Looking for a credible Case

GIVE STEVE CASE CREDIT FOR consistency. He was wrong six years ago, when he pushed America Online and Time Warner together prematurely. And he’s wrong now when he says the two giants should be separated.

Case, the former chief executive of AOL, was the driving force behind its ill-fated acquisition of Time Warner in 2000. So his call this week for a do-over, saying the merger was holding back the pieces of the empire he forged, came as a bit of a surprise. Born out of Case’s boldness and big-picture thinking, the $99-billion deal combined the world’s most popular Internet service with a news and entertainment powerhouse. The marriage was supposed to help Time Warner’s content and AOL’s dial-up Internet businesses leap into the broadband era, when content would be distributed online and on demand. But the synergies Case envisioned did not materialize, and the company’s stock sank.

The consolation for Case and other former AOL shareholders was that the deal gave them real assets to cling to after the dot.com bubble burst. Time Warner shareholders, on the other hand, have watched in dismay as their once high-flying stock has languished below $20 per share.

Case had the right idea. As millions of homes sign up for high-speed Internet service, the Net is emerging as an important pipeline for entertainment. But like many online entrepreneurs, he got the timing wrong. Wiring the nation for broadband is taking longer than they thought, and entertainment companies have been slow to embrace the Net. Beyond that, it’s no mean feat to meld disparate corporate cultures into a giant entertainment and electronics conglomerate for the sake of digital “convergence” -- as Vivendi Universal and Sony have also learned.

On Sunday, Case joined other restless Time Warner investors, such as billionaire Carl Icahn, in urging the company to break itself up. The company should ignore him. As the Pew Internet & American Life Project pointed out earlier this year, “The Web has become the ‘new normal’ in the American way of life.” Time Warner needs to figure out how to profit from this change. Owning AOL helps the company work out new business models for the broadband era.

In fact, the company is starting to do just that. It recently said it would make episodes of old TV shows available for free on AOL.com -- just the sort of synergy the Steve Case of 1999 was so excited about. Maybe Time Warner executives should introduce him to the Steve Case of 2005.