AOL Time Warner: Deal of the Century Turns into Disaster of a Lifetime (Bovée/ThillMescon, 2007)AOL acquired larger Time Warner in 2001, in a merger valued at over $180 billion (USD) and tagged the ÃÂdeal of the centuryÃÂ. The merger was the first between a traditional media giant and a new media-internet giant and had a significant impact on a variety of different industries including e-commerce, magazine publishing, music and the media industry as a whole. (Eunjung/Dugan, 2000)ÃÂAOL Chairman and CEO Steve Case àdescribed the upshot of the merger this way: "We're going to map out a route to the promised land."à(Dembeck/Caswell, 2000)The merger gave AOL access to Time WarnerÃÂs broadband assets to squelch pressure for AOL to move from phone-line to broadband, and gave Time Warner immediate marketing and advertising access to AOLÃÂs online audience of over 20 million users. (Dembeck/Caswell, 2000)ÃÂWhen the merger was announced, analysts believed that Time Warner's music, movies and magazines along with its cable systems would speed up AOL's transition from phone dial-up to broadband, and that AOL's Internet mentality would accelerate growth at Time Warner.
Neither has occurred.ÃÂ (Case, 2005)Challenges faced by the merged companies included a dysfunctional integration to form ÃÂoneÃÂ company, as each division just ÃÂdid its own thing.ÃÂ (Case, 2005) stifling innovation; turf wars were the focus instead of moving forward; and personality clashes overshadowed each step forward. Additionally, along with the slump of the dot.com economy and a significant reduction in advertising revenues, the merger led to significant layoffs of employees in the first 1-2 years.
Finally, an investigation into the companyÃÂs finances resulted in approximately $500 million in fines, and within a few years of the merger, the ÃÂdeal of the centuryÃÂ was seen as an utter failure, ultimately leading to Time Warner dropping AOL from...