Let me first speak in praise of Bob Pittman.
He absolutely did his job. Did it preternaturally well. He accomplished the most difficult but most elemental feat of modern business: By engineering the preposterous millennial sale of Time Warner to AOL, he turned fantastic and improbable paper money into real dough (at the recent gathering of media moguls in Sun Valley, Viacom’s Sumner Redstone, more streetwise than Jerry Levin, said that when he had been approached about merging with AOL, he’d told Mr. Pittman, “I really don’t trust your currency”). Dross, in his hands, became gold.
Pittman, who had taken primary control of AOL from Steve Case, the detached founder and chairman, acted in the interest of his shareholders (and in his own interest as well). He was following that most basic (if not so often publicly stated) business principle: You only make money, real money, off people who are stupider than you; the stupider they are, the more money you can make.
He knew that since TW CEO Jerry Levin had made being smart the raison d’être of his moguldom – he was the mandarin mogul – it was even more unlikely that anyone would say to him about the AOL deal, “Don’t be stupid.”
He not only snookered Levin, but hosed every one of Time Warner’s shareholders (including most of its 70,000 employees).
Pittman’s gross inflation of AOL’s value by what the Washington Post characterized last week, with a clearing of the throat, as “unconventional transactions,” might even have been legal. It was a more permissive age. (It is hard to imagine, though, that AOL, with its history of accounting sleight of hand, wouldn’t be a scandal now – or won’t be a scandal soon.)
It is a kind of ultimate character note, the ultimate cool – slick, fast, and coiffed – that having done what he did to Time Warner, having become fabulously rich while great numbers of Time Warner people (although not Jerry Levin) got their accounts wiped out (it didn’t help matters when Pittman took to telling people that he too had lost a lot of money – that he wasn’t even a billionaire anymore), he still thought he could hang around, even become the CEO. He, quite possibly, figured he’d be held in awe for pulling off the greatest bait and switch in business history. He even seems to have thought, in a rare and fatal misjudgment, that after he was not made CEO, he still had a job.
But then, kind of inevitably, the crowd ripped him apart – and last week, it was finally decided that he had to go.
Of course, taking it out on the guy who outsmarted you does not, in turn, make you smart.
They got mad at Bob Pittman – in a way that they haven’t gotten mad at Steve Case – not just because he pillaged and decimated TW but because of the widely circulated suspicion that Bob Pittman turned out not to believe in AOL. (Here’s a question that gets asked: “When did Bob know that the company was going to go south?”)
Whereas Richard Parsons, the AOL Time Warner co-COO, who bypassed Pittman, the other co-COO, to become CEO, apparently continues to believe – or at least believes he has no other alternative but to believe.
Much of the same logic that advanced thinkers (or hustlers) were championing in, say, 1995 is the logic that the highest-ranking people at AOL TW will still detail for you now: The Internet is the future; platforms will converge; the winner will be the one with the most eyeballs.
It was with a sickening sensation that people at the company came to realize Bob Pittman wanted to wash his hands of AOL.
Now, given that Bob Pittman knows more about running AOL than anyone else, given that he has been arguably more successful in the Internet business than anyone else – he built the 800-pound gorilla of the industry – and given that he has in fact saved AOL once before, turning it from a subscription service into an advertising giant, you’d think that it might bother people that Bob Pittman has wanted to get as far from AOL as possible. Indeed, it may be that Bob Pittman doesn’t believe in the Internet business because he is the man who destroyed it.
Here’s what he did: He convinced every Internet company that it would be a loser unless it became what he called an “anchor tenant” on AOL. That is, these companies would pay AOL fantastic sums of money, often hundreds of millions of dollars, to have first crack at the legendary mother lode of AOL eyeballs. Accordingly, every Internet company went to the public markets with, fundamentally, this one proposition: If you give us money, we can buy access to AOL eyeballs, and then we can’t lose.
Of course, everybody lost (except AOL, which, on the basis of these anchor deals, managed to trick Time Warner into the ultimate anchor deal). AOL eyeballs turned out to be worth much less than AOL was selling them for. Ergo, Bob Pittman, like no one else, came to understand AOL’s real value – that there was a profound discrepancy in the accounts.
I hasten to add that inventing a reality that everyone, however briefly, comes to believe (while knowing all along, because you’ve invented it, that its basis is more art than science) is a metaphysical rather than an accounting fraud.
There are two AOL Time Warners, both of which harbor no goodwill for Bob Pittman: the division fiefdoms and then the more abstracted corporate office.
On the division level, there’s Jeff Bewkes’s HBO and Don Logan’s Time Inc. (In last week’s power shift, they both stepped up to the corporate level.) Jamie Kellner’s Turner. Then the cable guys. The music guys. The studio guys. In Bob Pittman’s ideal world, they all would have reported to him. He would have been the operating overlord turning these TW divisions into a great sales-synergy organism – he would have been inventing some grand anchor-deal concept for the entire mother ship. And for a year, Pittman steamed around and held meetings and demanded accountability and cut perks and sought margin growth and insisted on integration (the shared distaste for Pittman may have actually brought the divisions closer than they’ve ever been before). The problem here was not just that all of these guys who run TW divisions have never really reported to anyone but that the division from whence Pittman came was the weakest one of them all.
The sorry state of the AOL division means that the old Time Warner, with all its fractious and testy division moguls, got to rise again. (Part of Jerry Levin’s original merger dream was that AOL would be such a superdivision that all the other divisions would converge into it.) The company returned to being (apparently, had never left being) an association of disparate enterprises, each with vast and often unassailable clout, whose highest imperative may be to resist what management wants – to resist, in fact, the idea of being managed at all. Pittman, it turned out, was easy to dispose of. (He complained last week to the Wall Street Journal that the real problem was that the Time Warner divisions wouldn’t cooperate with his grand one-stop, cross-platform-print-TV-film-music-online-cable-advertising-merchandising-promotion vision, complete with rewarding Burger King servers with walk-on roles in AOL TW television shows.) And all talk of integration, Time Warner people report with satisfaction and relief, has ceased.
Then there’s the AOL Time Warner meta-level, where Bob Pittman’s name became cringe-inducing, too (Levin and Pittman became conjoined evil twins).
There seem to be two deeply held beliefs in the AOL Time Warner corporate offices – both existential in nature. The first is that spinning off or otherwise disposing of AOL would probably mean the end of the larger company, too. The business theory here seems to be that promises are, in fact, a currency. If you have no more promises, then you really have nothing to offer – you’re really broke – and power passes to others who do have promises to make (how you make your promises and how you account for them is, of course, the central drama of the day). As soon as you stop maintaining the promise that you can fix AOL – never underestimate the remarkable power of promising that things really will get better – it’s the deluge. Bob stopped making promises.
The second belief among the deeply depressed people at the highest levels of AOL Time Warner is that the whole media business is probably going up in smoke. Music has been the first thing to go; print is going fast; pictures will follow. The media business will lose control of the media. Puff. Napster. The horror, the horror. (At overachieving Time Warner, more than at any other major media company, many people really came to believe in the great promises of the digital revolution. The story of how Time Warner got the faith is nicely laid out in John Motavalli’s new book Bamboozled at the Revolution.) AOL was supposed to be the lifeboat. Except then Pittman and his posse wanted out of the lifeboat.
Along with the divisions and the corporate suite, there is, as I think of it, a third, and oddest, piece of the AOL TW hierarchical puzzle. That’s Steve Case – who also came to deeply distrust Bob Pittman.
Case is a strange, even eerie figure – no one quite knows what to make of him. It’s bewildering, and embarrassing, if you’re a student of power, which almost everyone at AOL TW is, not to know if someone is all-powerful, or if someone is of no consequence at all.
Case’s brother, who died recently, had been ill for some time, and that’s often the reason given for his extreme disengagement. But he has been disengaged, by many accounts, since 1994. Now, recently, there has been the myth of his reengagement. What this seems to mean is a return to 1994. AOL, Case is telling people, will once again be transformed through R&D and the invention of a killer app. Pittman, meanwhile, greatly annoyed Case by telling him not to throw good money after bad.
Bob Pittman is a media guy – in a very old-fashioned way.
He’s not a manager, or philosophizer, or mandarin, or even, really, a mogul.
He’s a promoter, a huckster, a snake-oil guy.
You find something to sell, and then you do what you have to do to get people to buy it. Likewise, if people stop buying what you’re selling, you sell something else. Music videos (Pittman ran MTV – and has long annoyed many people by claiming to have invented it). Theme parks (he went on to run what were then Time Warner–owned Six Flags amusement parks). Real estate (he was briefly the Century 21 CEO). Online services. There’s always something.
This is the source, perhaps, of his perpetually unruffled quality. He doesn’t see any of this as life-and-death, or painful transition, or existential business drama. Rather, it’s the same old hustle.
What’s more, he doesn’t hang around a disaster area. This is show business. If the show flops, you close it. Onward and upward.
E-mail: michael@burnrate.com