WarnerMedia
Based on Wikipedia: WarnerMedia
The Worst Merger in Corporate History
In the year 2000, America Online paid $183 billion to acquire Time Warner, creating what was supposed to be the ultimate media powerhouse of the digital age. Just two years later, the combined company reported a loss of $99 billion—at the time, the largest annual loss ever recorded by any corporation in history. AOL's stock, once valued at $226 billion, collapsed to roughly $20 billion.
The executive who eventually became Time Warner's CEO called it simply "the biggest mistake in corporate history."
This is the story of how a funeral parlor company became one of the world's most powerful media empires, how that empire was nearly destroyed by hubris and hype, and how it ultimately became a pawn in the telecommunications wars of the 2020s.
From Parking Lots to Batman
The corporate ancestor of WarnerMedia wasn't a movie studio or a television network. It was something called Kinney National Company—a sprawling conglomerate that ran parking lots, funeral homes, and cleaning services. Not exactly the stuff of Hollywood dreams.
But in the late 1960s, Kinney's leadership spotted an opportunity. The entertainment industry was consolidating, and old-line studios were struggling. In 1969, Kinney purchased Warner Bros.-Seven Arts, a historic film studio that had fallen on hard times. It was a strange marriage: a service company that emptied garbage cans now owned the studio that had created Casablanca.
The transformation happened quickly. By 1972, Kinney had divested all its non-entertainment businesses into a separate company and renamed itself Warner Communications. The parking lots were gone. The funeral homes were sold off. What remained was a pure entertainment company with ambitions to become something much larger.
Under the leadership of Steven Ross—who would become one of the most influential media executives in American history—Warner Communications expanded aggressively throughout the 1970s and 1980s. The company acquired Atari, the pioneering video game company, and for a few years rode the wave of the arcade boom. It purchased DC Comics, gaining control of Batman, Superman, and Wonder Woman. It built a cable television empire and formed partnerships that would launch MTV, Nickelodeon, and VH1—channels that would define youth culture for a generation.
The Video Game Crash
Not everything went smoothly. Warner's acquisition of Atari looked brilliant at first, then catastrophic.
In 1982, Atari dominated the home video game market. The company seemed unstoppable. Then came 1983, and the entire American video game industry collapsed almost overnight. The market became flooded with low-quality games—the infamous "E.T. the Extra-Terrestrial" game, rushed to completion in just five weeks to capitalize on the film, became a symbol of the industry's excess. Retailers couldn't give cartridges away. Atari lost hundreds of millions of dollars.
Warner was forced to break up and sell off Atari in pieces. The video game industry wouldn't fully recover until Nintendo revived it later in the decade, this time from Japan rather than California. But Warner Communications survived the debacle and, by the mid-1980s, had rebounded to become one of America's most valuable media companies.
Time Meets Warner
In 1989, Time Inc.—the venerable magazine publisher behind Time, Life, Sports Illustrated, and Fortune—announced plans to merge with Warner Communications. The combination would create the largest media company the world had ever seen.
Not everyone was happy about this. Paramount Communications, sensing an opportunity, launched a hostile takeover bid for Time Inc., offering $12.2 billion to derail the Warner deal. Time's board rejected the offer. Paramount raised its bid to $14.9 billion. Time rejected that too, and Paramount sued in Delaware court to block the merger entirely.
The courts ruled twice in Time's favor. Paramount withdrew, and on January 10, 1990, Time Warner Inc. officially came into existence.
For the next decade, Time Warner operated as a diverse media conglomerate. HBO pioneered multiplexing in 1991, offering multiple channels where there had been one, and became the first digitally transmitted television service in 1993. Warner Bros. helped introduce the DVD format in 1996, gradually replacing VHS tapes as the way Americans watched movies at home. CNN launched its website in 1995, which would become one of the internet's most visited news destinations.
In 1996, Time Warner made another transformative acquisition, purchasing Ted Turner's Turner Broadcasting System. This brought CNN, TBS, TNT, and the Cartoon Network into the fold. It also reunited Warner Bros. with something it had lost decades earlier: its own film library. Warner had sold the rights to its pre-1950 films years ago, and through a series of corporate transactions, those rights had ended up with Turner. Now they came home.
By the late 1990s, Time Warner was the undisputed king of traditional media. Its films dominated box offices. Its magazines sat on newsstands everywhere. Its cable channels reached into most American homes. Its music labels represented artists from Madonna to Prince.
Then came the internet, and with it, a company that would nearly destroy everything.
The AOL Disaster
To understand what happened next, you have to understand what America Online meant in the year 2000.
AOL was the internet for most Americans. Its software came pre-installed on computers. Its dial-up service—you'd hear that distinctive screeching modem sound, then a friendly voice announcing "You've got mail!"—connected some 27 million subscribers to the online world. Its stock price had soared to astronomical heights on the promise that the internet would change everything.
And the internet would change everything. But not in the way AOL imagined, and not with AOL leading the way.
In January 2000, AOL announced it would acquire Time Warner for $183 billion. The deal structure was telling: despite Time Warner having far more assets and revenue, AOL's inflated stock price meant that AOL shareholders would own 55% of the combined company. In practice, this wasn't Time Warner buying AOL. This was AOL, riding a bubble of dot-com mania, swallowing one of America's greatest media companies.
The vision seemed compelling at the time. AOL would use Time Warner's cable lines to deliver high-speed internet. Time Warner's magazines, movies, and music would flow through AOL's digital pipes. The future of media would be interactive, personalized, delivered directly into homes through computers. Traditional media and new media would become one.
"All you need to do is put a catalyst to [Time Warner]," declared AOL's president and chief operating officer, Bob Pittman, "and in a short period, you can alter the growth rate. The growth rate will be like an Internet company."
It didn't work out that way.
The Collapse
Almost immediately after the merger closed in January 2001, problems emerged. The dot-com bubble had burst. Advertisers were fleeing online media. AOL's dial-up business faced competition from faster broadband connections offered by cable and telephone companies—including, ironically, competitors to Time Warner's own cable division.
The "synergies" that were supposed to justify the merger never materialized. Time Warner's divisions had always operated as independent fiefdoms, each with its own culture and priorities. Magazine editors didn't want to coordinate with internet executives. Film studio heads saw no reason to share their content with a struggling dial-up service. The conglomerate's structure, which had worked well enough when each division could operate autonomously, became actively dysfunctional when executives were expected to work together toward some unified digital strategy.
Making matters worse, the new compensation system tied bonuses to the performance of AOL Time Warner as a whole, rather than individual divisions. Time Warner executives found their pay cut because AOL was underperforming, and they resented it bitterly. Many of them had opposed the merger from the beginning. Now they blamed AOL for everything.
The fighting became vicious. Bob Pittman, who had championed the merger and expected to integrate the two companies, found himself undermined at every turn. Time Inc.'s print media division reportedly used its own publications to attack Pittman through leaks and unflattering coverage. Senior executives who had built their careers at Time Warner treated the AOL people as invaders to be expelled.
By July 2002, Pittman was gone—reportedly burned out, nearly hospitalized, and with nowhere to advance in a company where he had become toxic. His departure was celebrated by Time Warner veterans as a major victory. The message was clear: the old guard had won.
In 2003, the company dropped "AOL" from its name entirely. Steve Case, the AOL co-founder who had been chairman of the board, resigned in 2005 after being pushed out by institutional investors. The remaining years saw a systematic dismantling of the merger's premises. AOL was relegated to just another division, then spun off entirely in 2009.
Jeff Bewkes, who became CEO of Time Warner in 2008, didn't mince words. The AOL merger, he said, was simply "the biggest mistake in corporate history."
The Long Unwinding
After the AOL debacle, Time Warner spent more than a decade shedding assets and simplifying its structure.
Warner Music Group, home to recording artists who had defined popular music for decades, was sold in 2003 to an investor group that included Edgar Bronfman Jr., whose family had once controlled the Seagram beverage empire. Time Warner's book publishing division went to the French conglomerate Lagardère. The company's cable systems—millions of subscribers paying monthly bills—were spun off into a separate company called Time Warner Cable.
By 2014, Time Warner had shrunk to its core: Warner Bros. studios, Turner Broadcasting's cable networks, and HBO. It was still a formidable company, but a much smaller one than the sprawling conglomerate of the merger era. Confusingly, despite having divested Time Inc.—the magazine company whose name it still carried—the corporation continued calling itself Time Warner.
Then AT&T came calling.
The Phone Company Takes Over
In 2018, after a court battle with the Department of Justice, AT&T completed its $108.7 billion acquisition of Time Warner. The telephone giant—which had once been broken up by the federal government as an illegal monopoly, then gradually reassembled itself through decades of mergers—now owned Batman, CNN, and HBO.
The logic was similar to the AOL merger, though the technology had changed. AT&T owned pipes—mobile networks, fiber optic cables, internet service. Time Warner owned content. Put them together, the theory went, and you could compete with the tech giants that were increasingly dominating media distribution. Netflix was surging. Amazon was producing its own television shows. Apple and Disney were preparing their own streaming services. AT&T needed content to fill its pipes, and Time Warner needed deep pockets to compete with Silicon Valley.
To avoid confusion with the separately traded Time Warner Cable (which had been acquired by Charter Communications and was now called Spectrum), AT&T renamed its acquisition WarnerMedia.
Under AT&T, WarnerMedia launched HBO Max in May 2020, an ambitious streaming service meant to compete with Netflix and Disney+. The service combined HBO's prestige programming with content from Warner Bros., Turner's cable networks, and new original productions. It was AT&T's bet on the future of television—a future where traditional cable subscriptions would continue declining and streaming would dominate.
But AT&T quickly soured on the entertainment business. The company had taken on massive debt to acquire Time Warner, and the wireless industry demanded enormous capital investments. Managing a phone network and managing a movie studio required very different skills. By 2021, AT&T's leadership concluded they had made a mistake.
Yet Another Merger
In May 2021, AT&T announced it would spin off WarnerMedia entirely and merge it with Discovery, Inc.—the company behind HGTV, the Food Network, and an assortment of cable channels known for home improvement shows, cooking competitions, and reality television about people who hunt alligators.
The combined company would be called Warner Bros. Discovery. The merger closed in April 2022, and WarnerMedia—the company that had once been Kinney National, then Warner Communications, then Time Warner, then part of AT&T—ceased to exist as a separate entity.
Warner Bros. Discovery inherited a complicated mess. HBO Max had to be merged with Discovery+, creating confusion among subscribers. The new company faced enormous debt. Content libraries that had been promised to various streaming services had to be untangled. Television shows and films that had already been produced were pulled from streaming services and written off for tax purposes, enraging the artists who had made them.
And almost immediately, there were rumors of yet more consolidation to come.
Eighteen Years at the Top
For eighteen years, from the Turner acquisition in 1996 through the mid-2010s, Time Warner held the title of the world's largest media conglomerate. At its peak, the company's market capitalization reached $160 billion. In 2018, just before the AT&T acquisition, Time Warner ranked 130th on the Fortune 500 list of America's largest companies.
Throughout its nearly thirty-two-year existence (counting from the 1990 merger through the 2022 absorption into Warner Bros. Discovery), the company that became WarnerMedia owned and later divested an extraordinary collection of businesses. AOL, once worth hundreds of billions on paper, was spun off for a fraction of that value. Time Inc., the magazine company whose name Time Warner carried for decades, was sold to Meredith Corporation and later dissolved. Warner Music Group became an independent company again. Time Warner Cable was spun off, then acquired by Charter. Six Flags theme parks were sold. The book publishing division went overseas.
What remained at the end was what had been there at the beginning: Warner Bros., the studio that Steve Ross had bought from a parking lot company more than fifty years earlier. Plus HBO, the premium cable channel that had pioneered so many firsts. Plus the Turner networks—CNN, TBS, TNT—that Ted Turner had built and then sold to Time Warner in 1996.
The core had survived. Everything else—the magazines, the music, the internet portals, the cable systems, the theme parks—had been experiments that eventually ended.
What the Mergers Meant
The story of Time Warner is really a story about what American corporations believed, at various moments, would be the future of media.
In 1990, the merger with Time Inc. reflected a belief in media convergence—that the companies producing content for films, television, magazines, and books could operate more efficiently and profitably together than apart. There was some truth to this, though the reality proved more complicated than the theory.
In 2000, the AOL merger reflected a belief that the internet would devour all previous forms of media, and that traditional media companies would have to be absorbed into internet companies or die. This was partly right about the trend and completely wrong about which internet company would lead it. AOL, built on dial-up modems and monthly subscription discs mailed to every household in America, was already obsolete when the merger closed.
In 2018, the AT&T acquisition reflected a belief that distribution and content had to be combined—that owning the pipes and owning what flowed through them would create an unbeatable competitive advantage. AT&T abandoned this theory within three years.
And in 2022, the Discovery merger reflected a belief that scale mattered above all else in streaming—that only the biggest content libraries, with the most subscribers and the largest budgets, could survive the brutal competition for attention in the streaming age.
Whether this latest theory proves true remains to be seen. The history of Time Warner suggests that media executives are not particularly good at predicting the future of their own industry. The AOL merger was hailed as visionary. The AT&T deal was supposed to create an unstoppable competitor to Netflix and Disney. Each time, the reality fell far short of the promise.
The Headquarters
For most of its existence as Warner Communications, the company was headquartered at 75 Rockefeller Plaza in New York City—a prestigious address in the complex built by the Rockefeller family during the Depression. After becoming Time Warner, the company eventually moved its headquarters to the Time Warner Center, a massive development at Columbus Circle that combined corporate offices with luxury condominiums, upscale retail, and the Jazz at Lincoln Center performance venues.
Under AT&T, the company's headquarters moved again, to 30 Hudson Yards—part of the enormous new development built on a platform over the rail yards on Manhattan's West Side. Hudson Yards represented the newest vision of New York luxury: gleaming towers rising above an old industrial infrastructure, expensive and controversial, loved by some and criticized by others as a symbol of inequality.
The headquarters moves traced the arc of American capitalism. Rockefeller Plaza was old money and established power. Columbus Circle was the flashy 2000s, when media companies seemed to rule the world. Hudson Yards was the 2010s and 2020s, when technology and finance had eclipsed media, and even the largest entertainment companies found themselves as divisions of telephone giants.
The DVD Revolution
Amid all the mergers and restructurings, it's worth pausing to note one of Time Warner's genuine technological contributions. In 1996, Warner Bros. was instrumental in introducing the DVD format, which would transform how people consumed films at home.
Before DVDs, home video meant VHS tapes—bulky plastic cassettes that wore out with repeated viewing, offered mediocre picture quality, and had to be rewound before returning to the rental store. DVDs were smaller, offered sharper images and better sound, could include bonus features and commentary tracks, and didn't need rewinding. They were more convenient and more durable.
The transition from VHS to DVD happened remarkably quickly. By the early 2000s, DVD was the dominant format. For about a decade, DVDs generated enormous profits for Hollywood studios, creating a golden age of home video revenue that helped finance increasingly expensive theatrical productions.
Then streaming arrived, and physical media sales collapsed. The DVD era, which Time Warner had helped create, lasted barely fifteen years before giving way to the digital distribution that would eventually be dominated by companies that didn't exist when the format was introduced.
What Remains
Today, the descendants of Time Warner live on inside Warner Bros. Discovery. HBO still produces prestige television. Warner Bros. still makes films. CNN still broadcasts news. The DC superheroes still appear in movies and television shows and comic books.
But the company that Steve Ross built from a funeral parlor business, that swallowed Time Inc. and was swallowed by AOL and then by AT&T, no longer exists as an independent entity. Its name lives on only in the memories of those who worked there and in the legal documents recording its various transformations.
The "worst merger in history" taught the media industry a lesson that it has repeatedly failed to learn: that bigger is not always better, that synergies often exist only in press releases, and that predicting how technology will reshape entertainment is far harder than it looks. Every generation of media executives seems certain they understand where things are heading. Every generation seems to be at least partially wrong.
What comes next for Warner Bros. Discovery—whether it remains independent, merges again, or breaks apart—will depend on which theory of media's future the next generation of executives embraces. Based on history, they will probably be wrong about that too. But they will try anyway, because that is what media executives do. They make bets on the future with other people's money, and sometimes those bets pay off spectacularly, and sometimes they produce the biggest mistake in corporate history.
The parking lot company that became Batman is now just one piece of a larger puzzle. Whether that puzzle ever gets solved is anyone's guess.