July 18, 2002 1:40 PM PDT

Pittman to leave AOL Time Warner

AOL Time Warner's embattled chief operating officer, Robert Pittman, will relinquish his role as the media behemoth's No. 2 executive and leave the company, the media giant announced Thursday.

Pittman, who also serves as the interim chief executive of the company's America Online unit, could remain at the online division until a permanent CEO is found. But the timetable for Pittman's departure will be based on his own decision. AOL Time Warner last week confirmed that it hired executive search firm Spencer Stuart to head AOL's CEO search.

"I've decided that after a new CEO is in place at AOL, I won't return to AOL Time Warner as chief operating officer," Pittman said in a statement. "Having worked so hard to build the AOL service and brand, and after then going through the merger and the last 18 months, it's time to take a break. I'm proud of what we built at AOL and believe that it has a great future."

Aside from Pittman's resignation, two well-regarded division heads in AOL Time Warner will split oversight of the company's divisions. Jeffrey Bewkes, the CEO of Home Box Office, and Don Logan, the CEO of Time, will oversee AOL Time Warner's entertainment and media properties, respectively.

As AOL Time Warner's new chairman of its media and communications group, Logan will oversee America Online, Time, Time Warner Cable, the AOL Time Warner Book Group and the Interactive Video unit. Bewkes, now the chairman of the entertainment and networks group, will be in charge of HBO, New Line Cinema, The WB, Turner Networks, Warner Bros. and Warner Music. Both Logan and Bewkes will report to AOL Time Warner CEO Richard Parsons.

In their place, Ann Moore, formerly the executive vice president of Time, will become the magazine division's CEO. Moore formerly headed business operations for popular titles such as Time, People, In Style and Teen People, to name a few.

Chris Albrecht, formerly the president of HBO Original Programming, will take over for Bewkes.

The changes were little surprise, as the balance of power in AOL Time Warner continues to shift into the hands of the media old guard. Since AOL and Time Warner merged in 2001, the combined company has been a disaster, marked by missed revenue expectations that led to the ouster of CEO Gerald Levin, Chief Financial Officer Michael Kelly, and now the departure of Pittman.

Current CEO Richard Parsons and Chairman Steve Case remain the only members of the core executive team that was conceived during the merger.

At AOL, Pittman was viewed by employees and Wall Street as an operational star with a no-nonsense, hard-driving, bottom-line attitude. At one time, he had been considered the heir apparent to Levin's position.

However, Pittman adhered to his belief that AOL Time Warner would meet its aggressive growth targets as the advertising recession of 2001 heightened. In September 2001, AOL Time Warner conceded that it would not meet its financial expectations, and then in January the company admitted that the AOL division would suffer greatly from the advertising downturn.

Justifiably or not, Pittman became the source of ire among many of the company's old media division heads. As AOL's financial state continued to worsen, dragging AOL Time Warner stock down to the teens, more heads began to roll. In April, Barry Schuler, CEO of AOL, stepped down and Pittman was airlifted in to turn around the troubled division.

The ups and downs of Bob Pittman
For AOL, Pittman was the right man for the time. Known for his savvy marketing and company-building skills, AOL's then-CEO Case lured Pittman from real estate giant Century 21 in 1996 to turn the struggling online service into a solid business. On the day he joined, AOL introduced flat-rate pricing for its Internet access, a move that prompted bandwidth hogs to clog the company's network. Casual users were locked out of the service, causing some to sue AOL.

Still, Pittman transformed AOL into a real media company that could rest on the two enormous revenue pillars of subscriptions and advertising revenue. He stewarded the company though the boom years, reaping rewards from dot-com start-ups flush with cash, and infused a militantly bottom line-focused attitude among his lieutenants.

"Bob is very formal," said one former AOL executive who had exposure to Pittman. "Like if you don't make your numbers, you're gone."

Pittman combined these factors with his unabashed marketing-at-all-costs attitude to transform AOL from a laughing stock into an Internet empire. He boiled down AOL, criticized for its bad customer service and its busy signals, into something many Internet early adopters were unprepared to accept--the basic principle that consumer businesses will succeed with strong brands.

"I'll only take jobs where the brand is already built and there's plenty of room for growth ahead," Pittman said in an interview with CNET News.com in April 1997. "I went through building brands with MTV and Nickelodeon...I swore to God I'd never build another brand as long as I live. It's the most miserable, time-consuming, awful, nerve-wracking experience that you could possibly imagine because you never know until the end of the day whether you will succeed."

But his efforts to polish AOL's image as the Internet service that even grandma could understand helped AOL win over first-time Internet users. This ease of use also helped AOL outmaneuver the online efforts of many high-tech giants such as Microsoft and AT&T. To date, AOL remains the Internet leader with 34 million subscribers, leaps and bounds greater than Microsoft's 8 million.

But it was AOL's greatest hour that eventually would send Pittman to his grave at the company. AOL's merger with Time Warner, announced in January 2000, sent shock waves around the world. Pittman, expected to become Levin's successor, steadfastly adhered to the company's aggressive financial projections despite clear indications of an advertising downturn.

Pittman tried to unify AOL Time Warner's divisive culture into one that operates with the entire company's benefit in mind. But telling the world's largest magazine publisher to work with the nation's No. 2 cable company or with Warner Bros. became more practical on paper than in real life.

Adding fuel to the fire, AOL's financial woes made Pittman a convenient target for AOL Time Warner's stellar division heads.

In the same 1997 interview, Pittman portrayed himself as the journeyman executive with the Midas touch for turning around companies. Perhaps his assessment of his skills was prescient after all.

"What I don't enjoy doing, as you probably can tell from my career, is that once something really gets successful and we actually have real power, I don't want to be there anymore because I'm not interested in being powerful," Pittman said during the interview.

 

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