by Ted Turner
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.
I left Australia following the closing ceremonies. As I made that long flight back to Atlanta I tried to rest, but wound up spending much of the flight reflecting on all that had happened over the past twenty months. I continued to be concerned, but on that evening of September 9, 2001, I tried to convince myself that things could only get better.
32
Stepping Away
On the morning of September 11, 2001, I was in my CNN Center office with my television tuned to CNN and the sound turned down. I was jet-lagged and tired after my flight home from Australia but I remember speaking briefly to my old friend NBA commissioner David Stern first thing that day. We had executives getting ready to fly to New York to meet with NBA representatives about a possible new rights agreement, and I wanted to check in with him before that meeting. Sometime after that call CNN began showing im
ages of smoke coming out of one of the World Trade Center towers. The initial reports said it might have been a small plane accident. I was having trouble understanding how a crash like that could happen in downtown Manhattan when I saw on my monitor another plane go into the second tower and instantly thought, “We’re at war.” It felt like I was watching Pearl Harbor, live.
I immediately went downstairs to the CNN studios to offer what support and encouragement I could. At one point, I looked up at a monitor displaying Headline News and it was still running its usual loop of various news stories. I ran into Walter Isaacson—who had replaced Tom Johnson as CEO of CNN in July—and suggested he should put the regular CNN feed on Headline News as well. He agreed and the change was made minutes later. As tragic as those events were, it was gratifying once again to see CNN performing at such a high level at such a critical moment. But this was a different experience for me than our coverage of the Gulf War. I don’t know if any decisions were discussed that were similar to the ones we made to let our crews stay in Baghdad, but if they were, my input wasn’t requested. CNN didn’t report to me anymore and it was a strange feeling to be on the outside looking in at this company that I’d helped create. (Months later, when the U.S. war effort began in Afghanistan, I volunteered to go over as a military correspondent. I figured this would be another unique experience and without day-to-day responsibilities I could certainly spare the time. CNN management politely declined my offer.)
Jerry was in Europe on September 11 and was greatly affected by the day’s events. The tragedy brought back reminders of his son’s murder, and once he was able to fly back to New York, he returned to his job that much more adamant about AOL Time Warner making a difference. He was quoted referring to the company as a “ministry” and said that, post-9/11, our journalistic mission was more critical than ever. I had always been in favor of using the company’s media for the common good but the Time Warner mind-set seemed to be at odds with the culture at AOL. Not only had they never considered their company to be a journalistic enterprise, their primary focus had always been on growing the business and making their numbers. With the country moving into a recession, the company struggling, and the 9/11 tragedy so fresh in everyone’s minds, this was a tense and difficult time at AOL Time Warner.
After months of portraying our company as nearly invincible, in late September Jerry and Steve confessed to investors that they weren’t going to make the numbers for the third quarter. The market responded in a predictable way, driving the stock down to a new low of $30 per share.
As AOL Time Warner’s problems intensified, I felt like I was increasingly being kept at arm’s length. When I requested updates or reports on corporate issues, I rarely got what I asked for. I didn’t appreciate being treated this way. I might have been stripped of my operating role but I was still vice chairman, the largest individual shareholder, and a member of the board and I deserved to be kept in the loop. I continued with my years-old practice of being away from the office for days at a time. Earlier in my career, when I was delegating to trusted people who worked with me, this worked well; they did their jobs without daily interference and I would be out at one of my properties clearing my head and thinking about strategic issues. But now that I was no longer in charge, I think my absences worked against me as it became easier for Jerry to shut me out.
I tried a few times to discuss this with Steve Case but I got the feeling that he didn’t really know what was going on either. It seemed ironic that Case and I—the two founders of the company—were being ignored. The situation was unacceptable and something needed to be done.
A TED STORY
“Let’s Get a Meeting with Case”
—Taylor Glover
Both Ted and I had the perception that Jerry Levin had built a wall insulating Ted from the company and people on the inside were telling me that the same thing was happening to Steve Case. Given the fact that AOL had acquired Time Warner, you’d have thought that Case would have this monumental role but he really didn’t; Jerry still controlled everything. I suggested to Ted that we meet with Case to discuss our concerns with him and he agreed.
We set up a time to meet before the November 2001 board meeting in Dulles, Virginia. The plan was for me to go a half hour early and talk with Case privately about our perception of what was happening to Ted and to him. Ted would join us in progress, after I’d had a chance to lay this all out. Just prior to the meeting, I was surprised to learn that Steve was bringing his fellow “AOL” board members to the meeting, including Ken Novak and Miles Gilburne, but I decided to tell the entire group the same things I had planned to say to Steve privately.
I told them that in the first few weeks after the merger, Ted remained involved and informed—there was no wall around him. “Then a row of bricks went up,” I said. “Then another row was added, then another, and another, and pretty soon Ted couldn’t see over that wall anymore. He could try to jump and pull himself up to try to see over it but eventually it got too high.” I looked at Case and said, “Ted’s been totally shut out and we think the same thing is happening to you.”
My perception at the start of the meeting was that Steve looked very stiff and didn’t seem particularly interested. He was probably wondering why he was meeting with somebody like me in the first place. But as I described this situation he leaned forward in his chair and all but acknowledged that this was happening to him. He didn’t say it in words but his body language said, “Okay, we’re all in the same camp here,” and you could sense around the table a collective desire to go after Jerry.
The meeting was cordial and constructive but before we could get into any further discussion on our next steps Ted burst through the door and the tone changed immediately. Ted had a fire in his eyes like I’d never seen before and to my surprise he started screaming at Case. He said, “You don’t have any money in this damn deal! What are you worth, anyway? And what are you worth, Novak?” He instantly put everybody on the defensive but he made an important point. A lot of the people on the AOL side had cashed out a great deal of their stock while Ted had held on to his and was riding it into the ground.
The meeting didn’t go quite the way we had planned but it was productive. We helped Steve Case understand more clearly what was happening to him and to Ted. He and the other AOL directors also saw firsthand how irate Ted had become. If it came time to count noses around the table, Ted would be on their side. Case already controlled half the board. All he needed was Ted and one or two others and Jerry was history.
I knew that Taylor had planned for the meeting to go differently but the more I thought about the events of the prior two years the harder it was to contain myself. Getting fired was tough enough, and now I had to stand on the sidelines and watch the people who pushed me out run the company nearly into the ground. At this point, I realized I could no longer reserve all my anger for Jerry Levin. It was clear if AOL hadn’t merged with us, they would be in far worse shape. Instead, just prior to the dot-com bubble bursting, they acquired Time Warner with their inflated stock, effectively slowing their own descent while dragging us down with them in the process. I wasn’t happy and it was time for these guys to see it for themselves.
In the board meeting the next day I was more restrained, but when it was explained that our earnings were coming in well below the projections we had given Wall Street it was time for me to voice my disappointment to the full group of directors. Jerry was sitting right next to me and after trying to be supportive of him for so long I didn’t know if I’d have the courage to speak up, but I did.
“I’m not happy,” I said. The room got very quiet. “I’m not happy with these results and I’m very disappointed with the senior management of this company.” I got a little louder and more adamant as I went along, reminding my fellow directors that our stock price had been cut in half since that summer and saying that it was time that we as a board stepped up and did something about it. When I finished, no one else said a word. The meet
ing adjourned just a few minutes later.
No discussion followed my comments, but no one defended Jerry, either, and he must have realized that the handwriting was on the wall. In the following days he worked out a deal with Fay Vincent, a longtime director and head of the board’s governance committee. Jerry announced his resignation in December, explaining that he would officially leave the company in May of 2002. Dick Parsons would succeed him as CEO and Bob Pittman would be COO, marking one of the first times in the nearly two years since the deal was announced that a Time Warner person won out over someone from AOL for a key executive position. Steve Case would remain in his role as the company’s chairman.
Amid these transitions some people speculated that I might try to take over as the company’s chairman or CEO. I considered this briefly—along with just about every scenario I could think of to help the business—but returning to a management role simply wasn’t desirable. Running AOL Time Warner would have meant significant changes in my lifestyle. I’d have to move to New York and spending time at my properties would no longer be an option. I might have convinced myself to make these sacrifices if I thought I had the answers to the company’s problems but I didn’t. We had made a fundamentally bad move by merging with AOL, and I didn’t know how to turn the ship around any more than anybody else did. It was a relief to have Jerry gone and his replacement had the full support of the board. Dick Parsons is a good guy and the last thing he needed was Ted Turner going on some other quixotic adventure to try to regain power in the company. The best thing I could do now was to give Dick my support and hope that he could at least get things stabilized.