WHAT YOU NEED TO KNOW
The 1990 merger of Time Inc. and Warner Communications brought together two companies with extensive histories, Warner’s dating back to 1903 and Time Inc.’s starting in 1922 with Time magazine. Today, Time Warner, which merged with AOL in 2001, is the world’s largest media conglomerate, gathering $44.2 billion in revenue in 2006.

WHAT THEY GOT RIGHT
Time Warner’s curse is the dreaded “synergy” of its properties. On the one hand, it’s simple to coordinate on-demand content from pay-cable networks when you own the cable provider, or to sell Matrix DVDs when you made the movies. On the other hand, a lagging division—like AOL or the company’s publishing unit—can drag down the stock price and snarl business operations. Hence, the 2006 invasion of noted corporate raider and major shareholder Carl Icahn, who started a proxy battle and attempted to oust management. He argued that the stock price could rise only if the company was split up. Icahn backed off after the cool response from the market and the media, but not before exposing some of the cracks in Time Warner’s massive facade. “We created our own monster,” C.E.O. Dick Parsons admitted in 2006. “We oversold the notion of synergy.”

Synergy aside, Warner banks on its brand strength. From Batman and Superman to Scooby-Doo and Neo, Warner Bros. Pictures has a treasure chest of franchises. The Lord of the Rings trilogy, produced by Warner-owned New Line Cinema, took in about $2.9 billion in global box office collections and then a further $3 billion in consumer products. New Line’s Wedding Crashers was the highest-grossing comedy of 2005. And then there’s Harry Potter, who might as well be tossing diamonds from his broom.

Warner Bros. Television Group produces such shows as ER, Gilmore Girls, and Two and a Half Men, and the company also owns the very successful H.B.O. Time Warner Cable is the nation’s second-largest cable operator. And Time Inc., the top consumer magazine producer in the country, publishes more than 150 titles worldwide, including People, Sports Illustrated, and Time. Though Time Inc. continues to lay off workers, InStyle and Real Simple prove the company can still launch blockbuster magazines in a tired print market.

WHAT THEY NEED TO FIX
In what the New York Times called “the worst merger in business history,” America Online purchased Time Warner in 2001 in a $106 billion deal. The company renamed itself AOL Time Warner and set about losing money. AOL had shown explosive growth in the 1990s thanks to its pioneering subscription-based browsing, online chat, and email services, but these days it lags behind other providers and has shed nearly 5,000 employees. Still, AOL had $7.8 billion in sales in 2006 and remains a force in the internet sector as it converts to an advertising-based model.

WHAT’S NEXT
The conglomerate plans to splinter—somewhat. In 2006, Time Warner said it would spin off the company’s cable service into a separately traded entity. Parsons recently said in an interview that growth for his and all other media conglomerates will come from international expansion. And the fifth movie in the Harry Potter franchise, which has so far garnered $3.5 billion at the box office, comes out in the summer of 2007. Gird your loins, Jack Sparrow. —Julia Ramey