New York Is "In For Some Years of Lean"

AOL Time Warner COO Richard Parsons says his company is staying in the Big Apple, a city whose residents are just too ornery to succumb

Richard D. Parsons, one of AOL Time Warner's two chief operating officers, is a quintessential New Yorker. Born in Brooklyn and raised in Queens, Parsons ran the Manhattan-based Dime Savings Bank before jumping into the media world in 1995.

Today, besides overseeing AOL's movie, music, and publishing businesses, the 53-year-old executive is chairman of the Upper Manhattan Empowerment Zone and the Apollo Theater Foundation in Harlem. He once worked for former New York Governor Nelson Rockefeller in Albany and later in Washington, D.C., when Rockefeller was Vice-President. Parsons himself has been mentioned as a possible future candidate for governor or even New York City mayor.

On the morning of September 11, Parsons had already departed for work from his home in Tribeca, just blocks from the World Trade Center, when the tragedy unfolded. He recently sat down in his Rockefeller Center office to talk with BusinessWeek Media editor Tom Lowry about the prospects for his company and for his wounded city (see BW, 10/22/01, "The Future of New York"). He has taken the attacks very much to heart, as you'll see in these edited excerpts from their conversation:

Q: Several blocks from here, giant cranes are busy erecting the first floors of what is expected to be AOL Time Warner's new $1.7 billion headquarters on Columbus Circle. Given the events of September 11, do AOL executives have any second thoughts now about being New York, or reservations about having so much of your operation here?


We are fully committed to completing the project on time [scheduled opening is early 2004.] While the attacks are obviously tragic, we are not changing our business strategy or our location strategy. Now is the time that businesses need to stand up and say they are committed to this city. AOL's efforts have included donating $5 million to relief funds; helping to rewire the city, including the Mayor's new command post; and creating a database so that disrupted businesses can be connected with agencies that can help them.

Q: What needs to be done to rebuild New York?


There certainly needs to be enhanced financial resources. We need to clean up the site and rebuild the area, but in order to do that, you have to get the 9,000 small businesses hurt by these attacks up and running. These are the businesses that had no business-interruption insurance. A fund in the model of a crime-victims' fund needs to be set up. In the truest sense, these businesses were crime victims, and they need a financial bridge. If the neighborhood down there doesn't come back, it doesn't bode well for the larger business community.

Q: Can New York recover from this?


This has been felt in New York in a way that it hasn't in the rest of the nation. To an extent, it's the same feeling of violation you might have if your home was robbed, or your daughter was raped. This is personal. [But] we are very resilient people. New Yorkers are just too ornery to succumb to this evil.

Q: What are the prospects for the city's economy?


We're coming off of the 1990s, which was a pretty wonderful time in this city. People had money in their pockets. And we welcomed record numbers of new immigrants, who only helped to make the city stronger. We've had a decade of fat. And now we're in for some years of lean.

Q: Two weeks after the attacks, AOL revised its revenue and earnings forecasts for the year. Because of the advertising market slowdown and the increased costs of covering news related to the terrorist attacks, AOL said it expected its 2001 cash flow would be $10 billion, instead of the original goal of $11 billion, and revenues would be $38.7 billion, instead of the $40 billion target. How will 2002 shape up for your company, which relies on advertising for about 25% of its revenue?


Advertising tends to mirror the rest of the economy. Hey, you don't fish until the fish are running. What helps us out though, are our strong box-office prospects at the end of the year, including the Harry Potter movie [due out Nov. 16 from AOL's Warner Bros., which has the movie rights to three Potter books]. I think this [will become] as big a franchise as the James Bond series or the Star Wars series. Warner's Ocean's Eleven will be strong, with an all-star cast that includes George Clooney and Julia Roberts. And the sleeper of them all might just be The Lord of the Rings [due out Dec. 19 from AOL's New Line Cinema]. These movies are the kind you can take your family to.

Q: AOL has also mentioned it will incur higher costs for covering news events. How expensive will it be?


I can't say right now. But this kind of journalism is part of our heritage. What CNN and Time magazine and our other news outlets are doing is what we are all about. We'll spend what it takes.

Q: Let's come back to New York. In the wake of September 11, tell me how you picture New York City five years from now.


I guess Rome is the eternal city. But to me, New York is also an eternal city. Five years from now, New York will continue to be the financial and media capital of the world. The look and feel of the city will be the same. In fact, I'm sure it will be more bustling than ever, so much so I may have to just take leave because I won't be able to stand it [laughs].

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