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Lord of These Things

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On January 10, 2000, one year to the day after the first episode of The Sopranos aired, Time Warner’s Gerald Levin and America Online’s Steve Case announced that the two companies were merging. Actually, AOL swallowed up the bigger company at the height of the Internet boom with wildly inflated stock. Time Warner’s stock price soared to $102 on that day in a spasm of delusional fervor, but the post-merger stock subsequently crashed to $8.60 before leveling out and flatlining at about $17.

Parsons, who was one of very few executives to whom Levin confided details of his clandestine merger talks, helped negotiate the final terms. At the time, the deal looked pretty good to everyone, and even Bewkes (not among Levin’s confidants on the merger) sipped the Kool-Aid. “No, hang on to it, it’s going to go up,” Bewkes advised a colleague who wondered if he should start unloading stock. He soon regretted his faith.

And yet, in early 2002, when Parsons, the freshly minted CEO, was focused on wresting power back from AOL to the Time Warner camp—but didn’t wish to confront Steve Case himself—it was Bewkes who wielded the gun. Bewkes had learned of the merger along with the rest of the world on that January day, when the Internet entrepreneur in a coat and tie and the normally buttoned-down Levin in an open-neck shirt made it known. Despite the applause of Wall Street, savvy executives on HBO’s business side, such as John Billock and Bill Nelson, who replaced Albrecht as CEO, ran the numbers and were deeply skeptical. They started selling their stock.

“He projects an absence of panic and fear.”
—David Chase, creator of The Sopranos

As AOL’s stock went south in the months before the deal was finalized, Bewkes urged Levin to cancel it. “Shouldn’t we be paying the breakup fee?” Bewkes asked his boss, pointing out that the numbers and rationale were becoming less and less attractive, and they could extricate themselves for a mere $3.8 billion. But Levin—who was convinced that he was a visionary and liked to boast, “I have iron balls”—wouldn’t hear of it. Bewkes tried to be a good soldier, meeting with counterparts at AOL to discuss how the companies could best be fit together, but he seethed at their attitude of patronizing arrogance—new-media wunderkinds lording it over old-media has-beens—an attitude that, oddly, persisted even as the problems at AOL became increasingly apparent.

By the time of the Bewkes-Case contretemps in the spring of 2002, Levin had already been forced out as CEO. A year after the merger, Bewkes sat impatiently at the meeting of AOL Time Warner’s senior management while Case lectured the group about his latest rosy scenario of world domination in the 21st century, his enthusiasm for buzzwords like “convergence” and “synergy” undiminished by AOL Time Warner’s sagging fortunes. Finally, Bewkes had heard enough. “I’m tired of this,” he snapped at Case, according to Stealing Time, Alec Klein’s 2003 book about the merger. “This is bullshit. The only division that’s not performing is yours. Every one of us is growing, making the numbers. The only problem in this construct is AOL.”

It was an “Emperor Has No Clothes” moment, and Case was shocked into silence. According to Klein, Bewkes’s surprise attack had the prior approval of Parsons. In due course AOL exec Bob Pittman was purged as Parsons’s No. 2, and Case eventually followed Pittman out the door. Bewkes and Don Logan, another Time Warner loyalist, stepped in to oversee the company’s various divisions under Parsons’s stewardship.

Today, Parsons denies that he put Bewkes up to the hit. “I don’t put people up to stuff, but I don’t hold them back either—if you get the nuance,” Parsons says. “It isn’t as though I didn’t know what Jeff thought and what other people thought. There are ways of communicating to people that you’re trying to run an open shop and people should get their feelings out on the table so we can deal with them … After regime change, I think a lot of people felt unleashed—not because I unleashed them but because they felt they could speak their piece with a greater sense of security.”

The 59-year-old Parsons deserves praise for “calming the waters after a catastrophic debacle,” says Gordon Crawford, portfolio manager of the Los Angeles–based Capital Research Global Investors, which at various times has been Time Warner’s largest institutional shareholder. “Basically, people in the company trusted Dick when nobody trusted anybody.” Parsons tried to clean up the mess. He settled various shareholder lawsuits and paid fines to dispose of charges of fraud, accounting and reporting violations brought by the SEC and the Justice Department.

With Bewkes’s help, Parsons also sold off Warner Music and the book-publishing unit of Time Inc., and in early 2006 beat back corporate raider and stockholder Carl Icahn (who retained the consulting services of investment banker Bruce Wasserstein, chairman of Lazard Frères & Co. and the owner of this magazine) and his plan to carve the company into four different units.


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