Calling Time Warner a media giant is an understatement along the lines of pointing out that Shaquille O’Neal is a large man. Time Warner is the biggest media firm the world has ever known, and much like the afore mentioned NBA superstar, is growing larger everyday.
Naturally, Time Warner has not always been a massive media conglomerate. The company traces its roots back to the early twentieth century. It was then that two media companies were just beginning to take form. Time Inc. began in 1923 with the launch of Time magazine by Henry Robinson Luce (1898-1967) and Briton Hadden (1898-1929) (ketupa.net). Time was originally made to be a reading conglomeration much in the style of Reader’s Digest. The magazine was a hit. At the end of the year, circulation reached more than 30,000 readers. By the end of the decade, that number had reached 250,000(ketupa.net). Luce took sole control of the company in 1929 after Hadden’s death and slowly began to expand his magazine business into other interests with Fortune(1930), Life(1936), and Sports Illustrated(1954) (ketupa.net).
The Warner Brothers Studio was founded in 1923 as well. Harry, Albert, Sam, and Jack Warner established the studio with a desire of securing content for cinemas and film exchanges controlled by the brothers and their associates (ketupa.net). The company slowly grew quickly and was the pioneer for many new advances in the film industry such as talking pictures, animation and color newsreels. Throughout the decades, Warner expanded its enterprise to include music and print. Jack Warner sold the last of his brothers’ stake in Warner to Seven Arts Productions in 1967, but the company continued to expand into music and the burgeoning computer industry (ketupa.net). In 1990, Warner Communications merged with Time Inc. to form Time Warner.
On January 10, 2000, Time Warner merged with America Online, creating the largest company merger in history, thus cementing AOL-Time Warner as the largest media conglomerate in the world (Bagdikian). At the time, Time Warner was worth $163 billion while AOL was worth a similarly impressive $120 billion (Bagdikian). Since then, declining subscriptions (and thus, revenue) to AOL forced AOL-Time Warner to drop the Internet subscriber from its name.
Time Warner has become the mold for which all other media firms hope to aspire. In 2004, the company produced revenues of $42.089 billion, a 6% increase over 2003 earnings (Gohring). It has an extremely rich diversification of assets that include publishing, film studios, Internet holdings, cable services, and television networks.
Although Time Warner’s roots date back to the magazine industry, publishing is probably the smallest revenue producer of all its media divisions. In 2004, Time Warner’s publishing sector produced only 13% of the company’s total profit (timewarner.com). That does not mean that Time Warner is not a major player in the magazine industry. On the contrary, Time Warner has an extensive collection of many different magazines that cover a vast array of public interests ranging from the outdoors (Field & Stream, Outdoor Life) to popular sports (Transworld Snowboarding, Skiing Magazine, Yachting) (cjr.org). During the 2004 fiscal year, Time Warner’s magazine division produced $5.565 billion (timewarner.com). The publishing division of Time Warner is a small revenue producer because of the nature of the industry. Magazines are niche businesses that focus on small, specific audiences. Thus, Time Warner may not make a lot of money (relatively) off of its publishing ventures, but it owns upwards of 100 different magazines.
On the opposite end of the revenue spectrum are Time Warner’s filmed entertainment businesses. Warner Bros. and New Line Cinema are the major producers responsible for $11.853 billion that Time Warner earned from its film ventures in 2004 (roughly 26% of the company’s revenue) (timewarner.com). In addition to major motion pictures, Time Warner’s film studios are also responsible for more current productions on the air than any other studio (timewarner.com). However, much of the revenue that Time Warner takes in from its film studio comes from the production and sale of DVDs. Many movies often make much more money from DVD sales than from theatrical ticket sales. This is because when a movie is released, film studios must go through a middleman, a theater. When a movie is released on DVD, media conglomerates like Time Warner are in direct control of the production and distribution of the content. Furthermore, the popularity of present and past television shows released to DVD has provided a new source of income that was not there five years ago.
America Online and the Internet represent the newest frontier of Time Warner’s revenue producers in the media world. When Time Warner merged with AOL, it acquired nearly 20 million U.S. Internet subscribers, each paying a monthly fee of between $14.95 and $44.95 (Perez). Including Europe, that number jumps to 28.5 million (Gohring). That accounts for nearly 21% of company revenue, or $8.692 billion. However, AOL has been on a steady decline since the 2000 merger (Perez). With the rising availability of DSL and Cable Internet services that can provide content at 100 times the speed of dial-up Internet, customers have been leaving AOL in droves. In 2005, AOL lost nearly 3 million subscribers worldwide, a decrease of 4% (Gohring). AOL is attempting to recoup losses in several different ways. In addition to raising the cost of dial-up access, AOL has now begun to provide broadband Internet access (Perez). AOL has also sought ways to acquire subscription fees from customers who frequent AOL’s popular Internet resources like Mapquest, Moviefone, or Instant messenger (timewarner.com).
Time Warner’s cable subsidiaries also represent a major source of revenue. In 2005, Time Warner Cable Inc. sold cable packages to nearly 11 million people. Cable revenue for the year increased 12% to $9.5 billion (Gohring). Base customer growth has begun to stagnate due to industry competition from satellite providers and other companies, but Time Warner seeks to increase profits through other measures. The company has begun to offer Digital Phone service to its customers: packaging video, high-speed data, and voice services in one bundle. Although initial losses were seen due to the installation of the product (nearly, $45 million), Time Warner expects a jump in revenue in the near future (timewarner.com).
Lastly, Time Warner’s television networks accounted for $9.6 billion, an increase of 6% (Gohring). Time Warner has successfully produced and sold content through a number of cable networks including TNT, TBS, Cartoon Network, CNN and many others. In addition, the company has been able to package new television series’ with movies from its film studios to be sold at a subscription fees on its various HBO networks (Albarran).
Covering all its media diversification, Time Warner holds over $123 billion worth of assets, with its stockholders equity at nearly $61 billion (money.cnn.com). Although the company has fallen off a bit since its acquisition of AOL six years ago, it still remains one of the largest companies of the world, ranking 32nd of Fortune 500 companies (money.cnn.com). Net worth of Time Warner has dropped some since then: it is currently valued at $78 million (Litterick).
Perhaps in response to recent business deals, Time Warner finds itself with a new Chairman and CEO since the big AOL merger: Richard Parsons. Parsons has been with the company since 1991 as member of the board (forbes.com). In 1995 he was promoted to serve as president of the company (forbes.com). Parsons has a background rich in government, law, and banking. He began his career as an assistant to New York Governor Nelson Rockefeller in 1971 and followed him to the White House when Rockefeller became Vice President under Gerald Ford (money.cnn.com). Afterwards, Parsons became a managing partner in the law firm Patterson, Belknapp, Webb, & Tyler and helped Dime Bancorp through the savings and loan crisis (money.cnn.com). In addition to his work with Time Warner, Parsons sits on the boards of several companies, consults for a nonprofit organization for African American senior executives, and chairs the Upper Manhattan Empowerment Zone Development Corp.; a company set up to spur business and job creation in Harlem (forbes.com).
Parsons heads up a company that is responsible for 84,900 jobs worldwide, a number that has grown over 6% in the past year (hoovers.com). Part of being such a large media driven company means that Time Warner must deal with many different labor unions, not all of which are on friendly terms with the company. The largest of these is probably the Screen Actors Guild (SAG), a union that is responsible for representing over 120,000 workers acting in film, television, industrials, commercials, and music videos (sag.org). SAG was established in 1933, and has branched out to over 20 outlets throughout the U.S. (timewarner.com). SAG currently is on friendly terms with Time Warner, supplying much of its labor force for its film division. Time Warner even airs the SAG awards each year over its TNT and TBS cable networks.
Yet for every good relationship with a workers union, Time Warner seems to have soured with several other guilds. Recently, Time Warner has received criticism for the way it treats writers and artists the company hires. The company has been demanding that freelance workers sign contracts that in addition to the work they sell to Time Warner must also turn over any other work they produce while still only being paid as a freelancer (nwu.org). In affect, this allows Time Warner to turn freelancers into a cheap labor pool, imposing the same contract conditions as staff writers on freelancers but for far less pay and without health insurance, job security, paid vacations, or pensions (nwu.org). Naturally, this has created uproar not only within the National Writers Union, but also with many other guilds including the Graphic Artists Guild, the Authors Guild, Editorial Photographers, the American Society of Media Photographers, and the American Society of Journalists and Authors (nwu.org).
Despite recent shortcomings, Time Warner remains the largest media conglomerate in the world today. It is a premier example of media consolidation that has been a mold for American capitalism for nearly a century: one that encompasses full vertical integration of media. Time Warner produces successful movies and television shows. It then shows its content on a myriad of cable networks that it owns ranging from news (CNN), to movies (TNT, TBS), to pay-per-view (HBO). If that was not enough, Time Warner also provides the way through which we see this content, as it is one of the largest cable providers in America. Furthermore, the company gives the public a mode through which to read and research such products and much more through its Internet and publishing empires. Overall, no matter what your views on Time Warner or its practices, it is at least an interesting case study; one that can provide an immense depth of information about our corporate world.
Albarran, Alan B. Media Economics: Second Edition. Iowa State Press. Blackwell Publishing. 2002.
Bagdikian, Ben H. The New Media Monopoly. Boston: Beacon Press. 2004
CNNMoney Online. 26 Feb. 2006. “Parsons: the man”. 5 Dec. 2001. http://money.cnn.com/2001/12/05/ceos/parsons_profile/
Columbia Journalism Review. 19 Feb. 2006. “Who Owns What: Time Warner”. 11 Aug. 2004. http://www.cjr.org/resources/index.php?c=timewarner
Davis, Susan E. National Writers Union Online. 19 Feb. 2006. “Time Warner Action Report”. 4 Feb. 2004. http://www.nwu.org/activism/TimeWarnerReport_020404.htm
Forbes Online. 27 Feb. 2006. “Richard Parsons Profile”. 2006. http://people.forbes.com/profile/richard-d-parsons/19731
Gohring, Nancy. InfoWorld Online. 17 Feb. 2006. “Time Warner grows revenue but loses AOL subscribers”. 1 Feb. 2006. http://www.infoworld.com/d/developer-world/time-warner-grows-revenue-loses-aol-subscribers-482
Hoovers Online. 21 Feb. 2006. “Time Warner Inc. Overview”. 2006. http://www.hoovers.com/company/Time_Warner_Inc/rfthrxi-1.html
Ketupa.net. 21 Feb. 2006. “Time Warner media profile”. Oct. 2005. http://ketupa.net/time.htm
Perez, Juan Carlos. InfoWorld Online. 25 Feb. 2006. “AOL nudges U.S. dial-up subscribers toward broadband”. 22 Feb. 2006. http://www.infoworld.com/t/platforms/aol-nudges-us-dial-subscribers-toward-broadband-862
Screen Actors Guild Online. 26 Feb. 2006. “SAG Homepage”. 2006. http://www.sag.org/
Time Warner Online. 16 Feb. 2006. “Time Warner Home Page”. 2006. http://www.timewarner.com/corp/