On the day America Online Inc. agreed to take over Time Warner Inc., executives stood up and touted the wonderful future their employees faced at the combined companies.
"This is one of those happy comings together, where opportunities are going to be created, not reduced," said Richard Parsons, then president of Time Warner and now co-COO of AOL Time Warner. "This is not a merger that is being driven by the fact that we can squeeze out employees and reduce our costs. This merger, the coming together of these two companies, is going to create innumerable opportunities for the existing employee bases of both companies, enabling them to have richer, more interesting, and ultimately more rewarding work lives."
Well, for most employees, anyway. Last week, the newly combined AOL Time Warner stepped toward the $1 billion in annual savings Chairman Steve Case promised from the takeover by issuing pink slips to 2,000 more workers. That's in addition to the 400 workers being cut at CNN.
And it may not be over yet. Whole divisions were left untouched, including some sensitive to the now-sluggish ad cycle. Time Warner executives said the cutbacks were designed more to resolve what AOL executives saw as overstaffed or redundant operations, and not aimed as much in response to the sliding ad market. But if revenues continue to fall as badly as media executives are seeing in the first quarter, another wave is in the works.
Other than CNN, AOL Time Warner's television units were largely spared. Time Warner Cable, Home Box Office, The WB and the entertainment side of Turner Broadcasting said they weren't laying off anyone this round. "They're feeding the things that are doing well and cutting the ones that aren't," said one cable executive.
Jettisoned employees shouldn't blame AOL. Time Warner executives were pondering cutbacks well before Steve Case showed up and long before the threat of a recession loomed. In 1999, senior Time Warner officials privately discussed with Wall Street executives a plan for layoffs and division shutdowns to cut costs by $1 billion or more. Some, like overhauling CNN or shuttering Time-Life Books, were considered too politically sensitive to attempt.
"There were a lot of sacred cows at Time Warner," said one Wall Street executive. "They now have the opportunity to take those on."
The hit list includes AOL's online unit, which is dropping 725 out of 15,000. About 100 corporate staffers at the old Time Warner will go.
New Line Cinema will lose 100, 20% of its total. Warner Bros.' feeble entertainment portal Entertaindom is nearly a wipeout with 40% of its staff, or 100 workers leaving. Magazine unit Time Inc. is cutting 400 jobs, mostly in customer service and its venerable Time-Life Books direct-marketing unit. Warner Music Group will lose 600.
The pain was most evident at CNN, which got a week's head start. Staff cuts destroy morale under any circumstances, but they're particularly brutal for an organization like CNN, where many of the pink-slipped are people who helped grow the business from the equivalent of a garage band to a superstar.
When farewell e-mails started flying last week as the chosen ones were called into human resources, morale disintegrated. CNN handled it with characteristic sangfroid
by having techies cut off computer access for the fired while they were being handed their sentences. "Some were given until the end of the day, and some were kicked out immediately," a Turner source said.
Los Angeles-based reporter Greg LaMotte, who was captured for a week by Iraqi soldiers in the Gulf War, was axed. So were Steve Cassidy, one of the founders of CNN Headline News and deputy international managing editor at the time of the layoffs and Gene Cooper, vice president of research, handpicked by Steve Korn, vice chairman and COO of the news group who bailed out a year ago. Jim Moret, co-anchor of the axed Showbiz Today
opted to quit rather than move his family from Los Angeles to Atlanta. Several correspondents were cut, including Jennifer Auther from the L.A. bureau and Graylian Young from Atlanta.
White House correspondent John King is also expected to leave of his own accord when his contract expires in March.
Morgan Stanley Dean Witter analyst Richard Bilotti looks for more savings in marketing.. "The next is shrinking Time Warner's telcom and technology costs because AOL is a volume buyer."