They may have just created the media marriage the markets were waiting for, but Steve Case and Gerald Levin make an odd couple. The quietly spoken Case, head of the world's largest internet service provider, has little in common with Levin, the often brusque leader of an old media giant and 18 years his senior.
Whereas Levin plays the tough-talking Hollywood insider who tamed the volatile genius of Ted Turner and created the world's largest media company by joining Time with Warner Communications, Case is a marketing guru with a smaller-than-life persona.
But it was the web that bought them together. The pair first got to know each other while co-chairing a committee on the new economy and became friends on a fact-finding mission to China. That shared interest led the two men to announce the world's largest corporate takeover yesterday.
The merger of America Online and Time Warner creates the world's biggest online media company in a deal that is set to value the combined group at more than $350bn (£220bn). By bringing together dominant players from the worlds of old and new media, the new company could redefine the worlds of entertainment, communication and commerce.
The new company will be called AOL Time Warner - but significantly will trade on the market under AOL's initials.
It will enable AOL customers to have access to the sprawling Time Warner media and entertainment. In turn, Time Warner will be able to deliver its products over the internet in a more comprehensive way than at present.
Time Warner, based in New York, owns the Time publishing empire, CNN, Warner Bros., Time Warner Cable, Sports Illustrated, People, HBO, Fortune and Entertainment Weekly. Time Warner gets access to the world's largest online and e-commerce platform; AOL offers access to the brave new world of such web companies as CompuServe, Netscape Communications and ICQ.
Celebrity gossip
In the jargon, this is "convergence" - when the barriers between television and the PC disappear. The AOL subscriber will potentially be able to download any of the 5,700 films made by Warner Bros. Or listen to the latest track from the Red Hot Chili Peppers or watch the latest episode ER or flick through the celebrity gossip in People magazine.
In announcing the deal yesterday, Steve Case said: "This merger will launch the next internet revolution." It was the deal that business analysts were waiting for, proof that the huge distribution abilities of an online group could marry a group with a dowry of entertainment assets desired by the mass market.
Peter Kreisky, a senior consultant at Mercer, echoed other analysts when he said yesterday: "This is a marriage made in heaven and one that we've been waiting for for a long time."
The Virginia-based AOL, used by more web surfers than any other online group, gains access to a new cable television network, while Time Warner can send its information to a new breed of online consumers. Both groups will then cross-promote each other's content. Both sides were yesterday stressing the importance of the timing of the deal. Yesterday was 10 years to the day after Time Warner was formed following the combination of Time Inc and Warner Communications, a merger which brought the old world of printed news together with the faster growing entertainment industry.
For many yesterday was also the first full business week of the new "internet century". "This is an historic moment in which new media has truly come of age," said Case. "We've always said that America Online's mission is to make the internet as central to people's lives as the telephone and television, and even more valuable, and this is a once-in-a-lifetime opportunity to turn this promise into reality."
Case, now reckoned to be the most important manager in cyberspace, first raised the idea of a "merger of equals" in a phone call to Levin last October. The call - at around the same time as Viacom and CBS announced their merger to create one of the world's largest media companies - was breathtaking in having most of the important details already worked out. Levin, a 59-year-old dealmaker, said Case immediately offered him the post of chief executive of the new group. Case will take responsibility for overall strategy and deal-making in his role as company chairman.
Levin said yesterday that he was immediately impressed by this offer to "digitally transform Time Warner". He was particularly attracted by the chance to link up with these "bright, impressive, hip, new media-oriented types". However, the deal floundered for the next month as it became obvious that the stock market put a far greater value on these hip types than those employed by an old media group.
Biggest fears
Throughout November, AOL's share price rocketed and made Time Warner nervous about its valuation. Although the old media group made almost $27bn in revenues last year, compared with less than $5bn by AOL, the internet company is worth at least 1.5 times what the old media group is in the stock market. Amid the celebratory tone yesterday, the biggest fears raised were over the reaction of AOL's shareholders, now saddled with a slower growing media giant.
Under yesterday's deal these shareholders will own 55% of the combined group with Time Warner shareholders owning the rest. If the deal is approved by shareholders and regulators, the biggest problem could come from a clash of cultures. Levin's decision to be the only senior executive of the new group not to wear a tie at yesterday's New York presentation prompted one analyst to exclaim that he had "gone internet".
Levin also could not help pointing out the unusual nature of a company "with both Steve Case and Ted Turner as executives". Turner, the high-profile founder of CNN, owns 9% of Time Warner and will become deputy chairman of the new group. After the tie-up, his wife, Jane Fonda, from whom Turner has separated will be in line for up to $500m in a divorce settlement.
The deal is likely to set off a new wave of mergers between media and technology companies. But it could also worry regulators around the world, worried about the dominance of a handful of companies controlling information and how that information reaches people.
Both executives played down that threat yesterday and said they would work at opening up access to both rich and poor. Bob Pittman, the co-chief operating officer of the new group, said the merger would allow the company to expand more internationally.
"It is no coincidence that last year was the first in which the number of internet users abroad has outpaced that of the US," he said. Yesterday's takeover of Time Warner showed how far the world has moved in the 10 years since the company was formed. In 1989 the internet was hardly used outside a small band of academics and business people, now it is set to become a mass market medium.
