Business Wars Presents: The AOL-Time Warner Disaster

0:00Behind every successful business, there's a battle to get to the top. And sometimes that battle ends in disaster. Back in 2000, AOL was at the height of its power. Then it made a move that stunned Wall Street. It made a bid to buy Time Warner, one of the most powerful media companies in the world. It was supposed to be the merger of the century, but instead, it turned into one of the messiest corporate disasters on record. This season of Business Wars takes you into that moment when ambition, ego, and emerging tech collided. You'll hear how a deal meant to secure dominance in the digital age collapsed under its own weight.

0:40But before any of that could happen, AOL had to overcome the odds to get America online. I'm about to play a clip from the latest season of Business Wars, the AOL Time Warner disaster. While you're listening, follow Business Wars on the Wondery app or wherever you get your podcasts.

1:05In the mid-80s, online services seem like a business full of promise. Fewer than one in 10 owns a computer in 1985, but that number is creeping up. So while there are established rivals like CompuServe. There's plenty of room for growth. CBC decides it will build an online service for the market-leading personal computer of the day, the Commodore 64. And in May 1985, they mark this new direction by adopting a new name, Quantum Computer Services. Oh, you thought they were about to become AOL, huh? Well, not yet. But that moment's coming. But what exactly is an online service in 1985? We're not talking about the Internet here, let alone the World Wide Web.

1:56That's years away. In 1985, the online universe is made up of competing subscription services. They offer the stuff we take for granted nowadays. Email, chat, shopping, and news. But in 1985, each service is separate and self-contained. For instance, CompuServe users can't email quantum users, and vice versa. And online services are slow. So slow. How slow? Well, when CBC became quantum, Simple Mind's Don't You Forget About Me, remember that song? That was at the top of the Billboard Hot 100. You know, it was the song from the Breakfast Club movie. Say you wanted to download that song as an MP3 on a mid-80s modem.

2:40You'll have that file downloaded in about three days. But it gets worse. Being online in the 80s is expensive. Quantum's Q-Link service charges a monthly subscription fee of$9.95, plus another$0.06 for every minute spent online. That's$3.80 an hour, back when the average hourly wage was less than$9. So downloading that Simple Minds MP3 will cost you more than$270. Just as well, no one had invented MP3s yet. The long and short of it is this. It's cheaper, quicker, and easier to go to Tower Records, so going online is very niche. Something for the geeks. At 6 p.m. on November 1, 1985, Q-Link goes live.

3:32Connect to the QuantumLink network and suddenly, a diverse, new, interactive world of easy-to-use services is right at your fingertips, beginning with People Connection, the social center of quantum link, where people from across the nation converse, exchange information, share ideas, and participate in informative lectures. Ah, just smell that digital idealism. People are going to get online and take part in informative lectures. They're definitely not going to doom-scroll cat videos and argue like overtired toddlers, hmm? But chat isn't all the Q-Link offers. There's email, sports reports from USA Today, breaking news from Reuters and games like Hangman and Blackjack.

4:19There's even rock and roll news, so you'll always know what Phil Collins is up to. By early 1986, 10 ,000 people are signed up with Q-Link. It's not enough to make it profitable, but it is enough to attract investment and get quantum on firmer financial footing. But there's a problem. Commodore computers are losing market share. So Quantum moves to bring its online services to other computers, starting with Apple. In 1988, Quantum's Apple Link service goes live. Soon after, it launches a service for PC owners. But Case is worried the services feel faceless. He wants them to feel friendly. Quantum's mission is to make getting online easier.

5:09So, one afternoon in 1989, he floats the idea of adding a voice to the service. Right now, all users hear when logging on are the strange buzzes and chirps of their computer connecting with a service. Which sounds like this.

5:29Case tells his colleagues these sounds aren't welcoming. He wants users to be greeted when they log on and told when they get an email. The discussion is overheard by Quantum customer service rep Karen Edwards. She tells Case her husband is a voice actor, and so Elwood Edwards lands the job. He records the lines on a cassette deck at home. Quantum pays him$200 and then adds his tones to the service. Welcome. You've got mail. By the time Elle Woods' voice debuts in October 1989, Quantum has 75 ,000 subscribers. But it's not sports news or Phil Collins updates that are keeping people online. It's the chat rooms, especially the ones about sex.

6:20Quantum isn't too happy about that. It wants to project a family-friendly image. The worry is that all these chat rooms could cause a scandal. But the company's executives consider shutting down the chat rooms. And then they check the numbers. Users spend a lot of time talking dirty. And the longer they stay logged on, the more money Quantum makes. So, the company looks the other way. Quantum wanted a squeaky clean image, right? but when the dirty chat room started driving revenue, he made peace with it pretty quickly. And if you're in the trenches of business, you may have to make peace with this too.

7:06In business, ideological purity can be a luxury while pragmatism often pays the rent. So, what's the line you won't cross? And how far will you stick with it once you see what the competition's doing? But even with the sex chat rooms, Quantum is a distant third in the market. The market leader, CompuServe, has half a million subscribers, and the limited uptake of Quantum's service prompts Apple to cancel its deal with the company. Losing that deal gives Case another headache. Apple owns the AppleLink name, so Quantum needs to rename its service for Apple computers. So Case holds a contest to select the new name.

7:51After sifting through the entries, he decides the best idea is his own. And it's a name that captures the company's ultimate goal. America Online. AOL is here. And soon, everyone will know its name.

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