Time Warner Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Time Warner is the world’s second-largest media and entertainment conglomerate, whose business includes interactive services, cable systems, filmed entertainment, television networks, and publishing. The company is headquartered in New York City, and among its major subsidiaries are America Online (AOL), Time Inc., Time Warner Cable, Home Box Office (HBO), Turner Broadcasting System (TBS), Cable News Network (CNN), and Warner Bros. Entertainment. The company positions itself as a leader in media and entertainment, thanks to continuous innovations in technology, products, and services, as well as creativity, talent, and commitment by the company’s employees.

Company Beginnings

The business was founded in 1972 under the name Warner Communications as a spin-off from Kinney National Company. Warner had been able to make significant profits in the early years of its existence, especially from the acquisition of Atari, which at its peak accounted for a third of Warner’s annual profits. Although the purchase price Warner paid for Atari was rather high at the time (estimated at$28–$32 million), the investment paid off because of the incredibly fast growth of Atari’s computer and game console sales in the United States. Also in the 1970s, Warner founded a joint venture with American Express—Warner-Amex Satellite Entertainment—which together owned popular cable channels, including MTV and Nickelodeon.

A situation of relative stability was changed somewhat toward the mid-1980s. First, there was an unsuccessful expansion into the world of professional sports—the company lost a significant amount of money acquiring and then selling a professional baseball team. Later, Warner was forced to sell Atari to a business rival. After that, Warner had to buy American Express out of their joint venture and sell the entire unit to its biggest competitor, Viacom. Finally, experiencing certain difficulties in coping with market pressures, Warner decided to merge with Time Inc., which actually turned out to be a sound business decision.

In the 1990s, the company continued to restructure and acquire various related businesses to ensure maximum synergy. Among its largest purchases was the acquisition of TBS from Ted Turner. During the same decade, the company combined all of its businesses under one name, Time Warner.

Mergers And Acquisitions

The new millennium brought about various changes to Time Warner, the biggest of which was undoubtedly the 2000 acquisition of the company by the much smaller America Online for $164 billion. The deal rather quickly passed the scrutiny of both U.S. and European regulators, effectively creating the largest media and entertainment company in the world, AOL Time Warner. The merger, however, has not resulted in any major improvements in either the company’s balance sheet or income statement. Instead, by 2002, the profitability and the market value of the company’s internet service provider division (AOL) tumbled drastically, which forced a significant write-off, which in turn forced AOL Time Warner to post the largest loss ever recorded in the world of business, an estimated $99 billion. The same year, the company dropped AOL from its official name, and the next year, the chairman of a unified company stepped down, causing considerable changes in Time Warner’s leadership. At the end of 2007, the new chairman of the company, Jeff Bewkes, announced possible plans for the near future, which included, among other things, a selloff of Time Inc.

The Future Of Time Warner

Despite past financial troubles, Time Warner remains a profitable organization. Its 2007 gross revenues were in excess of $46 billion with a net income of nearly $4.5 billion. The company also owns a significant amount of assets worldwide, including major real estate properties in New York City—several buildings in Rockefeller Center, as well as some adjacent buildings, which house its headquarters and new CNN studios.

As with many of its direct competitors—Viacom, News Corporation, Walt Disney Company, and so forth—Time Warner has to deal with the recent trends brought about by rapid changes in the external business environment. For instance, the company needs to keep pace with the advancements in information technology, combat piracy that reduces its revenues around the world, and deal with the declining growth of the DVD market. Time Warner, in its own words, is ready to handle these challenges, mainly thanks to its unrivaled reputation for creativity and excellence, as well as its hunch for opportunities for constructive collaboration with various players in the worldwide market of media and entertainment.

Bibliography:

“America Online and Time Warner Will Merge to Create World’s First Internet-Age Media and Communications Company,” www.timewarner.com (cited March 2009);
com, “Time Warner May End Reign as Largest Media Company,” www.bloomberg.com (cited March 2009);
Alec Klein, Stealing Time: Steve Case, Jerry Levin, and the Collapse of AOL Time Warner (Simon & Schuster International, 2004);
Richard Siklos and Stephanie N. Mehta, “Time for Change at Time Warner,” Fortune (v.156/7, 2007);
Kara Swisher, There Must Be a Pony in Here Somewhere: The AOL Time Warner Debacle and the Quest for a Digital Future (Crown Business, 2003).

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