How the AOL-Time Warner Merger Went So Wrong

A Q&A with Steve Case and Gerald Levin. A decade ago, America Online merged with Time Warner in a deal valued at a stunning $350 billion. It was then, and is now, the largest merger in American business history.

The Internet, it was believed, was soon to vaporize mainstream media business models on the spot. America Online's frothy stock price made it worth twice as much as Time Warner's with less than half the cash flow. When the deal was announced on Jan. 10, 2000, Stephen M. Case, a co-founder of AOL, said, "This is a historic moment in which new media has truly come of age." His counterpart at Time Warner, the philosopher chief executive Gerald M. Levin, who was fond of quoting the Bible and Camus, said the Internet had begun to "create unprecedented and instantaneous access to every form of media and to unleash immense possibilities for economic growth, human understanding and creative expression." The trail of despair in subsequent years included countless job losses, the decimation of retirement accounts, investigations by the Securities and Exchange Commission and the Justice Department, and countless executive upheavals.

Today, the combined values of the companies, which have been separated, is about one-seventh of their worth on the day of the merger. To call the transaction the worst in history, as it is now taught in business schools, does not begin to tell the story of how some of the brightest minds in technology and media collaborated to produce a deal now regarded by many as a colossal mistake.