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Reliable Sources

Will the AOL-Time Warner Merger Compromise Its News Organizations?

Aired January 15, 2000 - 6:30 p.m. ET


HOWARD KURTZ, HOST: The media's biggest mega merger: America Online buys CNN, "Time" magazine and the rest of Time Warner. Will the news organizations be compromised when they're part of Steve Case's cyber empire?

Welcome to RELIABLE SOURCES where we turn a critical lens on the media. I'm Howard Kurtz along with Bernard Kalb.

It was a deal that took the journalistic and business worlds by surprise, a sweeping combination of traditional media and the Internet.

By Monday's closing bell, everyone seemed to be talking about the news and not just on Wall Street.


DAN RATHER, CBS NEWS: The world's largest media conglomerate.

TOM BROKAW, NBC NEWS: The biggest corporate takeover ever.


KURTZ: America Online's plan to buy CNN's parent company, Time Warner.


STEVE CASE, CHAIRMAN & CEO, AMERICA ONLINE: This really is an historic moment, a time when we transform the landscape of media and communications.


KURTZ: All this talk about synergy raises complicated issues for journalists who work for Time Warner, questions about how reporters for CNN, "Time" and "Fortune," among others, should cover the Internet industry, of which they will soon be a part and whether the public will believe they are editorially independent of AOL.

But the mainstream press covered this mostly as a business story. Banner headlines, pages and pages of analysis in print and on the Web, all buzzing about the business of the mega deal. With 20 million customers, America Online is the nation's largest Internet provider, giving Time Warner a potentially huge new customer base. Time Warner brings to the table cable channels like the Cartoon Network, HBO and, of course, CNN, magazines, music labels representing artists from Third Eye Blind to the Three Tenors, companies producing TV shows like "Friends" and movies like "You've Got Mail."

So while the focus in much of the media seems to be about stock prices, personalities of the players and the future of the deal, what does all this mean for journalism?

Well, joining us now from New York, John Huey, the managing editor of "Fortune," Steve Young, senior technology correspondent for CNNfn and in San Francisco, Kara Swisher, who covers the Internet for the "Wall Street Journal." She's also the author of " How Steve Case Beat Bill Gates, Nailed the Net Heads and Made Millions in the War for the Web."


Senior executives of CNN and Time Warner declined to further discuss these issues on our program.

John Huey, you wake up Monday morning and you discover you'll soon be working for AOL. Fairly or unfairly, does this undercut to some degree the credibility of any story your magazine runs on the Internet industry not just about AOL but about such AOL rivals as Yahoo! or Microsoft?

JOHN HUEY, MANAGING EDITOR, "FORTUNE" MAGAZINE: Well, obviously I don't think it does and if it does it's unfairly and if that's the case it's my job to get the word out that it's not a problem. First of all, you've got to realize that Time, Inc. has a lot of experience in this arena because we've been part of Time Warner for 10 years and when the Time Warner merger took place the same sort of noise came out that we wouldn't be able to cover Time Warner fairly, that we would, you know...

KURTZ: Favor Hollywood movies made by Time Warner or books like Warner Books?

HUEY: Yes, we'd hype their movies. I can show you headline after headline after headline out of both "Fortune" magazine and "Time" magazine as well as "Entertainment Weekly" and "People" where, you know, we've -- let me just put it this way. As a business editor, every week there are at least three or four big CEOs who you've heard of who are mad at me. And...

KURTZ: And you like it that way.

HUEY: Well, it's just part of the job. And quite often those executives could be division heads at Time Warner. We've, I looked at a headline the other day we had that said "Time Warner Cable Strategy -- Time To Bail Out."

BERNARD KALB, CO-HOST: Steve... HUEY: I guess we were wrong but we, you know, we've...

KURTZ: You still ran the story. Bernie?

HUEY: We've written stories, for example, saying that CNBC was whipping up on CNNfn, which is also owned by Time Warner, you know, countless examples of these kind of things.

KURTZ: Point well taken.

KALB: John, could I move it on to Steve? Steve in New York, look, I think we all agree that the two companies did not do it out of love. So there is some concern that if the bottom line is given the top priority we may see -- the concern we may see the combo avoiding controversy and moving toward the terrain of journalistic blandness. Is that a concern that you see as well, Steve?

STEVE YOUNG, CORRESPONDENT, CNNFN: Well, I don't know, Bernie. I did early reporting on problems that AOL had in terms of servicing the customers it was able to attract. I'm the fellow who, you know, broke the story of Intel's Pentium bug at the very time that CNN had a business relationship with Intel and I've got to tell you, it didn't even cross my mind, nor, to the best of my knowledge, did it cross the minds of management who are approving my copy. Is there a potential for a problem? Sure. But in my experience it's not been a problem.

KURTZ: Kara Swisher, you are sort of a biographer of Steve Case. Steve Case will now be in charge...


KURTZ: ... overseeing these huge news organizations. Have you seen any evidence that he particularly cares about journalism or is particularly sensitive to journalistic criticism?

SWISHER: Well, you know, my experience with him is his -- him correcting my grammar on certain things. But, you know, he is interested. I mean it sounds stupid, but he ran a high school newspaper. But he's been very interested in the media forever and, you know, I think he's always wanted to do this from the beginning, from very early on. He knew his business was not dialing up and accessing the Internet. It was about being a media company.

So I think he has been on this course for a long time, longer than anybody else, and, you know, I don't know why he'd make a different owner than, I mean the owner of "U.S. News & World Report" is a real estate guy, you know? I don't necessarily think that you can assume he's going to be bad or good until you see if he's bad or good.

KALB: Kara, can I push this discussion...


KALB: ... toward the future of "Time" magazine?


KALB: If more people decide to get their "Time," so to speak, on the Internet rather than get the actual edition in their hands...


KALB: ... haven't they made a decision which essentially is pushing "Time" toward suicide?

SWISHER: No, not at all. I mean, you know, these discussions about the Internet, it's the Internet or magazines, it's the Internet or television, the reason this was done is because the Internet is a fabulous distribution platform and a media company has to be always (unintelligible).

KALB: No, well I realize that but I'm talking about the future distribution. Will I not...

SWISHER: Well, what's the difference where you get it?

KALB: Well...

SWISHER: I mean what's the difference? You should think about how consumers want to get the things. And if they -- listen, if they want the "Wall Street Journal" on salami, I'm right there to print it on it. I mean it just doesn't really matter.

KALB: Yes, but you're ducking my question.

SWISHER: And I think this...

KALB: I'm talking about Internet versus holding an actual copy of the magazine in your hand.

SWISHER: What's -- but so what? If you want that I'm sure you can print it. I mean some day there'll be like instant printing, instant printing of books and things like that. I mean I think it's just you get caught up in those ideas and the idea is really good content has to be created no matter how it's distributed. And, you know, I mean, you know, I like holding the newspaper but if my, you know, if I have kids and they don't want to hold the newspaper, hey, let them get it on Palm Pilot if they want it or get it on a screen or get it on anywhere they want.

I don't know why we argue about the format, you know?

HUEY: Well, "Time" magazine content has been on AOL for years anyway.


HUEY: That's not, that's not really an issue that is involved in this merger, I don't think.

KURTZ: Well, let me turn back to Steve Young. You, both you and John Huey have made the point that you've aggressively covered the world of business and the world of the Internet despite the various interrelationships that sometimes go on in the corporate world. But again fairly or unfairly, once this deal closes, you'll be seen by some people as working for AOL TV. Is there a public perception problem here and what if companies like Amazon or Yahoo! decline to give you some information because they don't, because they're worried about the corporate connection?

YOUNG: I don't know. I'd raise a different kind of question. I think that as a journalist within CNN we've got to understand that we don't have any special claim on information from AOL. You know, I think that that's the other side of the equation.

I must say that one of the early problems this week was parsing the purposefully obfuscated press release from the two companies which spun this as a merger of equals with eight folks on the board from each company. It took a while internally for it really to be sunk in that 55 percent of the company was owned by AOL...

KALB: Steve, how will we know -- excuse me for interrupting, just to pick up a different theme -- how will we know, we're all talking about journalistic courage, that there will be no intimidation because of the ownership but how will we know something more subtle, when journalists may self-censor themselves not to arouse some sort of a controversy within the shop and possibly even jeopardize the momentum of their careers?

YOUNG: Well, you know, I think being realistic there may be a certain tension but I think that'll be between the rank and file folks like us who are in the trenches doing the reporting and management levels, which may feel some of those sensibilities that maybe we should be thinking about. But I think most of us who just go for a great story won't be thinking about it.

HUEY: I think you hit on two pretty good questions there. Those are the two big issues that face us that, you know, and you do have to go out of your way to convince the people that you cover in the industry that you're not carrying water for AOL. But if you're somebody like "Fortune" magazine or "Time" magazine, it's not a big problem because the people we're sending out there are people like Joe Nosera (ph) and Brent Shlender (ph) and Carol Lumus (ph). These are people who have reputations as independent journalists who've been covering these people for 20 and 30 years and they know that there's no way that these people are going to be corrupted into doing something to please AOL corporate management, whoever that may be. That's the first thing.


HUEY: So secondly, I mean I would say that the day this merger took place, the day after it we called our whole staff in and said look, we just want to give you one message about this merger, it's business as usual. You do your job. You're journalists. If it's time to be tough, you be tough. You always be fair. It's the same thing as it was with Time Warner.

KURTZ: Kara, let me come back to the journalism question. The first day of coverage of this huge, you know, biggest merger in history and so forth, there was an awful lot of gushing about how great, fabulous and wonderful this is and then the next three days AOL stock went down 19 percent.

SWISHER: Isn't that the way we do it all the time?

KURTZ: Well, that's what my question is...

SWISHER: No, no, no wait a second.

KURTZ: ... was there too much cheerleading in the first 24 hours?

SWISHER: Well, you know, it is, it's an astonishing moment. I mean no matter how you slice it it's a moment of Internet becoming sort of an adult. It's a lot of money. It's all these fabulous personalities. Of course there's going to be an oh my god look at this kind of thing and I think that's normal.

HUEY: It's also like an IPO.


HUEY: The stock goes up on the thrill of victory and then everybody sobers up and starts figuring out what it is.

SWISHER: And thinks about it. Well, what's...

KALB: Kara, let me pick up a line in the op-ed page of Friday's "New York Times"...


KALB: ... which says if this becomes the model it could be the end of America's independent press.

SWISHER: No, this is, you know let's dump that...

KALB: Is that too apocalyptic?

SWISHER: No, let's jump out of the sandbox here. Disney owns ABC. You know, G.E., a defense company, owns NBC. I mean it's, there's very few family, I mean let's say it, Dow Jones...

KALB: And therefore? Therefore?

SWISHER: Dow Jones, "The Washington Post," this has been happening forever and it's just another big company buying another big media company.

KURTZ: Plus...

SWISHER: And I think -- let me just say, if "Fortune" magazine gets worse, it's only going to hurt AOL because if they don't have good content, good, solid reliable very good reporting, it's going to just ruin the franchise. So why -- I mean good content finds distribution and good distribution finds content and if they ruin "Fortune" magazine, it'll be only their fault when their stock's not worth anything.

KURTZ: I'm going to have to blow the whistle here. We'll let you respond in a moment, John Huey. More of our discussion, when we return.



Steve Young, we've been talking about the web of potential conflicts here but other than the employees' stock going up, is there any ways in which the AOL acquisition could improve the journalistic prowess of CNN or CNNfn or "Time" or "Fortune," in your view?

YOUNG: I don't know about improving the journalistic prowess. It certainly could improve our distribution. You know, I was thinking, Kara, with all deference to the "Wall Street Journal," one of the amazing things was that this story was not in the "Wall Street Journal" Monday morning. I got a call at 4:00 A.M. Monday morning, I don't know about you.

In fact, Mr. Levin, the CEO of Time Warner, said at the press conference Steve, were you surprised? Well, I was and I don't know anybody who wasn't.

SWISHER: I have to correct you. We had it on the "Wall Street Journal" Dow wires at two in the morning. We actually broke the story and I was on CNBC at five in the morning announcing it. So we did, we actually have, that's what's great about the Web, we were able to put it on our Web site, on our wires and then we, with our relations with CNBC we were on talking about it before they made the release.

KALB: John, let's go future tense, a question we alluded to a little too swiftly in our last segment and that is the doomsayers are predicting that if this becomes the model of the future, this synergizing, to borrow that word again, that this essentially writes an obituary for America's small, independent press.

HUEY: Well, I want to answer that with an anecdote. Years ago I was sent to Laramie, Wyoming to write a story and the story was about how the FDA had discovered some contaminated Bon Vivant vichyssoise in the shelves of a grocery store which happened to be owned by the president of the Chamber of Commerce of Laramie, Wyoming.

A local radio reporter, which was an independently owned radio station, it happened to be owned by Kurt Gowdy (ph), the sportscaster, reported that this Bon Vivan (ph) vichyssoise was on the shelves. He was fired. The local newspaper, the "Laramie Daily Boomerang," which was locally owned, declined to print the story. And I went up there and I interviewed the editor of the newspaper and I asked him why didn't you write this story? You had soup that had given people, had given botulism to people in years past and you didn't report that it was on the shelves. He said what am I supposed to do, run a story that says my god, everybody, John Schuster (ph), who was the president of the Chamber of Commerce, is selling poison soup? And...

KURTZ: That's a cautionary tale.

HUEY: This was corrupt journalism at its worst and it had nothing to do with size or synergy or anything. It had to do...

KALB: Yes, but vichyssoise, vichyssoise is not going to be the taste or the sort of the pattern of the future.

HUEY: Well, no. What I'm talking about...

KALB: But John, there is going to be...

HUEY: But what I'm saying is...

KALB: There is real concern...

HUEY: ... integrity has nothing to do with size or synergy. It has to do with the integrity of the people who are running the news organizations.


HUEY: And at Time, Inc., as long as the people who are running the news organization are the kind of people we have running it now I don't have any fear. They've stood up to any pressure they've ever felt from anywhere.

KURTZ: Kara, let me jump in here. There aware hundreds of journalists covering this story, a huge story, big merger and so forth, and yet most of the talk I heard was about broadband strategy and synergy in stock price.


KURTZ: Why not more interest among journalists themselves in the impact on the news gathering capabilities of "Sports Illustrated" or "Time" or "People" or CNN?

SWISHER: Well, I don't know, it seems like this has been going on since the first auto dealer yelled at the first editor who, about a story some reporter wrote.

HUEY: Right.

SWISHER: I mean I think the issue here is that AOL needed cable badly. Its, you know, its runway was running out very quickly on the dial up service. They needed cable. Time Warner was panicked about their Internet strategy and wanted, you know, more distribution. And, you know, they had all this content and they decided it had great synergy. Now, we'll see if that's the case. But I don't think necessarily it means immediately that all journalism is going to stink at Time Warner because that is their strength is would be their strong "Time" magazine, "Fortune" magazine, "Sports Illustrated."

I mean look at they did that, that story on that terrible pitcher in Atlanta and it was a "Sports Illustrated" publication.

KALB: Kara, you talked about we'll wait to see if this is the case. The fact is we've already had a couple of years accumulated where the big fellows took over the other big fellows...


KALB: And I'm thinking particularly of Disney and ABC. There have been examples that we're all familiar with...

SWISHER: Absolutely.

KALB: ... that there has been a dimension of, what, was it Michael Eisner who owns Disney, who runs Disney who said I don't want Disney covering Disney?

SWISHER: Right. Well...

KALB: The message gets out.

SWISHER: I think you definitely...

KALB: So there are examples of a journalistic pullback.


KALB: Or pressure.

HUEY: Why aren't we talking about Newscorp? Newscorp is full of those examples all the time. Rupert Murdoch perpetrates his personal agenda through a wide variety of publications and broadcasts outlets...

KALB: So there should be concern.

SWISHER: Well...

HUEY: But that, that has nothing to do with anything except that Rupert Murdoch owns it and that's the way he likes to run it.

SWISHER: I think it does, it creates, if the integrity of the journalists are good it's going to be good. Now, the minute they start doing that, they're going to get very bad journalists there and the good ones, you know, I mean John Huey is an asset to them or else he'll leave and if he doesn't think he's doing the right thing, unless he feels like going with the corporate line, if they, if he doesn't agree with it, if he does, if they lose him they're going to lose something. If they lose, you know, Joe Nosera, you know, there's lots of great publications that are going to pick him up. And then they'll attract the readers, I think.

KURTZ: Kara, I need a five second answer because we're out of time. What was Ted Turner thinking when he said this was the best day he'd had since he first had sex 40 years ago?

SWISHER: You know, that guy just, he's a constant entertainment to me. But -- I have no idea. But I guess he's very thrilled to be on the Internet.


HUEY: I think he was thinking about the first day he had sex.

SWISHER: Yes. He's...

KURTZ: You may have nailed it, John Huey. Steve Young, Kara Swisher, thanks very much for joining us.

Well, when we come back, the circus comes to town with a barrage of political debates. Bernie's "Back Page," next.


KURTZ: Time now for "The Back Page" -- Bernie.

KALB: OK, here's your chance to become a millionaire. What's the first image that comes to mind when you hear the phrase media circus?

Once upon a time in the last millennium it was this, this classic scene of media chaos. True enough, but what about this scene, the way Peter and Tom and Tim and the others, the way they cracked the whip at the presidential debates? And what does all this remind you of? Exactly. The circus, the real thing, the lion tamer cracking the whip, the lions on their best behavior, just like candidates. Fact is, TV has been turned into a big tent. The anchors have morphed into ring masters. It's one big media circus and they've got to keep it moving so first thing is to let the presidential wannabes know who's in charge.


TED KOPPEL, ABC NEWS: I just want to point out that neither of you answered the question.


KALB: In other words, you've got to train them. Now, if that warning doesn't keep them on the defensive, you hit 'em again.


UNIDENTIFIED REPORTER: Well, for a man who rides the straight talk express, that wasn't the most forthcoming of answers.


KALB: Let's face it, this is really a crazy way to pick a president, the media as the nation's impresario. But even so, you don't want them wasting a lot of time telling you what they will do once they're in the White House.


PETER JENNINGS: Now, I'd like to ask you first, both of you, for a one word answer.


KALB: Now that we've taken care of the big issues facing the country, it's time to zap 'em.


UNIDENTIFIED REPORTER: What is the biggest mistake you made as an adult?


KALB: By and large, very little growling from the lions. But there are those rare moments.


ALAN KEYES (R), PRESIDENTIAL CANDIDATE: The format of this debate has gotten a little strange and I begin to wonder when Mr. Russert will declare his candidacy.


KALB: And then, the mother of all questions.


UNIDENTIFIED REPORTER: If you could only do one thing as president, what would it be?


KALB: That's an easy one.

Well, in case you've missed any of these media circuses, not to worry. They're scheduled to come up every other minute. The tickets are free. Bring the kids, it's a great lesson in the way democracy works.

KURTZ: Bernard Kalb, the ringmaster, thanks.

Well, when we come back, Hillary Clinton gets her own pop quiz in New York and CBS News takes a controversial step into the world of virtual reality.


KURTZ: Before we go, a couple of items from the world of media news.


DAVID LETTERMAN: When we started yakking at Hillary Clinton about being on the show, we had no idea she would show up.


KURTZ: After weeks of on air poking and prodding from David Letterman, Hillary Clinton finally turned up as a guest on THE LATE SHOW.


HILLARY RODHAM CLINTON, FIRST LADY: I knew that if I were going to run for the Senate I had to come and sit in this chair and talk to the big guy.


KURTZ: The first lady turned New York Senate candidate has come under fire for shunning press interviews. She may be starting to change that strategy, but she hasn't faced any tough political questions just yet.


LETTERMAN: Name New York's state bird.

CLINTON: Bluebird, I know that.

LETTERMAN: Very good.


KURTZ: She passed that pop quiz with flying colors. But it may not have been much of a surprise. Campaign spokesman Howard Wolfson admitted that Mrs. Clinton was told in advance that she'd be asked a series of questions about New York State.

So when do the real interviews begin? We'll keep you posted.

CBS News may be going a little too high tech. The early show regularly uses a digital CBS logo to cover up actual images. CBS also used the third quarter on New Year's Eve to block a logo from rival NBC. Dan Rather, who anchored the network's coverage, says it was a mistake. He told "The New York Times," "There is no excuse for it. I did not grasp the possible ethical implications of this and that was wrong on my part."

But CBS News President Andrew Heyward defended use of the new technology and said the network will continue to flash the virtual logo on its morning show.

The problem, of course, is that it raises all kinds of doubts when what you see on the screen, even the words CBS, isn't real.

Well, that's it for this edition of RELIABLE SOURCES. I'm Howard Kurtz. Join us again next time for another critical look at the media.


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