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Time Warner CEO points to overall 'malaise' in media sector
(Atlanta Journal-Constitution, The (KRT) Via Thomson Dialog NewsEdge) May 19--Dick Parsons could be forgiven if, by now, he'd simply turned into a grump.
The company he runs, Time Warner, has had a remarkably troubled run, from its famously flawed merger with AOL in 2001 to a stock price that has been stuck below $20 for four years. More recently, Time Warner has tangled with financier Carl Icahn, who wanted to bust the company into pieces and toss Parsons out.
But Parsons, Time Warner's CEO since 2002, has survived the onslaught. He fended off Icahn, in part by agreeing to boost Time Warner's stock buyback program from $12.5 billion to $20 billion. Parsons views many problems that afflict Time Warner as the product of a particularly challenging time in the media world, and he sees strength in important operations like the company's vast cable unit.
Today, Time Warner holds its annual meeting in Atlanta, home of the company's Turner Broadcasting System. Parsons, 58, spoke to The Atlanta Journal-Constitution about Time Warner, including Ted Turner's departure from the board of directors.
QUESTION: Time Warner's annual meeting could have been a real showdown if Carl Icahn had managed to get more support. Why didn't he?
ANSWER: Our shareholders... have been with the company a long time. They understand its strengths, they understand the industry... I'm not sure that Carl really did. While I would be wrong to say there isn't a lot of frustration, the whole media sector right now is in a little bit of a malaise. No one who really has been around this space for any period of time believed that Carl had any answers that were novel or likely to result in the stock moving up.
Q: For a while, Icahn was attacking the company, if not you, with great regularity. How did that affect your work?
A: It was beginning to take serious management time because it was a diversion. We didn't need that. And, secondly, this kind of daily pillorying in the press can affect your employees. Everybody sort of decides to abandon the field of play and become a spectator.
Q: Let's talk about different elements of your company. Start with Turner Broadcasting.
A: The Turner division has, since the time they became part of our company, always performed at the highest level and is continuing to do so. We couldn't be more pleased with how Phil Kent and how management down there is doing, particularly with TNT, TBS, CNN, Cartoon Network.
Q: CNN isn't the biggest Turner network, but it is the most prominent and perhaps the most challenged, in the ratings at least, thanks to Fox News. What are you happy about with CNN? What needs to be improved?
A: Its ratings are improving and, moreover, as I've always said to the guys at CNN, I'm more concerned with the quality of what we put on our air than necessarily running down the Fox ratings engine. CNN is not intended to be and shouldn't be talk radio on television. It's a news and journalistic enterprise.
Q: On the entertainment side, do you have a favorite show?
A: I thought 'Closer' [an original drama series on TNT] was pretty good. And then, of course, the NBA on TNT. I'm a big basketball fan.
Q: A least favorite?
A: I probably wouldn't tell you. No parent can ever say that any of their children are ugly.
Q: Turner Broadcasting has done some deals recently, with the sale of Turner South and the purchase of Liberty Media's share of Court TV. How will Turner grow in the future? Is it internal? Acquisitions?
A: [Adding Court TV] will result in very healthy growth for the overall Turner numbers. We will see a combination of both continued internal growth... plus some discreet acquisitions, as and when we find them.
Q: The Braves are in the process of being sold. What's the latest?
A: Those discussions haven't yet concluded, and it would be premature for me to say more.
Q: Time Warner hasn't been, in Atlanta, what you would consider a popular owner of the Braves, thanks to declining payroll numbers. What do you think about Time Warner's stewardship?
A: It's increasingly harder for global corporations to be sports team owners. The teams tend to be so far, in essence, down in the organization, they often don't get the attention they clearly deserve. One of the reasons that you've seen a lot of the other media conglomerates move out of sports ownership is just that reason, both from an attention-and-focus point of view, and from a point of view of how a company like Time Warner or Disney or News Corp. is valued. We're not valued on what is called... an asset valuation play. We're valued on growth and earnings, and a sports team, by definition in today's world, is really an asset play. Sports teams tend not to make a lot of money. In fact, most of them lose money, but the value of the underlying asset goes up over time. So there's a mismatch between how my shareholders look at Time Warner and an asset like the Braves.
Q: Your Time Warner Cable unit is one of the nation's biggest, and recently there have been some good numbers across the cable industry. Now the telephone companies are gunning for you. How can cable win?
A: That's been the question du jour for the last year or so. As a result, you're seeing cable valuations really reach kind of historic lows, in terms of the marketplace... What you're seeing right now is sort of a shifting in that sentiment. The cable platform is the only platform right now that can deliver a fully robust voice, video and data product -- the triple play. Now the phone companies are saying, well, we're gonna do this, we're gonna do that. But so far, it's mostly talk.
Q: AOL finds itself in transition, as subscriber revenues decline and ad revenues grow. What should AOL look like five years from now?
A: AOL historically has been almost exclusively dependent on subscriber revenues, and the ad revenue has been building, but slowly... You're going to see ad revenues, over time, become the fat kid in the boat, if you will. It seems pretty clear to us now that the ad-supported business model that for so many years undergirded the entire television business is going to be the primary model undergirding Internet businesses.
Q: Print publications seem to be more under assault than just about anything else in media. How is the performance of your magazines?
A: You have a bit of a dip in readership. Then the online advertising opportunities are draining away some of what would have otherwise been the growth in the print media advertising universe. So our magazines, like most magazines, are struggling with the tougher environment. What we're doing is we're rapidly trying to accelerate the transition of our brand strength into the online space... Like when the Sports Illustrated swimsuit issue came out, we had special online features that drew millions upon millions of unique visitors.
Q: Ted [Turner]'s retirement from the board is a landmark, certainly for us in Atlanta and probably for the media world in general. What are the top things Ted will be remembered for?
A: The thing in first, second and third place is CNN. I think that's the thing that even Ted himself relates to, in terms of his legacy... [But also] Ted really created the whole cable networks business and arguably the cable business as it exists today.
Q: What has your personal relationship with Ted been like? You once said he "imbued Time Warner with a bit of his earthy integrity."
A: Ted's a guy you can still do business on a handshake with. If he gives you his word, you're good to go... We've been anywhere from pals to friends. Certainly pals, and at this point in time, friends.
Q: Will Time Warner try to keep the Turner name on the stadium in Atlanta?
A: Probably premature for me to comment on that, because all of this will be discussed in connection to our efforts to sell the team.
Q: The big issue at Time Warner always comes back to the stock price, which hasn't budged much. What do you think it's going to take for Wall Street to believe in media companies again, and your company in particular?
A: I sometimes say investors can deal with good news or bad news, but they can't deal with uncertainty. And we've had clouds of uncertainty swirling around the media industry for the last several years, in terms of how will these so-called old media companies adjust to the onset of all this new technology and new competitors. The way you ultimately deal with all that uncertainty is you continue to perform... The Street is going to conclude that, you know what, maybe this will be like every other time when a new technology has appeared on the horizon. Ultimately, it becomes a servant of existing media and makes their business even more robust.
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