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While Washington weighed the merger's fate, AOL and Time Warner confidently, or arrogantly, carried on one of history's most extensive premerger integration efforts. The same week that the ABC controversy erupted, Levin and Case announced a new corporate structure, with Case as chairman; Levin as CEO; and Parsons and Robert Pittman, a veteran of AOL (and Time Warner), as co-chief operating officers.
Pittman has emerged as the battlefield commander, with what many view as an insurmountable goal: to shape Time Warner's disparate, shark-infested corporate divisions and AOL's single-minded Internet entrepreneurs into a lean, mean conquering force. Although Levin insisted that the new headquarters be in New York, the cost was the defenestration of much of Time Warner's corporate staff. Many of the top executive roles have gone to AOL. Middle managers from the two companies have clashed over, among other things, ad-sales strategies and Time Warner's compensation structure. "A lot of [AOL executives] came in thinking they were going to tell us how to run our businesses," says a top Time Warner executive, a veteran of that company's internecine wars. "Then they began to realize that movies, publishing and cable are a lot more complex than just being online." Admits Pittman: "There are people at AOL who have been a bit naive, but I'm working to change that."
Indeed Pittman is beginning to win the grudging respect of early doubters. He has formed a series of committees across divisions and a council of capos at which top executives meet every three weeks to weigh integration progress. They are gradually enforcing a new plan for action that encourages division managers to think and act more corporately, as opposed to pursuing purely their unit's interests.
As an incentive to work together, the merged company's 2001 plan includes a provision for granting stock options to each of the combined company's 85,000 employees. Time Warner's compensation will probably shift too, from a salary and bonus system to one linked more closely to stock performance, not unlike AOL's.
As for synergy? The two companies have already found ways to boost growth by cross-selling subscriptions and advertising and running promotions for Time Warner content on AOL. Last summer a promotion on AOL is credited with boosting box-office returns for The Perfect Storm. Perhaps the best success so far has come from collaboration between Time Inc. president Don Logan and Pittman, who engineered a scheme to sell magazine subscriptions via AOL. So far, the combination has produced more than 500,000 orders.
AOL is relaunching Netscape next year, positioning the browser as the central clearinghouse for Time Warner's content. That's not prime Internet real estate, and there are some murmurs within Time Warner that AOL's quest for its own content is exceeded by its lust for rent-paying deals. Don't expect Time Inc.'s Money.com to replace CBS MarketWatch on AOL anytime soon.