Ted Turner, Time Warner Inc.'s largest shareholder, is suffering seller’s remorse over America Online Inc.'s pending purchase of the company, according to people close to the media mogul.
The legendary pioneer of 24-hour news, who became a Time Warner vice chairman after the sale of his cable empire in 1996, is upset not only about his reduced role in the new company but also by how it was orchestrated behind his back.
Turner was stripped of his day-to-day operating role in a management reorganization unveiled earlier this month. After overseeing the cable group that is Time Warner’s fastest-growing division, Turner watched as it was handed over to Robert Pittman, chief operating officer of AOL and of the new company. Pittman will take charge of all distribution outlets, including cable, once the merger is finalized later this year.
The sudden changing of the guard shocked executives at Turner Broadcasting System, was overlooked by the media and could mark the end of the storied career of one of the most influential media figures of the 20th century.
It is unclear what if anything the volatile 61-year-old Turner--a loose cannon within the reserved Time Warner organization--can or will do to rock the boat. But some longtime associates are bracing for fireworks.
“I don’t think this is over,” said one Turner executive. “Ted could tell them, ‘I’m going to rock this ship so hard that this deal falls apart.’ You just don’t want to underestimate or count him out.”
At stake is one of the largest mergers in history--a $143-billion transaction that already makes Wall Street nervous because of the uncertain valuations of the novel pairing of old and new media. (AOL has a much larger market value than Time Warner, even though it earns a small fraction of the profit.)
A sensitive regulatory review took a turn for the worse three weeks ago when regulators questioned whether the combined AOL Time Warner could be trusted as a TV and Internet gatekeeper. That was after Time Warner outraged consumers by pulling the ABC network from its cable customers because of a contract dispute.
Turner refused to be interviewed for this article, but company officials verified that he had misgivings about his role.
AOL officials, however, say its chairman, Steve Case, is counting on Turner to play an active role as vice chairman and senior advisor. Key lieutenants say Turner is coming to terms with his emeritus status and had, long before the AOL merger announcement, retreated from day-to-day operations to pursue his passions for nuclear disarmament, land conservation and population control.
They say the recent changes, which weighed heavily on Turner’s Atlanta headquarters, where people read and reread the news release in disbelief, is a natural progression of a media consolidation that has made entrepreneurs like Turner a dying breed.
“Did Ted want an operating role with the new company? Yes. Was he unhappy that he didn’t get one? Yes,” said Terence McGuirk, chairman of Turner Broadcasting. “Is he on board with the new structure and embracing the merger? Yes.”
Others say Turner’s title is irrelevant and that he rules through the force of his personality.
“Ted doesn’t derive his power from an organizational chart,” said Michael Wolf, a management consultant at Booz Allen Hamilton. “He’s still a brilliant strategist and will continue to have a huge impact.”
Turner’s power is now enormous as Time Warner’s largest shareholder and head of the fastest-growing division, which includes Home Box Office, and the operations he bought or built--CNN, TNT, TBS, the Cartoon Network and New Line Cinema, as well as the Atlanta Braves and Atlanta Hawks professional sports teams.
Although the merger with AOL will reduce his 10% stake to 4%, Turner will remain the largest individual shareholder--bigger than Case. Turner’s wealth is estimated by Forbes magazine at $6.9 billion.
In January, Turner agreed to vote his shares in favor of the merger--and even demanded a recount of the Time Warner board vote because, as one source said, “he questioned their enthusiasm.”
Turner Sounds Off to Cable Colleagues
But by May, his mood had changed. That was evident two weeks ago in New Orleans at the cable industry’s annual convention, where the antics of the mogul known as “The Mouth From the South” and “Captain Outrageous” have become a celebrated ritual. At a banquet for cable power brokers, Turner vented his anger over agreeing to vote his shares for the acquisition only to be cut out of his job.
He told his cable cronies that the new structure was a breach of his contract, which assures that Turner Broadcasting, CNN, New Line Cinema and HBO report directly to him.
“He was disillusioned into thinking he would have a bigger role,” said a longtime cable colleague. “Why did he sign over his shares without a clear understanding of his role?”
Executives close to Turner say he was distracted by his split with actress Jane Fonda after nine years of marriage. They say the demotion left him feeling manipulated and hurt--particularly by his partner, Time Warner Chairman Gerald Levin, whose career he feels he helped revive.
In the negotiations with AOL, Case won Levin over by assuring him that he would be chief executive. Cable sources say the arrangement gives Levin protection in an era of consolidation when the only guarantee of survival is ownership of the kind enjoyed by founders like Sumner Redstone and Rupert Murdoch, who control Viacom and News Corp., respectively.
Some Turner supporters say Levin was waiting for the chance to elbow aside their iconoclastic leader, who never played the corporate game. Turner’s swashbuckling style, off-the-wall outbursts, his public fights with rival Murdoch, whom he once compared to Adolf Hitler, and his recent follies with trophy girlfriends embarrassed the rabbinical and proper Levin, who avoids confrontation as well as the spotlight.
After the $7.4-billion sale of Turner Broadcasting, Turner had toned down his roguish behavior. But he kept a protective bubble around the Atlanta operations, fiercely guarding it from Time Warner interference and preserving the intimate culture with folksy touches like the handwritten notes he humbly signed, “Your pal, Ted.” When Time Warner’s directives threatened his domain, Turner would erupt.
Even some longtime Turner supporters agree with the recent reorganization. “This is the right move for the company,” said one. “Ted is a loose cannon who has been disruptive to the company. His divorce is not helping.”
Detractors say Turner’s power struggles polarized the company, from his efforts to wrest control of the Warner Bros. studio to his public put-downs of the WB network. His goal of owning a major broadcast network conflicted with the company’s cable vision. Turner fought Levin’s efforts to speed Internet development by centralizing the function, reluctant to give up control of CNN.com. He is outraged that Time Warner Cable refuses to carry the new Turner South regional cable network.
Those kinds of turf wars could derail the promise of the pending merger, which hinges on leveraging AOL’s popular Internet service and Time Warner sites like CNN to drive sales of Time Warner’s high-speed cable service.
Sources say Levin devised the organizational chart, aligning Turner’s New Line Cinema and the Warner Bros. music and movie studios under Time Warner President Richard Parsons, a trusted emissary and peacekeeper.
Pittman, a founding MTV executive and Time Warner alumnus who is known as a consensus builder, controls divisions that will generate the bulk of the company’s profit--the magazines, Internet sites, cable channels, cable systems and the high-speed Roadrunner Internet services.
Sources say Levin hashed out the plan with Case, and brought Parsons and Pittman, the co-chief operating officers of the new company, into the process. Levin told Turner in a telephone call, which one person said was placed the day before the public announcement. Case placed a follow-up call.
Levin ‘Played His Hand Brilliantly’
One Turner observer said Levin “played his hand brilliantly.”
At the time of the Turner-Time Warner merger, Levin’s career was on the ropes, damaged by an ambitious cable bet that was wildly unpopular on Wall Street. Countering speculation that Turner would push him aside, Levin put out gentle reminders of Turner’s health problems. He once remarked offhandedly to some reporters of Turner’s surprising stability through the merger negotiations even though he had abandoned his mood-leveling Lithium treatments.
Yet the two executives settled into a productive partnership that, aided by a cable rebound, took Time Warner stock to new highs. Levin showed the proper reverence--insisting on naming the Brave’s new baseball stadium in Atlanta “Turner Field,” which locals today call “the Ted.” Turner was happy to exert his muscle behind the scenes and escape for periods to his Montana ranch.
Turner and Levin had grown up together in the cable business. As chairman in 1976 of Time Inc.'s HBO, Levin pioneered the use of satellites to beam the channel’s polka and bowling programs to cable operators back in the days when they relied on videotape.
While Time Inc. failed to expand further into cable programming, capitalizing on properties like Sports Illustrated, Turner did seize the opportunity. He scrapped the unreliable microwave technology in favor of satellites to establish his Atlanta UHF-TV station as the first national “superstation.” CNN, which early critics dubbed the Chicken Noodle Network, followed in 1980. Then came TNT in 1988, drawing upon Turner’s audacious $1.5-billion purchase of MGM in 1985.
The acquisition strangled the company, which was forced to sell back everything but the MGM library to the original owner as part of a bailout of Turner by 31 cable operators. Time Inc. and Tele-Communications Inc. were the ringleaders, picking up veto powers in the bailout that they used to block Turner’s pursuits of CBS and NBC.
Levin finally broke the stalemate by acquiring Turner Broadcasting--fulfilling a vision hatched within Time Inc. in the late 1980s. As chief strategist at Time Inc., Levin had drafted a memo recommending that the company diversify by acquiring Warner Communications Inc., a movie studio and cable operator--and Turner Broadcasting. A crafty corporate tactician, Levin rose to power after the merger with Warner in a highly chronicled 1992 palace coup.
Despite criticism of his leadership skills, Levin has secured his place in history through these transforming acquisitions, with the AOL deal further underscoring his uncanny foresight--and his grasp of technology.
Since the merger with Time Warner, Turner has turned his energies increasingly to his causes. He gave a record $1-billion gift to the United Nations three years ago, explaining that his priorities were shifting away from the media to “humanity and the planet.”
Turner, a sailing champion and avid outdoorsman, has since become the largest bison rancher and the nation’s largest private landowner and conservationist, owning 1.7 million acres.
Turner executives say his spirits have brightened a bit since returning last week from Russia, where he discussed economic reform and disarmament with President Vladimir V. Putin. They say he shifts between sullen and good humor and has been making self-deprecating jokes about his new title in an effort “to relieve the tension for everyone,” according to one executive.
The restructuring knocked the wind out of most Turner executives in Atlanta. “Ted’s personality has permeated the culture here, and a lot of people feel a sense of sadness and a sense of loss,” said one Turner executive. “It’s exciting to be on the cusp of a new world with AOL. But it’s hard to reconcile, because I love this man, as a lot of us here do.”
That outpouring of emotion conveniently lines up with the 20th birthday party next week of CNN, which Turner executives have been planning for months. “This is really a huge tribute to Ted,” said one CNN source. Journalists and dignitaries from around the world, including former Soviet President Mikhail S. Gorbachev, will be there.
In fact, Turner had a huge case of seller’s remorse the first time around with the Time Warner deal.
“It’s not much of a job,” he told an audience at the annual cable convention in 1996, shortly after being named vice chairman of Time Warner. “But I have another life to go to if I have to.”