There Must Be a Pony in Here Somewhere

by Kara Swisher

  On December 14, 1994, at a Sheraton hotel near Orlando, Levin launched his vision of the future. In front of a crowd of hundreds, he and an accountant named Karl Willard played a hand of virtual gin rummy via FSN, as reported by the Orlando Sentinel. As Levin went on to demonstrate the other games and features of FSN, he insisted to the assembled reporters, “This is not a hollow demonstration. This is not hype.”

  And it wasn’t really, despite all the scorn FSN would endure over the years. In retrospect, FSN was a groundbreaking system that offered a whole catalog of useful services—the same kinds that would soon spawn countless Internet companies and help create the greatest economic frenzy the country had ever seen. With FSN, customers could read Time magazine, shop at Winn-Dixie, buy music CDs, look up local restaurants, print maps, download movies, and play interactive games, all through their television sets.

  Years after FSN’s flameout, Levin defended the idea behind it but admitted he promised too much. FSN was, after all, an unproven consumer product with no immediately executable business. “I probably should not have hyped it quite so much,” he told me. “We should have positioned it from the start as an experiment.”

  A failed one, as it turned out. By the summer of 1995, only six months after FSN’s launch, the service was already struggling. There were fewer than 50 subscribers, and the cost of the set-top box still hovered around $5,000 (a number Levin now recalls as possibly even too low). In any case, it was far too high for any kind of serious rollout, especially since some key technological glitches still needed to be worked out.

  An even more serious problem loomed, one that was inherent in FSN’s basic concept. Even if FSN worked perfectly, and even if the costs could be brought down, would people really want this kind of interactive TV-based service? On June 19, 1995, the Wall Street Journal offered its answer to that question in a lengthy article titled “The Myth of Multimedia.”

  “Time Warner’s vision of the future is a chimera,” the newspaper opined. “Interactive multimedia technology is invading the home, but in a way that revolves around the personal computer rather than the television.” The article went on to correctly predict that the real boom would be in Web development, quoting research studies indicating that about 14 million consumers would be buying products and services via personal computers by the turn of the century. (That estimate, as high as it seemed at the time, would actually turn out to be woefully low—by 2000, almost 100 million users were making online purchases of some sort.)

  The Journal’s prediction was dead on: Interactivity would soon be the province almost exclusively of the personal computer, not on the television as Levin had wagered. As Time Warner’s Joe Ripp told me in a 2003 interview, “Jerry was always a little ahead of himself. With FSN, he had it right, but he had the wrong device. . . . The whole world was rushing toward the Internet.”

  Levin was going down the wrong path entirely with FSN—but luckily, he’d had the foresight to place another bet on the fledgling commercial Internet as well. Or, at least it had seemed lucky at the time. With $10 million in initial funding from the FSN project fund, Time Warner leapt into the Internet with a Web site of its own. It would be headed by up-and-coming Time Inc. editor Walter Isaacson and Curt Viebranz for the business side, and run by a core team that included Time Warner executives Bruce Judson, Paul Sagan, Linda McCutcheon, Oliver Knowlton, and Jim Kinsella.

  The choice of Isaacson was a clear signal of the venture’s importance, since he was one of the fairest-haired boys at a company filled with them. A respected writer and the assistant managing editor of Time, Isaacson had a honeyed accent redolent of his home state of Louisiana. But his level of ambition was pure New York, and he displayed an impressive ability to link himself up with even more impressive people. To the politically attuned denizens of the Time Warner empire, the involvement of Isaacson was a signal that the Internet was hot.

  Isaacson firmly believed it was more than just a political game for Time Warner, especially since the future was digital and that would eventually have an impact on every aspect of the company. In a March 1994 document entitled “Proposal for a Time Inc. Electronic Network and World Wide Web Site,” Isaacson wrote, “In targeting an audience, we will follow Russell Long’s advice about shooting a duck: Aim ahead of the duck. We would aim for a mass market audience of people who have not been early adapters to the online world: Ordinary folks rather than 17-year-old get-a-life geeks who want to download software.” Case and AOL had already started to do this, though AOL’s own efforts were just getting traction.

  Isaacson also listed the goals for the service, which, in true Time Warner blue-blood fashion, had been code-named Calliope after the muse of epic poetry. But the service’s aims were more pedestrian than its code name: To provide “online access to the content of Time Inc.’s publications and databanks, to new products and services based on Time Inc.’s titles and journalism, and to relevant material licensed or acquired by Time Inc.”; “a place to communicate, interact and form ‘virtual communities’ ”; “an environment for interactive advertising, shopping and transactional services”; “an easy way for average consumers to get onto the Internet”; “a front-end for cable systems that want to sell to computer users a high-bandwidth link to online networks, the Internet, shopping venues, email and other electronic services.”

  Because Time Warner had acquired a number of cable systems (a strategy that later became a key part of the eventual AOL Time Warner merger), cable was an important element of the first plans for Calliope. These plans included regional high-speed versions of Calliope for cable systems, which would link to things like school lunch menus. It was all part of a stated aim to eventually put dial-up online companies such as AOL out of business, and replace them with supercharged cable connections instead. While AOL struggled with phone costs and getting modems out to the masses at the time, Time Warner was hoping that it already had the right lines in place—cable lines, that is—that jacked more directly into the consumer.

  “In the next few years, high-speed Internet connection via cable may become commercially available,” noted one internal memo from the summer of 1994. “It will transform the online experience and could make dial-up services such as CompuServe and AOL, which pretend to be content services but are mainly connectivity services, vulnerable.” It was, in fact, the right idea, although way too early both technologically and creatively.

  But with such lofty goals, the new service would need a suitably fancy name. One internal memo listed about a dozen suggestions, including Cavalcade, Gateway, Avatar, Arena, Tempo, Jamboree, The Time Machine, Orion, Tidings, and the unfortunate Twin: The Time Warner Information Network.

  The eventual winner was Pathfinder, which was, as Isaacson wrote on the opening screen of Pathfinder on its debut day, “a tribute to a great character trapped in a dreadful novel: Natty Bumppo, the uncorrupted natural man who follows the wilderness westward in the James Fenimore Cooper novel that threatened to turn us off to reading when we were in high school. As he meanders his way through Cooper’s works, he picks up a bunch of other names, but most of us agreed that Pathfinder was a better name for an Internet service than Leatherstocking or Deerslayer.”

  In the same note to users, Isaacson linked the service to Time Inc.’s history. “When Henry Luce and Britton Hadden founded our company 72 years ago,” he wrote, “they spoke about how the glut of information in our daily lives created the need for a guide to what was important and interesting. We like to think that if they were alive today, among the things they would do is build a website.”

  With that perceived historical blessing and overly classy pedigree, Pathfinder was launched in October of 1994. Levin presented the service at an annual meeting in Manhattan, intending to show it off by instantly bringing up online photos of the World Series. Worried the technology might fail, the team had devised a plan: As Levin got into this part of the presentation, Isaacson sat poised nearby, a pen in his hand. If it seemed the photos w
eren’t going to appear, he was to drop the pen as a signal, and Levin was to move on quickly in his talk.

  No pen was dropped. But, despite that small victory and despite all the planning, Pathfinder ended up quickly becoming little more than a sprawling, badly organized patchwork of thousands of Web pages. Though it resembled an explosion at a Time Warner magazine factory, the company nonetheless dubbed it “The World’s Best Web Site.”

  And supposedly, it would be a profitable one. In a series of memos, executives outlined a plan to make money from a number of different revenue streams. These included “licensing fees paid by cable operators for the opening screens, software and package of basic services; selling advertising and transaction services that are featured on the initial screens; and creating a broad market for its own premium Time Inc. service, which will have a competitive advantage over existing services in a high-bandwidth environment.”

  In fact, the team was so certain that Pathfinder would make lots of money that it noted in another memo in December of 1994, “It is pointless to fight over how to divvy up the proceeds before we’ve finished robbing the stagecoach.”

  One stagecoach the team planned to rob was AOL, through the licensing of its powerful content brands. In fact, Time Warner had already signed a couple of deals with AOL in the spring of 1994, about a half-year before Pathfinder and FSN were launched.

  Isaacson and his team had briefly considered pushing Levin to buy AOL, but those efforts were never serious. Instead, Time Warner opted for a deal. In what was a typical transaction at the time, AOL paid an annual fee of several hundred thousand dollars in exchange for being allowed to offer Time magazine exclusively to its customers. The payment formula would shift, as AOL grew stronger, because content providers would eventually pay AOL rather than the other way around to reach its growing subscriber base. But these first Time Warner deals were vital to AOL in its early days, lending the fledgling service the legitimacy of Time Warner. And Time Warner, much to its delight, got cash.

  AOL was only one of dozens of Internet companies looking to make deals—either for content or investments—with the mighty Time Warner. Like tadpoles zipping around in search of a sustaining bit of algae, fledgling companies with quirky names like Netscape and Yahoo kept swimming up, offering percentages of their businesses in a variety of deals. But Time Warner turned down most of them, deciding it was not in the venture business. It was early in the game, executives believed, and no one knew whether any of these companies would last until the next year. In any case, the mighty Time Warner believed it could develop a major Internet business on its own.

  Levin was thrilled with Pathfinder and showed it off at every opportunity, especially to important visitors he could lure to the new media room at Time Warner headquarters. He’d push buttons and display instant Web pages to the inevitable oohs and ahhs of visitors. “I really thought we were on our way,” he would later recall about that time.

  But even though Time Warner shied away from deeper involvement with AOL, Yahoo, or Netscape, the company would soon leap headlong into a merger with another, more volatile partner. And this one would have a major role in the eventual marriage of AOL and Time Warner a few years down the road.

  Jerry and Ted’s Not So Excellent Adventure

  “I am being clitorized by Time Warner,” boomed Ted Turner in front of dozens of journalists at Washington’s National Press Club in September of 1994. Robert E. “Ted” Turner III was perhaps the only major American executive who could utter such a bizarre and desperately offensive statement without anyone really being surprised.

  It was typical Turner, I would learn—the ranting of the company’s resident “madman.” His outbursts—by turns amusing, embarrassing, and sometimes horrifying—were often greeted with eyes rolling and sighs by managers and fellow board members at the company. “That was Ted,” said more than one high-ranking Time Warner executive to me, in what appeared to be the generic explanation for Turner’s tantrum role at the company. His flashes of brilliance, most agreed, more than made up for the trouble, which often required someone dispatched from headquarters to calm him down, much as one would a small child.

  By that time, Turner was already a legend. His list of accomplishments was as eclectic as it was impressive: He’d won the America’s Cup sailing trophy in 1977, founded the Cable News Network (CNN) in 1980, and started the Goodwill Games in 1986. He’d even been named Time magazine’s Man of the Year for 1991. A person whose extremes of personality made him at once magnetic and repellent, he had a knack for business success that was matched only by his well-known appetite for the pleasures of female company.

  Born on November 19, 1938, in Cincinnati, Ohio, Turner grew up seeking (and rarely receiving) approval from his father, Ed Turner, who struggled with alcoholism and depression for much of his life. His father sent him to boarding school, where Ted worked harder at pulling successful pranks than at making good grades, eventually developing into a cocksure young man. But when he was a teenager, his younger sister, Mary Jane, suffered an agonizing death from a form of lupus—an event that seems to have pierced Turner to the core. As the New Yorker’s Ken Auletta wrote in a 2001 profile, “The experience transformed Turner. ‘I decided I wanted to become a success,’ he says.”

  Yet Turner’s ambition wouldn’t become apparent just yet. After being expelled from Brown University in his junior year (for a host of infractions, including having women in his dorm room), Turner began working for his father’s billboard company, Turner Advertising. He married his girlfriend, Julia Nye, began sailing in earnest, and seemed to have his life on a fairly typical upper-middle-class track. But on March 5, 1963, when he was just 24, that all changed abruptly. On that day, his father shot himself to death at home with a handgun.

  It’s impossible to fully gauge the emotional effect of a parent’s suicide on the child who is left behind. This is especially true when the relationship was as volatile and complex as that between Ted Turner and his father. But what is certain is that, following his father’s death, Turner took over the family business, and with a combustible blend of skill, desire, and chutzpah, he turned it into a major media empire.

  In the late 1960s and early 1970s, Turner began acquiring radio and television stations, soon venturing into the new phenomenon of cable TV. His programming tastes were part practical (whatever he could get for cheap) and part personal whim (mostly sports and movies). In 1976, he bought the Atlanta Braves baseball team, turning them into “America’s team” by broadcasting their games over his WTCG channel nationwide, a step that was both controversial and bold. By 1980, Turner was already a notable personality in the American business and sports landscape. But that year, he went a step further, making the move that would ensure his place in history. He launched CNN.

  The first 24-hour news station, CNN was Turner’s most passionate gamble. He believed, of course, that the station would eventually make money, but more than that, he believed it could change the world. Over and over, people who have worked closely with Turner have testified to his desire to truly make a difference. And while it’s true that Turner exhibited all the hubris and love of success one would expect from a prosperous entrepreneur, he was arguably the most idealistic soul in the pantheon of major American executives.

  He was also one of the most bedeviled. Even as he burned up the yacht-racing circuit and expanded his business domain, Turner often startled friends and associates alike with his widely reported erratic behavior. According to Porter Bibb’s 1993 biography of Turner, It Ain’t As Easy As It Looks, it was not unusual for Turner to suddenly strip naked, tell baldly racist jokes, or spew egregious insults at colleagues, his wife, or his children. The patina of success surrounding Ted Turner was always dimmed by a sense of gloom that hovered just below the surface.

  Turner suffered from violent and unpredictable mood changes, and he often talked about suicide. He even, according to Bibb, kept in his desk drawer the loaded pistol his father had used to kill hims
elf. Then, in 1985, a doctor at last gave a name to his demons: Turner was diagnosed as suffering from bipolar illness, or manic depression. Characterized by wild emotional swings, bipolar disease can often be successfully treated with lithium. Turner began taking the drug, and soon his peaks and valleys began to smooth out.

  They would smooth out even further when Turner began dating actress Jane Fonda in 1989. The two began seeing each other following Turner’s divorce from his second wife, Jane Smith. It seemed almost impossible that two such enormous personalities could be in the same room together, much less in a relationship. But Fonda, who’d gained fame as an actress, antiwar demonstrator, and workout guru, seemed to have completely captivated the restless Turner. The couple married at Turner’s sprawling Florida estate in December of 1991.

  Turner now seemed to have it all. He was rich, handsome, and physically fit. He was married to a beautiful, famous actress, and the sheer star power of their union turned heads in Hollywood as well as New York. But as always, he still wasn’t satisfied.

  Turner had long wanted to own one of the “big three” television networks—and, in fact, had tried unsuccessfully in the 1980s to purchase CBS. Then, he’d been outmaneuvered by the network itself, which reportedly didn’t want to be owned by the maverick newsman from the South. Despite the success of CNN—which had become a respected news organization, after initially being derided as the “Chicken Noodle Network”—Turner was a loose cannon and was not welcome in the staid world of network news. In the 1990s, when he shifted his attention to buying NBC, he was thwarted by an enemy on his own board. It was an enemy he’d come to despise even more in a few years’ time: Jerry Levin.

  Levin had the upper hand, because Turner had sold off sizable stakes in TBS in the previous few years in order to pay down crushing debt and raise cash for his often-precarious empire. After the sales, one group of cable companies run by cable mogul John Malone owned 21 percent of TBS, and Levin’s Time Warner held 19 percent. That gave Time Warner a board seat and a strong influence on Turner’s fate.