AOL Time Warner Inc. CEO Gerald Levin, who built a reputation taking risks that sometimes looked career-threatening, said last week he would retire in May.
Levin said he'll step down at the company's next annual shareholder's meeting — ahead of others' timetables, but on his own terms, after 30 years in the business. Richard Parsons, Levin's long-time lieutenant and the current co-chief operating officer, will take the CEO reins. Co-COO Bob Pittman gains, as well, becoming sole COO.
While the timing appeared to surprise everyone inside and outside the company, Levin's stated reasons for stepping down rang true to friends and industry observers.
"It's like he's said publicly: Thinking about the next quarter's profit is not your whole life," said Hauser Communications chairman and former Warner Communications Inc. chairman Gus Hauser, a longtime friend of Levin. "He's always had other priorities."
In interviews, Levin said he had been contemplating retirement for about a year. He plans to devote more time to philanthropic causes.
"I've always been a risk-taker and done things against the tide," Levin told Cable News Network last week. "This is another risk, because I am giving up this wonderful platform that's enabled me to speak out and do what I want to do.
"But at the same time I need to find out — people should understand I'm not just a CEO corporate person. I am a real human being. I have strong feelings about things. There's a creative side to me that you would never know because I'm a suit, and you know, I engage in corporate-speak."
Levin also said in interviews that the Sept. 11 terrorist attacks drove his decision to retire — an idea that began to germinate after the murder of his son, New York City high school teacher Jonathan Levin, in 1997.
Shortly after his son's death, Levin quietly inserted a clause in his employment agreement that allowed him to retire before his contract expires in 2003, provided he gives the company six months notice.
Levin said he would likely lecture on social issues and perhaps write a book.
"Jerry is one of the most thoughtful people I've known," Cablevision Systems Corp. chairman Charles Dolan said in a statement. "He is soundly creative and was a worthy successor to [former Time Warner chairman] Steve Ross.
"He is a philosophical person with an academic background and he doesn't depend on his job for life fulfillment. It doesn't surprise me that after a very successful career at Time Warner, Jerry would want to move on to broader interests, and that only reinforces my opinion of him."
PUT TEAM IN PLACE
The surprising part about the timing is that Levin had only completed Time Warner's career-defining merger with America Online Inc. in January. And company insiders said he had not lost his passion for the business.
He was excited about Time Warner Cable's nascent video-on-demand and subscription VOD efforts, joining in conference calls to discuss the much-publicized SVOD trial of Home Box Office in Columbia, S.C., for example.
And AOL Time Warner hasn't finished making deals. Levin confirmed last week that the company has made a "proposal" to AT&T Corp. concerning its AT&T Broadband cable unit, the biggest U.S. cable operator.
But he said in interviews (not with Multichannel News) that he is satisfied that he's helped put a management team in place that can successfully execute the company's many diverse-yet-convergent agendas.
Employees and ex-employees said Parsons is much-liked. Phrases frequently used to describe him are variants on this refrain: No one in the company has ever said a bad thing about him.
"I know him and I like him, like everybody else in the company," Hauser said. "I've talked to a lot of people in the company and the reaction is good. Nobody is unhappy with the choice."
High Speed Access Corp. CEO Dan O'Brien, who worked at Time Warner Cable for about a decade, said from what he has heard, everyone at the company is pleased Parsons got the CEO job. Parsons is well-liked and a known quantity, O'Brien said.
"With all of the changes that existed there over the years, I never once heard anything but incredibly positive things from anyone about him," the HSA executive said. "I think it's a great call, and he'll be a great leader for their organizations, and people will rally."
Pittman, meanwhile, adds operational oversight of Warner Music Group, the Warner Bros. film and TV studio, New Line Cinema and Time Warner Trade Publishing, which had belonged to Parsons.
And observers looking to parcel out winners and losers among the Time Warner and AOL halves note that Pittman and chairman Steve Case now outnumber Parsons, who might not stand up for Time Warner initiatives as strongly as Levin would.
But Parsons does have the consensus-building savvy the global conglomerate needs.
Parsons, a former chairman of Dime Savings Bank whom Levin recruited in 1995, has played corporate diplomat at some key times, helping salve the wounds created when Time Warner Cable briefly dropped ABC stations in May of 2000, for example.
Pittman and Levin's other current reports will answer to Parsons, but such division CEOs as Time Warner Cable chief Glenn Britt still report to Pittman.
Pittman said in published reports last week he wanted to be the sole COO.
Analysts seemed pleased with the new setup.
"Parsons is a great external guy, good with Washington, just the type of person they need," said Sanford Bernstein analyst Tom Wolzien. "Pittman is a good operations guy and now he has the whole sandbox. It all works out really well."
In a research report, Goldman Sachs & Co. analyst Richard Greenfield noted that on AOL Time Warner's top management team, two executives (Parsons and chief financial officer Wayne Pace) are from Time Warner and two (Pittman and Case) are from AOL.
He called Parsons the logical choice.
"We have always viewed Parsons as more of a natural fit for a CEO role (given his diplomatic nature), while Pittman, given his intense focus on operating issues, appeared a natural fit for the COO role," Greenfield wrote.
Parsons served as counsel to former Vice President Nelson Rockefeller and as an aide to former President Gerald R. Ford. He is currently co-chairman of President Bush's Commission to Strengthen Social Security.
Washington contacts would come in handy if AOL wins the bidding for AT&T Broadband. AOL is one of three potential suitors for AT&T's cable unit, along with Comcast Corp. and Cox Communications Inc.
Adding AT&T Broadband would create a 27 million subscriber mega-MSO that would attract rigorous regulatory scrutiny.
"In the short term, that's a key issue," Hauser said of Parsons's Washington connections. "If they ever make a deal, there's nobody better to have on your side."
COMMITTED TO CABLE
Wall Street and cable executives reacted favorably to Parsons's accession, but noted that the company and industry were losing a steadfast cable advocate.
"Inside the company, Gerry was a believer," Hauser said of Levin's commitment to cable. "He always stayed with it. He absolutely was a strong management force for cable and its future."
Levin first made his mark in cable at Home Box Office in 1972, then a fledgling sports-and-movie service founded by current Cablevision Systems Corp. chairman Charles Dolan. After HBO was sold to Time Inc., Levin moved over and in 1974 came up with the idea to place the network's programming on a satellite, enabling the service to reach cable operators nationwide.
He moved up the ranks, and in 1987 proposed that Time acquire Warner Communications Inc. Levin became the point man in the negotiations with Warner and — after a bitter fight with Paramount Communications Inc. over the assets — closed the deal in 1990.
Levin became chief operating officer at the new Time Warner, and, in a palace coup in 1992, persuaded the board to name him to replace company chairman Steve Ross — who was dying of prostate cancer — over Ross's No. 2, Nick Nicholas.
A staunch believer in cable's capabilities, Levin went on a $5 billion buying spree in 1995, adding 4.2 million subscribers to Time Warner Cable's footprint. The year before that, he invested millions in an interactive-television trial in Orlando, Fla., called the Full Service Network, which provided movies-on-demand, home shopping and other services to about 4,000 residents.
Although thought to be a failure at the time — never duplicated, the project was hugely expensive, and the company pulled the plug in 1997 — Levin always called it a success. In some ways, it helped pave the way for advanced services that now are the growth engines for cable operators.
The cable-system buys that nearly cost him his job now account for about 40 percent of AOL Time Warner's cash flow.
"He looks like a genius now," Mediacom Communications Corp. chairman Rocco Commisso said. "Not so much five years ago."
The 1996 merger with Turner Broadcasting System Inc. helped him become a genius. Although many analysts predicted Levin would lose out to outspoken Turner chairman Ted Turner, Levin eventually turned the tables, demoting Time Warner vice chairman Turner to a non-operating role after the AOL merger last year and stripping him of most of his responsibilities.
The AOL merger added huge Internet assets to Time Warner's base of movies, publishing, cable distribution and broadcast and cable programming. But growth has begun to slow at AOL, and the advertising downturn has hit Time Warner.
After months of sticking to lofty forecasts of 30-percent cash growth and 10-percent revenue growth, the company in September trimmed 2001 forecasts to 20-percent cash growth and 5-percent to 7-percent revenue growth.
Levin's supporters expect him to lecture on social issues, maybe write a book, and continue his commitments to philanthropic causes.
One of Levin's recent goodwill efforts was his role as honorary chairman of The Cable Center's Cable Television Hall of Fame induction ceremony (which honored Time Warner Cable chairman Joe Collins, among others) on Nov. 27 in Anaheim, Calif.
Levin did not attend the event: He had let the center know months earlier that he had a conflict, but lent his name to assist anyway, Cable Center CEO James O'Brien said. Levin has also committed $10 million to help bankroll the Denver-based center's efforts to preserve and highlight original cable programming.
"Having Gerry involved not only with the Hall of Fame dinner, but also really involved with the activities going on here at the Cable Center, is very important and has been very impactful for us," the center's O'Brien said.
When Levin retires, O'Brien added, "Hopefully he'll have a chance to spend a little more time for us, which is great."
Kent Gibbons contributed to this report.
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