On the defensive


Michael Eisner and Steve Case, arguably the two most scrutinized media executives on the planet over the past few months, appeared at an industry conference last week and basically pleaded for their jobs.

There has been massive speculation hinting that the jobs of both Case, chairman of AOL Time Warner Inc., and Eisner, chairman of The Walt Disney Co., are hanging by a thread. Case has been under fire for months, as federal investigators have scrutinized the accounting practices of AOL Time Warner's America Online unit.

For his part, Eisner has drawn the ire of investors who've watched the value of their Disney shares decline 25.4 percent since the beginning of the year.

Eisner was contrite last week at the Goldman Sachs & Co. Communacopia conference, admitting that his company has made mistakes, but insisting that it has laid the foundation for the future.

For several months, Eisner has been on shaky ground, as several press reports have detailed Disney board members' displeasure with the company's performance.

Eisner seemed to address the speculation surrounding his future with a bit of a joke. After receiving a glowing introduction from a Goldman Sachs analyst — who noted that Disney has reported a 15 percent rate of compound annual growth during Eisner's tenure — Eisner quipped, "Obviously, you haven't been reading the papers."

But though Disney stock has been hammered in the past year — and the company has been criticized for paying too much for recent acquisitions — Eisner said Disney was better off for having made those investments.

Disney also is looking for ways to cut costs, and Eisner confirmed the company has held talks about joining its ABC News division with AOL Time Warner's Cable News Network. But the Disney chairman said speculation the two operations would be combined is "very, very premature," putting the odds that deal would happen at maybe 50-50.

But Eisner said combining ABC News and CNN would fit in with Disney's horizontal structure, in which the management in charge of its broadcast properties is also responsible for its corresponding cable unit.

For example, the management in charge of its Disney Channel and Toon Disney cable channels is also responsible for ABC's Saturday morning kids' programming; the executives in charge of ABC's daytime programming also run its SoapNet channel; and those in charge of ABC's primetime programming run ABC Family.

Regarding ABC Family, Eisner said that looking back, Disney probably paid more for the network than it would pay today. But since the purchase, the former Fox Family Channel has shown substantial growth, including a double-digit rise in households and significant improvement across all demographics.

"All arrows are pointing in the right direction," Eisner said.

Storm-tossed case

Case likened the past 20 months since the merger of AOL and Time Warner Inc. closed to a "gathering storm."

And though he admitted to taking some missteps, he stressed that AOL Time Warner was well-positioned for the future. Case also vowed that he would take a more active role in the company.

"It's important to look back and learn from your mistakes with a healthy measure of optimism," Case said. "I understand your concern and I share your frustration. The first 20 months have been challenging. But we are firing on all cylinders.

"The idea of AOL Time Warner is the right idea," he added. "We are taking steps to capitalize on that promise."

Case took a veiled swipe at past AOL executives, adding that only recently has the company had the "right team in place to really encourage collaboration across the company."

While Case's critics have said the chairman has spent more time concerning himself with the big picture, Case said he has increasingly become more involved in day-to-day operations.

"More recently, I have been particularly focused on [the] AOL [Internet-service provider unit]," Case said. "That is the right role for me. I will be more active than in the first year of the company. In the longer run, that is the right model for the company."

Case also said that the AOL management team is working on a business plan to revitalize the unit, which will be presented to the board of directors in November. While the ISP has been hit hard by the downturn in online advertising, Case said opportunities exist in driving subscription revenue and electronic commerce.

Karmazin's tap dance

In contrast to Case and Eisner, Viacom Inc. president and chief operating officer Mel Karmazin ducked questions about his future with the media giant.

Investors have feared that Karmazin, whose employment contract with Viacom expires in 2003, may not stay with the company.

Instead of clarifying his status, Karmazin said that investors should not invest in a company "because of one individual. They ought to be investing in Viacom because it has an extraordinary portfolio of assets."

Investors should focus on Viacom's performance, including its strong free cash flow, $1.4 billion in the first half. And the company has a strong pool of managers, Karmazin added, especially at the divisional level.

"If I were not at this company, we still would have a strong portfolio of assets," Karmazin said. "A lot of us [CEOs] are blessed. When things are going well, we get more credit than we deserve."