AOL Chief Announces Retirement

In a move that stunned the entertainment world, Gerald Levin announced Wednesday that he will retire in May as chief executive of AOL Time Warner Inc., the world’s largest media company.

Levin’s successor will be his longtime deputy, Richard Parsons, 53, who became co-chief operating officer in January 2000 as part of Time Warner’s merger with AOL.

Levin chose Parsons over Robert Pittman, former America Online president, who has shared the COO title since the landmark merger in January.

Parsons is a logical choice because of his years of management experience and his role as a conciliator and deal maker within Time Warner. The former president of Dime Bancorp, Parsons is one of the highest-ranking African Americans in corporate America. He recently rejected a high-level job in the Bush administration.

Parsons will lead a company that is coping with the aftereffects of the complicated merger and a huge slump in advertising. Parsons now is in charge of content divisions such as Warner Music and the Warner Bros. studio, while Pittman oversees subscription businesses such as Time Warner Cable; magazines such as Time and Sports Illustrated; and cable and broadcast channels such as CNN, TBS, Home Box Office and the WB.

Pittman, 47, also was promoted in the restructuring. He will become the company’s sole chief operating officer and will assume an expanded role as all divisions will report to him in an effort to streamline its management structure.

Levin’s resignation surprised Wall Street, top executives at AOL Time Warner and other media moguls. It came only a year after he orchestrated the $99-billion merger between the world’s largest Internet service and the most powerful entertainment company.

Analysts said both Pittman and Parsons are well qualified for their new jobs, yet called Levin’s retirement a loss to the company. “The timing is not ideal because they are very much in the midst of a transition. Jerry has been the strategic visionary,” said Jessica Reif Cohen, an analyst at Merrill Lynch.

Levin, whose leadership transformed Time Inc. from a magazine company into the world’s largest entertainment conglomerate, was unusually introspective in describing his decision.

“I have a history of surprising people,” said Levin, 62, who will celebrate his 30th anniversary at the company when he retires. “Who I am and why I’m here [on Earth] can’t just be for this company. I am not all that I appear. I need to reclaim my identity. I’m about to demonstrate the real me.”

People close to Levin say he has not fully recovered from the brutal 1997 slaying of his son, Jonathan, a public school teacher in New York.

After his son’s death, Levin inserted a clause in his contract, allowing him to leave before it expired in 2003. He was required to give the company six months’ notice, and said he exercised this option as soon as it became possible.

His associates also say the September terrorist attacks had a profound effect on Levin, who since then has spoken passionately about the company’s role first as a public trust, and second as a money-making machine for shareholders.

Yet rival media executives, shocked by news that the tenacious Levin was retiring, searched for evidence of a rift that might have forced him out. “I don’t believe in a million years he left voluntarily,” said one high-ranking executive. “Why would a guy who is this young, who has the job running the world’s largest and most powerful media conglomerate, just walk away?”

On Wall Street, speculation swirled that Levin is taking time out before returning to run AOL’s enlarged cable operation. AOL is competing against Cox, Comcast and Microsoft in a bid to buy AT&T;’s cable business, the nation’s largest.

But most experts dismiss the notion that Levin would step down as CEO if he intended to play such a role in an expanded cable venture.

Levin said he wants to show there are alternatives to hanging onto a job until you die or are fired. “I’ve done something about managing a career that I hope serves as an example to others.” Neither Rupert Murdoch, 70, News Corp.’s CEO, nor Sumner Redstone, 78, who heads Viacom Corp., are expected to retire soon. Nor is another Levin rival, Michael Eisner, 59, who has been Walt Disney Co.’s CEO since the mid-1980s.

Levin acknowledged that he has been drained by his son’s death. “Emotionally, for me, [Jonathan’s death] continues to be very difficult,” he said. “It’s why my feelings for the 92,000 people here [at AOL Time Warner] are so personal. The suffering here [after Sept. 11] eats away at me. I have to do something. There is only so much I can use this platform for.”

When Jonathan Levin was murdered, his father leaned on Parsons to keep the company moving. Parsons became Levin’s fixer--and his most trusted confidant. Parsons stepped in to mediate a messy fight with News Corp., after Time Warner vice-chairman Ted Turner equated Rupert Murdoch to Hitler. Parsons made peace by striking an agreement with News Corp. to carry the company’s new all-news channels on Time Warner’s cable systems in New York.

Earlier, Parsons played an instrumental role as peacemaker within Time Warner under Levin, who appointed him president in 1994. Parsons already had gained respect within the ranks by easing the bickering factions within Time Warner after the 1990 merger.

Redstone, who considers Levin his closest friend in the media industry, said he is saddened by the news: “It was Jerry who put HBO on the satellite, giving it a lead that [Viacom’s] Showtime will never be able to overcome. He persistently stayed, despite harsh criticism from Wall Street, with cable, which has suddenly proven a valuable asset. In doing the deal with AOL, he created the framework for competition among the top four media companies.”

Levin joined Time Inc. in 1972 and changed the economics of cable programming by distributing Home Box Office via satellite, becoming the first cable programmer to do so.

After helping engineer the mergers of Time Inc. and Warner Communications, Levin orchestrated a palace coup that left him in charge. In 1992, as Time Warner Chairman Steven Ross was dying of prostate cancer, Levin is said to have masterminded the overthrow of the company’s No. 2 executive, Nick Nicholas, and took charge as sole CEO. Levin pushed the company into a cable acquisition frenzy that made Wall Street cringe and almost cost him the job.

Indeed, after Time Warner bought Turner Broadcasting in 1995, Wall Street was abuzz with predictions that the outspoken Ted Turner would force out Levin. But Levin ended up in charge of the combined company, demoting Turner to a non-operating role after the AOL merger.

By 1999, Levin had gotten religion about the Internet. Although many critics say he sold Time Warner short by merging with AOL just months before the Internet bubble burst, Levin seemed to relish his new role as the consummate industry survivor.

Yet Levin may be leaving too soon to declare victory in the merger.

One of the promises of the merger is to leverage assets, such as “Harry Potter and the Sorcerer’s Stone” or Madonna, across all the company’s cable and broadcast channels, magazines and Internet assets.

He spent most of the year reassuring Wall Street that the company could meet its aggressive targets for 2001. But in September Levin said the firm would fall short because of the weak ad market and economic slump.

Still, he gets credit for guiding the company through a difficult year.

“Levin has already done most of the heavy lifting,” said Scott Reamer, analyst at SG Cowen Securities.

The company’s shares are down about 25% since the merger closed Jan. 11 and are off 40% from their peak in spring. The stock closed Wednesday at $35.83 on the New York Stock Exchange, up $1.08.