Parsons faces major test in unifying AOL

special report The CEO-elect will inherit an unpredictable ensemble of executives next month when he takes the reins of the world's largest media company from outgoing chief Gerald Levin.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
9 min read
The peacemaker

By Jim Hu
Staff Writer, CNET News.com
April 3, 2002, 4:00 a.m. PT

NEW YORK--Cartoon icons dot the office of AOL Time Warner CEO-elect Richard Parsons: A 3-foot-tall Tweety Bird sits by the door, and Scooby Doo squats with his tongue hanging out next to a magazine-cluttered coffee table.

The cast of characters is strangely appropriate, given the unpredictable ensemble of executives Parsons will inherit next month when he takes the reins of the world's largest media company from outgoing CEO Gerald Levin. Taking charge

The denizens of the 29th floor at Rockefeller Center here include Chairman Steve Case, who calls himself "the Paul Revere of convergence" in media. In the office next door is Bob Pittman, the hard-driving co-creator of MTV who currently shares the title of chief operating officer with Parsons and was passed over for the CEO job. Then there's Vice Chairman Ted Turner, a loose cannon who once donned Confederate Army attire and unsheathed a saber during negotiations with Time Warner over the sale of his cable TV empire.

"If five years from now this company really has learned how to make the pieces work together, like a fist instead of five fingers...I'll feel like I've done a decent job," Parsons said in a recent interview with CNET News.com.

The potential for unifying these diverse personalities--and the insular Internet, media and cable fiefdoms they control--has been one of the chief arguments for the America Online-Time Warner merger ever since it was announced. Today, however, that goal has taken on new urgency as financial setbacks continue to cool investor confidence barely a year after the largest media merger in history.

With the company's stock trading near a 52-week low, AOL Time Warner executives who once heralded the deal as revolutionary now quietly admit that they oversold its strengths, at least in the near term. Last week, the company said it would take a $54 billion quarterly charge that reflects depreciation of the company's stock value since the AOL-Time Warner merger was announced in January 2000.

Analysts say such factors threaten to rekindle old rivalries within the company, especially from the Time Warner side, whose myriad divisions developed a reputation for fierce independence under Levin.

"Each of these divisions are being operated as a profit center," said David Simons, managing director of Digital Video Investments, a financial and market research firm. "It's difficult for a CEO to tell one division to sacrifice for the benefit of another."

That is especially true when the chief executive is new to the job and has never been the CEO of a major media company before. Although Parsons excelled as Levin's man behind the curtain, many people question whether he has been tested enough to deal with the toughest parts of the job, such as answering to angry investors and creating a strategic vision for the company.

Wall Street analysts publicly have shown support for Parsons, highlighting his Washington connections and his familiarity with all facets of AOL Time Warner. But quietly, some wonder whether Parsons lacks the pedigree to run a major media company.

"He has no experience in the content business; he's got no experience in technology," said one Wall Street source who spoke on condition of anonymity. "He's a great politician, and he was a great administrator around Jerry (Levin). But is Parsons doing the strategic thinking?"

Breaking the mold
Parsons is a study in contrasts--not only with his predecessor, but also with the stereotype of a media power broker.

At 6 feet 4 inches, Parsons stands nearly a foot taller than Levin but speaks in a quiet baritone that sometimes trails into a mumble. He's an African-American and a Republican in an industry dominated by white executives more comfortable in the company of Democrats.

Click here to Play Net mantra:
Make it easy

Bob Pittman, co-COO, AOL Time Warner
December 11, 2001

An outstanding student, he entered the University of Hawaii at the age of 16 and went on to finish at the top of his class at Albany Law School. He became active in politics as Nelson Rockefeller's protege and served in the Gerald Ford administration. At present, he is a member of President George W. Bush's committee to overhaul Social Security, a duty shared with former New York Sen. Daniel Patrick Moynihan.

Parsons can quote Thomas Mann but is equally comfortable expounding on the virtues of Miller Genuine Draft, his favorite domestic beer. His heart never seems far from the blue-collar Brooklyn neighborhood where he grew up, just blocks from Ebbets Field.

It is this human quality, and Parsons' self-deprecating humor, that has made him one of the most universally liked media executives--a trait that separates him in an industry known for autocratic, sharp-elbowed control freaks in the mold of Walt Disney's Michael Eisner, Viacom's Sumner Redstone and News Corp.'s Rupert Murdoch. If five years from now this company really has learned how to make the pieces work together, like a fist instead of five fingers...I'll feel like I've done a decent job.

"He is a persuader, not a dictator," said Leo Hindery Jr., CEO of The YES Network, the New York Yankees' entertainment and sports network. "People do things for Dick because he persuaded them to, not because he ordered them to. He intellectualizes outcomes and gets people to agree with his outcomes."

In fact, it's rare to hear a negative word uttered about him among co-workers or competitors. He is alternately described as a teddy bear, a statesman, a diplomat or even a mensch.

An agent of change
But make no mistake: Parsons has shown that he won't hesitate to shake things up when necessary. Unlike Levin and Pittman, who spun tales of near-effortless merger "synergies," Parsons says coaxing and cajoling can go only so far.

"At the end of the day, you've got to kick some people in the ass," he said.

Parsons may need such threats to succeed, but he'll have to tread carefully. The end of the Levin dynasty has awakened some sleeping giants within the company, including AOL founder Case, who has stated publicly that he plans to take a more active role as chairman.

Pittman, the former AOL president who was initially thought to be the front-runner as Levin's successor, is another player who may not fit neatly into Parsons' plans. By all public accounts, Parsons has embraced Pittman's role as the whip-cracking operations chief. Underwater

Pittman "likes making the trains go around and around the track," Parsons said, adding that his co-COO is "detail-oriented" and "gets into the nuts and bolts."

Parsons' ascension over Pittman was largely seen as a sign that the Time Warner camp was taking control of the company. The AOL side's strength had waned considerably since the merger, a direct reflection of the dot-com decline.

Levin's unexpected departure was preceded by the reappointment of AOL Time Warner CFO J. Michael Kelly to chief operating officer of the AOL division, and by the promotion of Turner Broadcasting's Wayne Pace to Kelly's position.

Still, there are indications that Parsons may not be entirely comfortable with the balance of power between the AOL and Time Warner legions. In a move that would have been inconceivable during the Levin era, Parsons has been actively courting one of the wildest cards of all: Ted Turner.

Shortly after Levin announced his intention to retire, Parsons invited Turner, the largest individual shareholder of AOL Time Warner, to extend his contract. Until then, Turner had publicly dueled with Levin, calling the sale of his company to Time Warner the "biggest mistake of my life." That feeling was exacerbated when Turner was left out of AOL Time Warner's management flow chart.

Turner will not have any direct operating responsibilities with Parsons, but he will have a voice in the direction of the company. Although Parsons has left Turner's role undefined, he appears to have genuine affection for the cable mogul, calling him "my man."

Parsons' feelings about Case are less clear. "Steve is--what's the right word--he's sort of almost an icon," Parsons said. "He's not quite at the Ted Turner level, but he is an individual that is sort of recognized...as a bright, visionary entrepreneur."

Parsons may have a fourth personality to contend with. John Malone's Liberty Media last week petitioned the U.S. Federal Trade Commission to change the terms of a 1996 consent decree barring the cable mogul from owning full voting shares in AOL Time Warner, an agreement that stems from Time Warner's acquisition of Turner Broadcasting. Some believe the move is aimed at securing a seat on the board for Malone, who owns about 4 percent of the company.

Click here to Play AOL Time Warner battle plan
Steve Case, chairman, AOL Time Warner
May 3, 2001

Almost a "sixth sense"
Regardless of what Parsons really thinks about any individual, his diplomatic skills make him uniquely qualified to navigate treacherous territory, sources say.

"He has an ability to size up whom he's dealing with very quickly," said one record industry executive who has negotiated with Parsons. "It's almost like he has a sixth sense of how people need to be treated to get what he wants."

This executive and others say Parsons has an uncanny knack for getting his way without leaving any bitter feelings. His ability to be strong-willed but sensitive has won him many admirers, even among competitors.

"The guy is the consummate gentleman," said Preston Padden, who heads Disney's lobbying operations.

Padden should know. Shortly after AOL and Time Warner announced their intention to merge, executives at Time Warner pulled Disney's ABC TV network signal off its cable systems in a contract dispute. Padden opened a lobbying campaign to alert government regulators to the monopolistic dangers of AOL Time Warner.

"There were multiple times when other people involved in discussions in one company or another were on the verge of losing it," Padden recalled. "Dick brought them back to calmness."

Such coolheaded qualities have served him well during the past six years, largely spent in Levin's shadow while Parsons was president and chief operating officer of Time Warner. Parsons is a persuader, not a dictator...He intellectualizes outcomes and
>gets people to agree with his outcomes.

Whenever Levin smelled smoke in the internal ranks, he deployed Parsons, his closest confidante, to extinguish the flames. Similarly, when trouble brewed in Washington over regulatory issues, Parsons became the statesman and tapped his extensive contacts within the Beltway.

As a result, Parsons has largely inherited the agenda by which he will most likely be judged as CEO.

"I think he's going to have his work cut out for him," said one executive from a competing media company. "He's leading the largest media company in the world, and the role he's assuming is totally different than the one that succeeded him. Can those skill sets be a part of his definition of CEO?"

Those within the company acknowledge the difficulties facing Parsons but say his appointment has sparked new life among divisions that have grown weary of internecine politics.

"It's not nearly as Machiavellian as I had imagined," said a member of AOL Time Warner's "Marketing Council," an internal group formed to bridge gaps between the two halves of the company. "I see it being a very different culture now--a culture of much more cooperation."

News.com's Jeff Pelline contributed to this report. 

"Synergy"--an elusive industry term for massive cross-promotion between various divisions within the same company--has been AOL Time Warner's mantra since the company's inception.

The concept has even led to the creation of an internal group called the Marketing Council, a cross-promotion laboratory where marketing heads from various divisions meet twice a month.

"This room is very much like a love fest," said Marshall Cohen, who heads the group as senior vice president. "The council is made up of these AOL Time Warner-centric people there to help one another and to figure out things we could be doing together."

CEO-elect Richard Parsons points out that the recent Warner Bros. film "Harry Potter and the Sorcerer's Stone," with lots of help from the America Online service, achieved what he called "100 percent awareness" in markets where the company was promoting the blockbuster.

Warner Music Group says synergy also has helped promote new teen pop singer Lindsay Pagano. For example, the AOL 7.0 software shows a clip from Pagano's video followed by a screen shot of an AOL Instant Messenger window that reads, "Hey, have you heard Lindsay's new song?"

Nevertheless, skeptical analysts say they are waiting for signs of synergy to appear in the company's battered bottom line.

"I don't know how you measure it, particularly given the noise you've got from the economy," said David Lee Smith, an analyst at Dain Rauscher Wessels. "You can put a few of those anecdotal stories together, but there have been so many difficulties created by the economy and 9/11. We won't know the answer for a couple years."


See special report: Massive media

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