merging AOL with Time Warner in 2000 could have and should have been a brilliant move, not just for Case, who made zillions by converting high-flying Internet stock (and a bit of fuzzy accounting) into real money, but for the world's biggest media company too. By the turn of the century, it had become apparent that the value of content was plummeting as more and more media were digitized. Time Warner's video, music and print, and especially its cable company, could have and should have rallied around AOL as the solution. AOL and Time Warner Cable's high-speed Internet arm, Roadrunner, could have and should have merged, making AOL, that once golden brand name, synonymous with a national broadband network. (See the worst business deals of 2008.)
And as that network grew and grew and grew, Time Warner's content divisions, from HBO to Time Inc., from CNN to Warner Bros., could have and should have been at the forefront of the digital-media revolution, leveraging that access against its powerful brands.
But all the coulds and all the shoulds couldn't put AOL Time Warner together again. I blame the company's curious entrepreneurial culture — curious because, while entrepreneurship is highly prized here, the jefes who run the big operating units still prefer the safety and comfort of a large corporation to the risk of running one's own business. And that creates powerful fiefdoms where divisions don't cooperate with each other and synergy becomes a bad word.
So in the end, Time Warner turned out to be the worst kind of conglomerate, a case study (no pun intended) in dysfunctionality. And once again, it was Case who saw this. In fact, he argued in public in early 2004 that AOL ought to be spun off. (He actually did a pretty good job of predicting the future then too, pointing out that online content would consolidate around powerful verticals.) (See the 50 best inventions of 2008.)
Spinning AOL off is a good move for AOL. With his Google pedigree, Tim Armstrong appears to be the right person for the job. AOL can soon sell its own stock and raise money to do what big Internet companies must do, especially now: buy the great (undervalued) start-ups that are creating the future. The only question that remains is, What happens to the rest of Time Warner? That's another story.
Watch TIME's video of Peter Schiff trash-talking the markets.