In the late 1990s, the goal for many dot-com start-ups was to raise money and spend it aggressively to grow market share as quickly as possible. But with many of these companies, their cash burn rates were so great and their revenue so low that they began to run out of money, and just as advertising had been the first thing they spent cash on when they had it, it was the first thing they cut as they ran out. Since so many of AOL’s advertising customers were other dot-com companies, the downturn put a big strain on the business. As we approached the June shareholder vote on the merger Steve and Jerry continued to assure investors that AOL was different. They would survive this downturn, and once the company was combined with Time Warner’s content, ad sales, and cross-promotional capabilities, this new merged company’s growth would resume.
At this same time, unbeknownst to me, Jerry and Steve had formulated a new management structure for the company. That May, on the day when they planned to send out a press release announcing these changes, I was out at my Vermejo Park Ranch in New Mexico. The phone rang and it was Jerry. He said, “I’m restructuring the company. I’m splitting it in two parts and I’m going to give Pittman half and Parsons the other half. The cable networks will report to Pittman. You will continue to be vice chairman of the overall company.”
I was stunned. I said, “Jerry, I’ve got a contract that still has a year and a half to run and it stipulates that I’ll be in charge of the networks.”
“Well, if you read your contract,” he answered, “you’ll see that we can change your responsibilities as long as we pay you your salary for the rest of your term and we’re perfectly willing to do that if needed.”
I tried to stay calm and I said, “Jerry, in my entire career I’ve never heard of abrogating someone’s contract.” Jerry tried to convince me that I would play an important role as vice chairman but when I asked him what my duties would be, it was clear that there weren’t any. Shortly after hanging up, I got a fax of the press release announcing the new management structure.
For the first time in my life, I’d been fired.
A TED STORY
“In His Mind I Fired Him”
—Jerry Levin
I was trying to build a bigger company with more Internet activity and this was something that Ted was not interested in, just as he wasn’t interested in the start-up of The WB Network, which he looked at as taking resources away or being competitive with what he was doing. So I had to figure out how to make this work in terms of management. I started to put in place a structure to run a new, bigger company with a lot of pressure because of the profile of AOL and Time Warner and the desire to really go forward on the Internet.
I was trying to get everybody into a different position and I couldn’t expect Ted to work for Bob Pittman or even Steve Case. But because of the force of his personality I genuinely wanted him attached to AOL Time Warner. The intention was that he would be a cheerleader and inspirer. He could go off and do other things and not have to worry about the day-to-day. This was important to me but it was hard to get that point of view across. I was concerned about the conversation and tried to articulate it with some feeling. I couldn’t say to him, “You know, when people build a business and they’re the fiery entrepreneur, once it gets institutionalized they’re probably better off stepping away—and of course, maybe it’s better if you decide to step away.” But during the call, he never said, “You’re firing me.” He just kind of took it and then went on this public bandstand that he had been fired.
He thought we took his balls off and that started the obvious deterioration—much to my regret—of our relationship because he was offended. In his mind I fired him. Now he, like everybody else, was very supportive of the transaction because obviously the stock was up and was worth a lot of money and it looked good and got a lot of attention. And then when the bubble burst and the stock started to go down that’s when the relationship really deteriorated. I don’t say this meanspiritedly at all because I think Ted is one of the most fabulous individuals of the past century, but he does like to target someone as the devil. That was Murdoch for a while, and I had also been the devil several times before in our relationship so I’ve just accepted that. I think that’s what happened. I became the symbol of all of his problems. And if it helps him to know that I’m the proximate cause of a number of things and now I’m out of the way, that’s okay, too. I hope and I believe he’s actually better off now because he was not constructed to be a part of institutions like AOL Time Warner or Time Warner. He’s better off doing what he’s meant to do, which is to perfect the planet.
Remember, I had known and worked with Ted for a long period of time—since the early 1970s. I was the one who introduced him that night when he pledged a billion dollars to start the U.N. Foundation and it was one of the greatest evenings of my life. Just working together on CNN was so meaningful to me, and seeing his relationship with Jane was the most fascinating thing. We had a long history together and we really haven’t spoken in years, which I really regret. I take whatever responsibility but it’s just a shame. I have everlasting regret that we don’t talk.
A TED STORY
“I Think You’ve Been Screwed”
—John Malone
I went down and visited Ted in New Mexico. Jane had left by then and her stuff was being hauled out of the ranch. I took a helicopter there and took Ted for a ride to see his property from the air, which he had never done. The first morning I was there Ted gets a fax announcing some details of the AOL deal and it says that Bob Pittman is going to be running the Turner networks. And Ted walks out of his little office there with this thing and he shows it to me and he says, “How can they do this? I have a contract.”
And I said, “Well, I don’t know what your lawyers will tell you but all you can get is money damages and they’re still going to pay you. I think you’ve been screwed, Ted.”
He was ashen-faced. He said, “How could Jerry Levin do this to me? He was supposed to be my best friend in the world.”
I called Levin after that to find out how he could have stabbed Ted in the back. Jerry’s public posture was it was a requirement of the deal but then he privately said they were having problems with Ted and his personal conduct. But whatever the justification or lack thereof they did it to him. They absolutely screwed him. They reneged on a commitment that they should never have reneged on. That’s the way I look at it because I didn’t see that Pittman was even half the guy as Ted in terms of running the Turner networks. Levin screwed him and there’s no way you can tell me otherwise. I know how badly Steve Case wanted that deal. If Jerry had said, “Absolutely not, Ted’s got a contract,” or something, there’s no way Case would have said, “Bullshit.”
It didn’t ring true. I think it was a deliberate move to cut Ted’s balls off and the fact that they didn’t disclose that to him when they got him to sign an agreement to support the deal but only afterward, I just think it was pretty low, frankly, and that’s what I told him. I said, “You’ve been stabbed in the back by a guy you thought was your friend and it’s pretty ugly, Ted.”
To breach an understanding and a relationship of many years and even to do it in the face of damaging the very business that you’re acquiring, the whole thing just stank. I really lost my enthusiasm for that management team at that point.
I was in shock. Jerry was taking away my responsibilities but my contract gave him that option, as long as my salary was paid out through the end of the term. My pay at the time was about $1 million a year, but that didn’t matter much to Jerry or Steve. They wanted me out and if it cost the company $1.5 million, that was fine with them. I found it hard to take that they were laying off 40,000 employees to cut costs but had no problem paying me my seven-figure salary to do nothing. I had worked at the same company my entire career and had been in charge of the Turner businesses for nearly forty years and now it was over.
AOL and Time Warner shareholders formally approved the merger the following month. Jerry and Steve were determined to keep pressing forward through the regulatory approval process but, of course, I had lost my enthusiasm for the deal. I was worried about the future of the company. It seemed increasingly obvious that Time Warner was hitching its wagon to a lame horse but having been pushed to the sidelines after pledging my shares, there wasn’t a lot I could do about it. When I was in Atlanta or New York I continued to go to my office but I didn’t have anything to do. Bob Pittman was friendly but he didn’t ask for my advice. Jerry and Steve continued to invite me to periodic meetings with the division heads but fairly soon it became clear that these were nothing more than update sessions and the company’s important strategic decisions were being made in meetings to which I wasn’t invited.
It’s hard to know how I would have felt if the company had been doing well, but standing on the sidelines while our stock and my personal fortune cratered was hard to take. Less than a year from the merger announcement, AOL’s stock was down by half. The dot-com bubble had burst and a downturn in the ad market was hurting Time Warner businesses across the board. Companies like Time Warner and Turner Broadcasting had weathered many ups and downs in the ad market over the years, but in this case, for AOL, the situation was extreme. Their stock price was driven by very ambitious sales targets, which had relied heavily on selling ads to other dot-com companies, which, by this point, were dropping like flies. AOL Time Warner was in a precarious position and Jerry and Steve refused to show any concern publicly and continued to stick with their aggressive growth projections. The regulators finally approved the merger in January 2001.
In March of that year, Bob Pittman brought Jamie Kellner, who had been in charge of The WB Network, to Atlanta to also run Turner Broadcasting, replacing Terry McGuirk. I wasn’t consulted on this decision and while I didn’t have issues with Jamie, I was not a supporter of The WB because I didn’t see any way that it would ever make money. (And it didn’t—several years later it merged with UPN to form The CW.)
It was a really rough time. Psychiatrists will tell you that the two most traumatic things that can happen to a man are going through a divorce and losing his job, and these two things were happening to me at the same time. And I couldn’t sell my stock as the company’s value plummeted. I was like Humphrey Bogart in
The Treasure of the Sierra Madre,
watching all that gold dust slipping through his fingers.
In that same summer, when things looked like they couldn’t get any worse, I was hit by another tragedy—the loss of one of my grandchildren. My youngest child, Jennie, and her husband, Peek, had a daughter named Maddox who was diagnosed with Hurler’s syndrome. This is a very rare genetic disorder and sufferers have an enzyme deficiency that limits their body’s ability to break down chains of sugar molecules. This causes waste materials to gather in connective tissues and vital organs, including the heart and the brain. In addition to causing physical deformities and mental retardation, it inevitably leads to premature death. Jennie and Peek showed great courage throughout their ordeal, and Maddox passed away in August 2001, three months shy of her third birthday. To see my daughter go through this with her child, and watch someone so innocent suffer and die so young, was brutally hard on everyone in the family.
For me, it brought back sad memories of my sister, Mary Jean, another innocent child who was taken from us. It was a terrible time for our family and with the other problems that I faced, it was almost too much. I developed anxiety that was worse than anything I’d experienced before. When I lost my sister and my father I was able to channel my energies into work and my sailing career. But I was now retired from competitive sports and my hands were tied behind my back as the company I built went in a nosedive.
Nearly all of my life I’ve slept like a log, but now I was tossing and turning almost every night. Eventually, I came up with a technique that helped. After spending my days dealing with all the things that were going wrong, at night I’d put my head on the pillow and try to think about the things I was thankful for, especially my family. In my mind, almost like a slide show, I’d picture my children and their families and think of each of their names. I’d start with the oldest, Laura, and picture her, then her husband, then their kids. Then I’d go to Teddy, the next oldest, and do the same with him and his family. Once I’d worked through Rhett, Beau, Jennie and their children, I’d go back in the reverse direction. Picturing my family helped calm me and cleared my head of worries as I slowly drifted off to sleep.
But even on days following a decent night’s rest, I found myself sad, frustrated, and perhaps more than at any other time in my life, worried. How much lower could the stock go? For the first year after the deal’s announcement, as a company “insider,” security laws prevented me from selling stock. That term was now over but there was a concern that stock sales by a high-profile person and a member of the company’s board of directors (I had not yet given up my seat) might trigger even more concerns and increased selling. The stock had fallen so far by the summer of 2001 (shares traded below $40 in August) that part of me thought that it couldn’t possibly go any lower. But what if it did? To finance my philanthropy and land purchases I had taken on about $250 million in debt. When I was worth $7 to $10 billion I was okay but now that the stock was dropping, I had to be concerned. I started to have thoughts about having to sell my properties, even considering which ones would go first.
At the end of August I flew to Brisbane, Australia, for our fifth summer Goodwill Games. Coming on the heels of my granddaughter’s funeral, it was a sad flight. The Games themselves provided a welcome distraction, but even this international sporting event was bittersweet for me. I continued to believe that gathering the world’s athletes for peaceful competition was a great idea, but the Goodwill Games were still losing money, and I expected that the new regime at Turner Broadcasting would pull the plug on them and that these games would be the last.