Why did the AOL-Time Warner merger fail?

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In 2001, the AOL-Time Warner merger--then the largest-ever media company merger--was hailed as a triumph. But the agreement quickly took a turn for the worse. The merger resulted in lost revenue for both companies, and the companies split in 2009.

Origins

In 2000, Time Warner Inc., the largest media conglomerate in the world at the time, decided to acquire AOL, the largest Internet service provider at the time, for $100 billion. According to CNNMoney.com, it was seen as a "visionary attempt to meld old media with new media." The deal was made official in January 2001.

Downturn

Following the deal, both companies struggled. AOL lost dial-up subscribers, and though it attempted to focus on Internet advertising, the company subsequently lost much of its revenue. Time Warner's stock dropped nearly 80 percent in the eight years following the merger, according to CNNMoney.com.

Split

In May 2009, Time Warner announced that it would split from the AOL division of the company. The split went into effect at the end of 2009.

AOL Aftermath

AOL continued its struggle to reestablish itself in the media business. It put effort into developing the websites it owns, like Mapquest.

Time Warner Aftermath

Time Warner became a more efficient organization without the AOL division as a distraction, according to the Wall Street Journal. It also spun off its cable division, Time Warner Cable, in 2009.

Source:

CNNMoney.com

Wall Street Journal

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Why did the AOL-Time Warner merger fail?

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