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A Scapegoat Named Steve Case


The resignation of Stephen M. Case as chairman of AOL Time Warner Inc. is triggering a nasty debate over whether he was a visionary who saw the Internet future or a sharpie who traded overvalued AOL wampum for Time Warner's real assets. Actually, he's both. Case was a Net pioneer who made it possible for millions of Americans to gain access to a new technology for $20 a month. That he persuaded gullible folks at Time Warner to accept AOL's dreamy stock valuation in 2000 and part with their magazine, movie, and cable assets cheaply, makes him a smart businessman, not a villain.

Case earned his place in history by understanding early on that the promise of the Internet was not in the new technology per se but in making it accessible to consumers. He also popularized some of the Net's most used features--e-mail, instant messaging, and parental control.

But times change. AOL's merger with Time Warner was, in retrospect, unreal. Distributing entertainment and news over many digital platforms--computers, cell phones, and handhelds--was Case's grand vision. Way too grand, it turned out. His hubris extended to the merger itself. The two corporations had vastly different cultures and didn't mesh. Case's band of we-are-the-future managers infuriated the old hands at Time Warner. And for that, Case shares the blame for troubles at the merged company. He bought Time Warner with such inflated Internet currency that once the bubble burst, all of AOL Time Warner went down with it. Shareholders can also thank Gerald V. Levin and other Time Warner executives who drank the Internet Kool-Aid without understanding the technology or the business. Ditto the Time Warner board.

One school of thought argues that AOL is simply a wasting asset with no future. Broadband gives consumers wide and easy access to the Net without AOL, which has lagged in switching its customers from dial-up to cable and DSL. Moreover, AOL has fallen behind rivals such as MSN and Yahoo! in e-mail, instant messaging, and other services. One wonders if Case's frequent absence from the company during many of the early months of the merger to spend time with his dying brother played any role in all this. We'll never know.

We do know that the current strategy for resurrecting AOL isn't working. CEO Richard Parsons is trying to apply a content model based on HBO, but so far there's no Internet equivalent of The Sopranos in sight. And even if one were at hand, consumers are notorious for loving the Net but hating to pay much for stuff on it. Witness the piracy of music and movies.

The best chance for AOL is probably divorce from Time Warner. If AOL were once again free, it could aggressively move to broadband, an absolute first step in survival. It could cut deals with cable and phone companies to package AOL service with their Net access. Time Warner was not willing to sacrifice its own Road Runner high-speed cable access for AOL Broadband. Then AOL must take back its original mantle of being family-centered and improve its parental control and antispam features. AOL also needs new and improved services, such as music subscription, mortgage lending, and games. Changing its pricing would help, too. It should lower its bring-your-own broadband access rates to match MSN. And it can revive advertising by offering better classifieds and paid placement when people search for information on AOL.

One more thing an independent AOL should take back--Steve Case. He deserves a second chance to redeem his dream and his reputation.


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