AOL Time Warner: Content and style

Sixteen years after its calamitous merger with America Online, Time Warner’s existential angst has barely lessened. In 2000, it held an enviable portfolio of assets: television networks, a movie studio, magazines, music. The core failure of AOL Time Warner was the absurd economics. It was billed as a “merger of equals”, but AOL shareholders gained 55 per cent of the combined company, effectively valuing AOL’s equity at $200 billion -- pretty juicy for a company whose revenue was $7 billion, less than Time Warner’s operating profit. AOL had 26 million subscribers who paid a monthly fee for Internet access. It was profitable (unlike most dotcom charlatans) but it soon became apparent that AOL was not in the same class as Time Warner.

Time Warner spun off the AOL business in 2008 and it was acquired by Verizon for $4 billion in 2015. While AOL had moved into branded content and programmatic advertising technology, its remaining 2m dial-up subscribers still generated the bulk of its profits. As for Time Warner, it has spent much of the past decade cleaning up its stable. It disposed of its pay TV distribution unit, Time Warner Cable, acquired by Charter Communications for $80 billion in total enterprise value. It also spun off Time, its magazine business. The remaining television and movie business held up quite well -- until recently.