Eisner and Parsons Put on a Happy Face
By Ronald Grover
If there was one surprise at the just-completed National Cable & Telecommunications Assn. Conference in New Orleans, it was the smiling faces. I don't mean the salesmen, ever-eager to sell the latest set-top boxes and interactive services. No, I'm talking about the merry media moguls.
On May 5, the night before the confab opened, a back-slapping, upbeat Richard Parsons, AOL Time Warner's incoming CEO, hosted a dinner for reporters and was gracious to everyone who came within yards of his booth. Later that week, Disney Chairman and CEO Michael Eisner, casually clad in an open-neck shirt and sweater, was glad-handing on the convention floor.
So what gives here, especially when a horrible advertising climate has hit both guys' bottom lines so severely? When the going gets tough, the tough get going, as the old adage says. And that's just what Parsons and Eisner are doing as they try to meet huge challenges with a mixture of charm and smarts.
Media honchos are supposed to have sharp elbows and take-no-prisoner battle plans. This is a business, after all, dominated by such pussycats as Sumner Redstone, Barry Diller, and Rupert Murdoch. Nor are these normal times in Media Land. In addition to the ad dearth, both AOL Time Warner and Disney have a mess of other problems. AOL Time Warner's stock price has lost a stunning $150 billion in shareholder value -- and this outfit was supposed to be the very model of a New Economy media giant.
Disney has been in a funk for six years, ever since its much-heralded merger with CapCities ABC. At $23 a share, it's scarcely above the price it commanded six months after that 1996 union. Like AOL Time Warner, whose Internet operation has been hugely derided of late, Disney's ABC unit is in such a huge ratings funk that it looks darn near hopeless.
TIME TO MAKE NICE.
Enter the smiling CEOs. Richard Parsons is widely perceived as a good guy, the antithesis of the scowling Gerry Levin, AOL's outgoing CEO. And AOL Time Warner, which has gained a tough reputation in past years for such high-handed antics as yanking ABC off its cable systems in a pricing disputes, could use a little of Parsons' good cheer. Right now, ongoing disagreements between AOL Time Warner and cable operators aren't making any friends for the AOL Internet operation, which could desperately use cable's superfast broadband wires.
Eisner, too, needs to make some friends -- among cable operators, Hollywood movie producers, Wall Street, his own investors, and maybe even his highest-ranking employees. So, while it's possible to see Parsons as a new broom ready to sweep clean the past, Eisner must reinvent his own recent stewardship of Disney. To his credit, he seems to be doing just that.
Since the first of the year, Eisner has taken some impressive corrective steps. He named as head of the film studio Richard Cook, a longtime Disney executive who is one of the best-liked people in Hollywood. That reverses Eisner's previous decision to leave the top job open and more or less run the studio himself -- a choice that kept some high-powered producers from coming to Disney for fear that their dealings with studio execs would be countermanded by Eisner.
BY THE BOARD.
To assuage Wall Street and investors, Eisner overhauled his board's governance requirements in late April, making the requirements for outside directors more stringent in an effort to shake off the long-held perception that the body was an entity that would bend to his every wish. Now, he wants to make nice with cable operators, which have been giving Disney a hard time about renewing contracts for Disney's ABC Family Channel, bought by Eisner for $5.2 billion -- $1 billion more than the nearest bidder (Viacom) was willing to offer. Breaking bread with the cable crowd isn't going to get them running to sign contracts, but it does represent a good start.
Parsons has just as tough a job ahead of him as Eisner, but the difference is that Parsons comes with little baggage. The towering one-time banker and lawyer enjoys a reservoir of good will from just about everyone who has crossed his path. At the cable convention, he made an unusual trip to a dinner with reporters hosted by AOL's Turner cable unit, chatting up the guests (including me) with stories of baseball, jazz, and good wine. (The conversation itself was off the record, but I can say that he knows his stuff and has the temperament to handle the inevitable slings aimed at anyone with the thankless job of cleaning up the mess AOL Time Warner has made of its reputation on Wall Street.)
Parsons will have to use all his diplomatic skills in coming weeks. He needs to stroke the ego of Comcast CEO Brian Roberts, with whom AOL has been negotiating for months to buy back the 25% of AOL's Time Warner Entertainment unit that Time Warner sold off years back to help pay some debts. Parsons says the company is in no mood to "write a big check, which could run to $10 billion or more. Roberts has been holding out for more money than Levin was willing to pay. But at the convention, the upbeat Parsons almost made it seem like a deal was mere weeks away, even joking that it was being completed in the backstage green room.
SHOWTIME AT THE APOLLO.
The public will get its first chance to see Parsons in action on May 16 at AOL Time Warner's annual meeting at New York's Apollo Theater. Shareholders will be understandably restless. At prior meetings, some of them have picketed CNN's supposedly unbalanced news coverage. This time around, Levin gets to wave goodbye halfway through the meeting and turn the session over to the far more diplomatic Parsons.
His first task as CEO will be to face down the almost-certain clamor of shareholders who have lost small fortunes on Levin's AOL misadventures. I would bet that Parsons is up to the task, and that he'll disarm critics by acknowledging that the company screwed up, and by assuring them that he'll be working overtime to fix the mess.
Will any of this nice-guy stuff resurrect either Disney or AOL Time Warner? Hard to say. Disney still has to find a half-dozen shows that will attract more viewers to the network. Cable operators continue to regard Disney with deep mistrust for its ever-increasing ESPN rates. And AOL remains fairly loathed by cable operators. Then there are the continued ad slump, rising programming costs, and a TV business that continues to splinter audiences for broadcasters and cable channels alike. You wonder why these two are smiling. Maybe it just beats the alternative.
Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BusinessWeek Online
Edited by Patricia O'Connell