A dissenting view on AOL's ex-chairman: A reader responds to Andrew Leonard's "Steve Case: Brilliant Visionary or Fumbling Clod."

Published January 15, 2003 8:30PM (EST)

[Read the story.]

Wrong. Sorry, you're simply wrong.

Like most media types, you've been reporting from the standpoint of letting the executives, brokerages and other major stakeholders drive the story, and all interpretations of it.

You want a real analogy as a title to an article? Try the following ...

"Steve Case: Brilliant visionary, fumbling clod, or wildly successful modern-day Butch Cassidy?"

It's a lot closer.

Long before all of you in the media figured out the "new economy" was going down the proverbial toilet, most of us in the front lines were well aware of it. Admittedly, I had a special perspective. Before going into Net programming, I went to George Washington for a master's degree in international affairs, specializing in economics. But even so, most of my co-workers were aware of the joke (we worked for a major Web development shop). On the day of the merger between AOL and Time Warner, I couldn't stop laughing. Why? As I said, in real time (with the entire company as witnesses), Steve Case had just pulled off the biggest legal bank job in history. Butch Cassidy would have been impressed, as well as disgusted as to how he got shot for doing the same thing.

You see, Case didn't pull a bonehead play. Nor did he pull a visionary action. What he did was trade tons of funny money, in the form of AOL stock, for actual tangible assets. Think about it. The Net economy was going down. Case ran a company whose highflying stock was based on the bubble. His company had serious problems.

1) No broadband strategy. The only way a monolith like AOL could get one was via congressional action to change ownership rules. This would remain true, merger or not.

2) A joke of a brand identity. AOL is viewed as Internet training wheels. Sign up your noncomputer-skilled family, and then switch them once they get used to being online. AOL had huge customer turnover.

3) They were paying big money for their new customers. Wow, they have a lot of people, don't they? Now look at the latest Best Buy circular, where you get $400 to $600 off a purchase for signing up for 3 years. Gee, it's not hard to get new customers when you give a two-thirds discount for each one.

4) Even so, there are only so many total "newbies" to rope in. And they are a finite resource.

4) Add 2, 3 and 4 together to see the major Achilles' heel here. Pay for your new customers, who leave when the contract is up. Eventually, you have to run out of new users to buy.

This isn't rocket science. Anyone could figure it out.

Yet Case brilliantly took this sorry mess, and seeing the disaster approaching, traded useless (but trendy) AOL stock for minor things like Time Magazine, CNN, Warner Brothers, etc ... and managed to be the "name" at the top of the merger. Brilliant, simply brilliant. AOL can now go bankrupt for all it matters, because regardless, Case and his senior execs from AOL have ownership of all those nice properties to send them revenues for the rest of their lives. He can retire at 40 to the Riviera. Not bad. Butch would be impressed.

That's the real story here. In fact, one guy actually got this reality. Garry Trudeau. Look up his old strip about Mike Doonesbury taking his start-up public. Pointing out to his investment banker that the company was banking on the bubble for survival, he questioned the advisability of going through with it, as they could tank. The banker said, "Yeah, but by then you own the Mariners."

In this case, Steve Case now owns a piece of the Atlanta Braves. No difference otherwise.

-- John Nowicki

By Salon Staff

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