Why the AOL and Time Warner merger now? The key to this questions is with Gerald Levin, Time Warner's CEO, who long ago decided that Time Warner's future was digital.
Basically, it boils down to this. Levin -- for all of Time Warner's failures online -- is one of the only media CEOs who has been convinced for a long time that the future belonged with the digital world.
Let's look at some ancient history-five years ago, to be exact. Levin was loudly proclaiming that he had seen the future of media, and it was to be found in interactive television. Specifically, in a project called the Full Service Network which promised to bring interactive two-way cable to the masses. Levin, who started out at HBO, was a strong believer that cable TV wires could be upgraded to bring interactive services to the home, and that these services, such as banking and video on demand, would take America by storm. So convinced was he that he was quoted as saying that "I stake my career" on the success of the Full Service Network.
The FSN wasn't successful, it turned out, because the fancy cable boxes that were necessary in each home to deliver the nascent two-way broadband network were far too expensive and complex to be affordable. The thing flopped, but Levin didn't quit. He remained convinced that Time Warner would someday be able to dominate in interactive content. This explains, at least in part, the hugely expensive commitment to Pathfinder, TW's Web site, which failed to justify even a fraction of its cost. But Levin persisted, and here is where Levin is different from other media CEOs. He stuck with his vision, despite huge setbacks -- embarrassing setbacks.
You have to admire the persistence of it all in a way. The guy was down and out twice, and he kept getting up again. The failure of Pathfinder must have been particularly difficult to swallow, because Time Warner has always been convinced that it has the best content in the world, and it imagined that it would take the Net by storm.
It's not hard to figure out why those dreams of domination were so compelling. Time Inc., the magazine division, rules the print world in a way that no other media company dominates a category. The company gets fully one-third of all magazine advertising, and it claims 130 million readers. Moreover, its CNN claims to reach one billion people around the world.
It stood to reason, the argument went, that by simply translating its magazines to the Internet, Time Warner would succeed. When that didn't happen, the company went looking for various Internet saviors, each of whom announced a contradictory Web strategy, and ended up looking ineffective.
Ultimately, Levin realized that his dream would never be realized from within -- a difficult pill to swallow. There was only one company that Time Warner could then turn to that was as dominant online as it was was dominant in print. And that company was AOL.
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