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Background: AOL-Time Warner Merger

January 10, 2000 at 12:00 AM EST
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TRANSCRIPT

RAY SUAREZ: Today’s blockbuster merger unites the biggest name in the world of traditional media with the biggest in new media. New York-based Time Warner, the world’s largest media and entertainment company, produces television, movies, music, and magazines.

The company owns CNN, HBO, the Cartoon Network; magazines like Time, People, Fortune, and Sports Illustrated; and the Warner Brothers movie, television, and music studios. Time Warner employees 70,000 people, and before today was valued at about $100 billion. Time Warner itself is the product of several mergers, including bringing together Time, Inc. with Warner Brothers, and most recently folding Turner Broadcasting System.

AOL, or America Online, based in Virginia, is the nation’s largest online company, providing more than 20 million subscribers with access to the Internet. About 12,000 people work for AOL, and prior to the announcement, it was valued at $163 billion. America Online has also previously merged with other companies, including Netscape and CompuServe. The heads of both companies announced the deal at a New York press conference this morning. AOL will own 55 percent of the new company; Time Warner will own 45%. Time Warner’s chief, Gerry Levin, will be the chief executive. He said the new company starts out with a large customer base.

GERRY LEVIN: You have all the obvious statistics here. When you look at the 22 million subscribers to AOL and CompuServe, the 135 million additional registered users for AOL, the 120 million readers of the more than 30 magazines of Time Inc., the 35 million subscriptions to HBO, its pay television services, the 20 million homes patched with digital cable. For TNT and TBS, our entertainment networks, they’re received by 75 million homes. And probably, very significantly, and you’ll hear from them shortly, CNN is really accessible to a billion people around the world. And, in fact, I view us and our combined company as the trustees for a remarkable heritage.

RAY SUAREZ: AOL’s Steve Case will be the chairman of the newly proposed company.

STEVE CASE: This merger will launch the next Internet revolution. Building on those technological advancements and making the most of them to benefit our consumers. AOL-Time Warner’s assets will include the world’s largest Internet dialup network, a whole array of cutting edge interactive technologies and cable systems that reach more than 20 percent of American households, making it the second largest system in the nation.

But there is another reason why this merger is so important, and it is not its size. It’s really the company’s potential for innovation and creation of new value and new choice for consumers. If we are going to develop all of the Internet’s great possibilities, we can’t just come up with faster, more affordable ways to deliver information. We also have to enrich and expand that information, making it even more central and more valuable to people’s lives.

AOL Time Warner will offer an incomparable portfolio of global brands that encompass the full spectrum of media and content, from the Internet to broadcast and cable television, to film, to music, to magazines, and to books. Ultimately, this is about serving consumers. So I want to talk a minute about what this will mean for consumers. It will mean new kinds of opportunities for entertainment. It will mean new opportunities for shopping for a variety of products and services that will improve their lives and add convenience to their lives. It will mean new opportunities to communicate, to learn about one another, and learn about the world around them.

So what will this mean for our core business? The merger will speed the delivery of media-rich broadband Internet services to mass market consumers and drive the growth of advertising and e-commerce across all of our combined brands. This is the first time a major Internet company has combined with a major media company and the possibilities are truly endless.

RAY SUAREZ: The two corporate heads were asked how their management teams would work together.

JOHN HIGGINS: Do you have a lot of cooks on stage, a lot of people with co’s in their title? I mean, there’s going to be a power shift. How does that work out?

GERRY LEVIN: I thought it was a plus that we had this group up here because it gives some indication of, not only the depth, but you can, you know, look at body language and see the interaction or the relationships that already exist. (Laughter) (applause) We’re… we’ve become a company of high fives and hugs.

RAY SUAREZ: The merger sparked activity on Wall Street today. Time Warner stock surged up more than 40 percent, while AOL fell more than 2 percent. The $166 billion deal must be approved by federal regulators and shareholders from both companies.