The End of the Affair

Then-AOL Chief Steve Case celebrates his company's impending synergies with Time Warner's CEO Gerald Levin.

Image: Time magazine

Like a lot love stories, the marriage between AOL and Time Warner started over a bottle of wine—a 1990 Chateau Leoville-Las Cases, to be precise—shared by AOL chairman and CEO Steve Case, Time Warner CEO Gerald Levin, AOL vice chairman Ken Novack, and then-former Time Warner CFO Richard Bressler at Case's house in 2000. The men also shared chocolate mousse and talked for hours about their needs, the complications their relationship might encounter, and their shared hopes for the future.

The talk, the plans, the wine, and the mousse inspired them to "swallow hard and jump off the cliff together," in the words of an unnamed party close to the men. They listened to their hearts—if not their shareholders—and joined their companies together as one, for better or for worse, for richer or for poorer.

That's according to the semi-official wedding announcement, Time magazine's January 24, 2000 story, "AOL-Time Warner Merger: Happily Ever After?," written, as so many articles in that magazine are, by six writers, including Daniel Okrent. The magazine even saw fit to run a photo of the lovebirds on the cover, Case smiling broadly as he leans into the older Levin (referred to as Jerry with clubby familiarity), who is shown with a slightly more strained smile—think Katharine Ross at the end of The Graduate—and no tie. (In the years that followed, Levin's tielessness became something of a metaphor for the lengths old hidebound Time Warner had gone to to learn the groovy new dance steps enjoyed by its younger intended: Journalists have referred to it ever since as a trope, an early indicator that this marriage was doomed from the start.) A few years later, Time would bitterly describe the cover as one of its worst, as embarrassing to them as 1981's groundbreaking investigation of ice cream ("Getting Your Licks") and 1990's Onion-esque satire by Gary Wills, the Dan Quayle "No Joke" cover.

The headline on the story read, "The Big Deal," but as required by the News Magazine Coverline Hedging Agreement (Or Is It?), the subheadline read: "How the AOL-Time Warner Merge happened… What it means to consumers… Does it make any sense?" It did for a short time: AOL-TW's stock traded as high as $90.06-a-share back in 2000. At the moment, it's at $32.19.

On December 9, after years of ups and downs (including the departure of Case, Levin, and their other dining companions) that marriage is coming to an end on December 9, when AOL and Time Warner will officially—and finally—split. That is, of course, if the government doesn't block the breakup, but according to paidContent's Staci D. Kramer, "that seems unlikely at this point." Everybody, it seems, wants these two to go their separate ways and move on. No regrets.

As befits a newly liberated company, AOL will take back its maiden stock symbol and be known once again as AOL. Shareholders of TWX stock will receive one AOL share for every 11 they hold of the combined AOL Time Warner, according to the official FAQ. Being alone won't be without some pain: As AOL's newish CEO Tim Armstrong noted last week, Project Everest—the companywide restructuring that will lead to more layoffs—is coming soon, possibly within the next two months.

Sadly, the children of the AOL and Time Warner merger will have to choose sides. TMZ, the naughty, adolescent gossip site operated jointly between AOL and Time Warner's Telepictures since its founding in 2005 as a website and later syndicated TV show, will be going with Time Warner, not AOL. The joint venture ends on December 31, 2010, presumably after a tough final year of joint custody.

That's gotta hurt AOL since, as paidContent's Rafat Ali notes, TMZ had revenue of $25.4 million in 2008. AOL added $12.7 to its coffers.

But don't think it's gonna be all smooth sailing for Time Warner when it goes it alone: The company's third-quarter earnings report from early November revealed falling revenues and profits. The New York Post's Keith Kelly also reported layoffs of as many as 540 Time Inc. employees in the coming months.

No one said breaking up is easy.