Business Expansion

Q1. Please study the case about the “Time Warner Cable” and write an analytical and

evidence based paper of minimum five (5) pages, APA formatted encompass the followings:

● A summary history and analysis of Time Warner business expansion since 2000

● What have been the business markets for Time Warner?

● Who is the competition for Time Warner and what policies Time Warner have used to challenge

it?

● What are the significant regulatory areas that impact the operations and strategic decisions of

Time Warner?

● The technological change and challenges that Time Warner has been facing.

Q2. research six (6) peer-reviewed articles that can be used to answer your Q1 . Your discussion should summarize the articles in such a way that

it can justify any arguments you may present in your Q1 and should be different

from the abstract. In addition to your researched peer-reviewed article, you must include an

example of the article researched as it is applied by industry (company, business entity, and so

forth).

Please note: This article summary should not be the only article researched for your Q1

. You may (and should) have several other articles researched to fully answer your

Q1. The concept of this DQ is to allow to be proactive in the research

necessary to complete this assignment. You may use your article summary, partially or in its

entirety in your Q1.

Important: Please ensure that your reference for the article is in correct APA format, as your

reference in your discussion post. Depending on which electronic database you use, you

should see a “Cite” selection for your article. In addition, there should be a variety of articles

summarized and as such, students should have different articles summarized. Your summary

MUST include ALL of the following in your DQ post (include every item in the bullet list below,

or you will not receive full credit):

Do these in order:

● In correct APA format, write the Reference of the article.

● Clearly state what the article is about and its purpose.

● Describe how you will use it in your upcoming assignment.

● Repeat for a total of six (6) peer-reviewed sources.

 

 

Case Study:

In January 2003, AOL Time Warner, Inc., announced that it would be posting a loss of $98.7 billion
for the year ended December 31, 2002, the largest corporate loss in U.S. history. While company executives described the loss as a result of accounting changes rather than problems with ongoing operations, the media conglomerate clearly faced significant challenges. The stock price closed the month of January at $11.66, down from $71 in January 2000, when it announced its merger with America Online (AOL).
The gravity of the events of the past few years hit TJ like a hammer. TJ was coming down from the high she felt when the CEO called last week to promote her to a new position within Time Warner—effective today, September 1, 2004. TJ set aside her morning coffee and The Wall Street Journal to review the company’s operations before replying to the first memo in her inbox.

BACKGROUND
Time Warner, Inc., was formed in 1990 by the merger of magazine publisher Time,
Inc. and Warner Communications, primarily a producer of film and television programming. To reduce debt, Time Warner sold 25 percent of Time Warner Entertainment (which included HBO, Warner Bros., and part of Time Warner Cable) to
Media One Group. In 1996, Time Warner acquired Turner Broadcasting Systems,
expanding its cable programming networks significantly. By the end of 1999, Time
Warner had revenues in excess of $27 billion and net income of almost $2 billion.
In January 2000, AOL and Time Warner announced their intent to merge, and
the merger was completed a year later. The merger was the largest in U.S. corporate
history, with AOL’s preannouncement value at $163 billion, and Time Warner’s
preannouncement value of $100 billion. However, by the time the merger was completed, the value of the combined firm had dropped to $165 billion. Both companies
hoped that the combination of Time Warner’s content and AOL’s Internet base
would provide increased opportunities for the merged company to grow. Many
ideas were presented to show how AOL and Time Warner would be able to combine
their Internet and media operations to enhance the value of the combined entity.
By 2003, AOL Time Warner had achieved few successes in merging the products.
Cooperation between the AOL and Time Warner divisions was nonexistent, and advertising deals were lost due to internal conflicts. The decline in the value of technology
stocks and a sluggish economy forced AOL Time Warner to take a $98.7 billion loss in
2002, primarily due to the write-down of the value of AOL. Gerald Levin, the chairman
and CEO of Time Warner prior to the merger, stepped down as the CEO of AOL Time
Warner in 2002. Steve Case, former chairman and CEO of AOL, resigned as chairman
of AOL Time Warner in early 2003. Richard Parsons was promoted from COO of the
Time Warner side to the position of CEO of the firm. Parsons, who was also appointed
chairman of the board when Case resigned, promoted several senior Time Warner executives and accepted the resignations of some of the top AOL management.
Several commentators and numerous Time Warner investors considered the
AOL merger a mistake, some even calling it the “worst deal in history.” Many
believed that AOL misled Time Warner prior to the merger about the outlook in
online advertising and overstated its revenues. In 2003, the Securities and Exchange
Commission announced an investigation into allegations that AOL used aggressive
and illegal methods for recognizing revenue leading up to the merger. By early
2003, the prospect of splitting AOL and Time Warner and undoing the largest
merger in U.S. history was a real possibility.
However, Parsons declined to shed AOL and instead focused on reducing the
company’s debt and integrating the businesses. The company announced agreements to sell its music recording and publishing operations, Warner Music Group,
for $2.6 billion and its CD and DVD manufacturing and distribution business,
Warner Manufacturing, for $1.05 billion. It also reached agreements to sell Time
Life operations, a direct-marketing business with 2003 net operating losses of $82
million, and its Turner winter sports teams (the NHL’s Atlanta Thrashers and NBA’s
Atlanta Hawks), which posted operating losses of $37 million. In September 2003,
the company dropped AOL from its corporate name and resumed operations as
Time Warner, Inc.
While 2003 saw improvement in operations and a return to profitability (see
Exhibits 1a and 1b in the Appendix), Time Warner executives still face numerous
challenges in managing the largest media company in the world. America Online is
facing declining revenues, Time Warner Cable is seeing saturated markets and
increased competition, and the publishing industry is soft due to low advertising levels.
Success in its filmed entertainment and cable programming networks has provided
the only encouragement.

OVERVIEW OF THE INDUSTRY AND TIME WARNER’S OPERATIONS
Subsequent to the AOL merger, Time Warner, Inc., is the largest media company in
the world, with revenues in excess of $38 billion. However, Disney, Viacom, News
Corp., and Sony are all huge media competitors, with various assets in the television, publishing, music, Internet, and film markets. (See Exhibit 2 for an overview
of selected competitors in the media industry.) In 2004, General Electric agreed to
merge its NBC property with Universal, owned by French firm Vivendi, to create
NBC Universal. The new entity is 80 percent owned by GE and 20 percent owned
by Vivendi. Currently there is speculation that Sony is attempting to acquire MGM.
Media consolidation is expected to continue due to recent revisions of media ownership restrictions by the Federal Communications Commission (FCC). In 2003, the
FCC relaxed several regulations that restricted the number of media outlets a company
could own in any local market and increased the national audience that any one company can reach. Media ownership regulations are designed to prevent any one company from controlling too much of the media; they represent an effort to ensure some
level of diversity in the media. Proponents of the stricter media regulations fear that
increased concentration will lead to greater homogeneity in media content and will be
a disservice to consumers. Those favoring relaxing the guidelines argue that the fast
pace of technological change makes it impossible for any company to control the flow
of information to consumers. The status of regulatory changes is still uncertain, as
Congress is considering legislation that would affect ownership rules.
Time Warner, Inc., operations include five principle business areas: AOL, filmed
entertainment, publishing, programming networks, and cable systems. Figure 15–1
provides a snapshot of how these business areas contributed to Time Warner, Inc.’s
2003 net income and sales.