Kara Swisher

Recent Posts by Kara Swisher

The $125 Million-Sweet DailyCandy Revenge of Bob "Pitchman"

Oh, there had to be much, much gnashing of teeth in the corporate offices of the Time Warner Center in New York yesterday with news of the sale of DailyCandy to Comcast for $125 million.

Why?

Maybe because that tasty payment is going right into the hands of Bob Pittman’s Pilot Group Ventures, which bought the fashion and shopping newsletter business for $3 million in 2003.

Longtime media exec Pittman was the former star AOLer, whose nickname was Bob “Pitchman” for his smooth-as-silk selling and even more marked spinning skills.

But the Web 1.0 supernova fell quickly to earth, after the online service merged with Time Warner (TWX) in early 2001, in what is now considered one of the more significant world-class corporate disasters.

After being tossed out of AOL Time Warner in mid-2002, Pittman (pictured here), along with AOL head Steve Case, was blamed for the stock decline and other woes at the media giant by the Time Warner side, whose deep bitterness toward him has never really faded away.

Now, with Time Warner trying to make a deal to sell the AOL unit for up to $10 billion to Yahoo or Microsoft–despite it being valued at $20 billion only a few years ago–Pittman’s small but impressive score has got to grate.

“I have been associated with the start-up, turnaround or acceleration of many companies and major brands, and rarely have I seen the kind of creativity, commitment and passion I’ve seen day in and day out at DailyCandy,” said Pittman in a letter to DailyCandy staff yesterday about the sale. “And the results speak for themselves: Since we made our investment in 2003, subscriptions have grown from just over 200,000 to over 2.5 million.”

In the letter, Pittman said the company’s EBITDA was over $10 million this year on revenues of $25 million.

This is certainly different from the situation almost exactly six years ago when Pittman was driven out of the then-named AOL Time Warner on the proverbial rail.

If you want a taste of those once-grim times for Pittman, here is an excerpt from my book, “There Must Be a Pony in Here Somewhere: The AOL Time Warner Debacle and the Quest for a Digital Future,” which was published in 2003.

The section comes from Chapter Six, “Way, Way After the Goldrush,” as the deal imploded:

THERE’S NO BUSINESS LIKE NO BUSINESS

Despite the troubles, Pittman, Case and [former AOL Time Warner CEO Dick] Parsons grinned out from the June 2002 cover of AOL Time Warner’s internal magazine, called Keywords, under the headline “Lift Off!” Actually, “Grounded!” would have been a more accurate headline, given the problems that would mount over the summer.

That was especially true at AOL, where Pittman found that just about everything–from morale to ad sales to subscriber numbers–was trending downward at an accelerating pace.

He had grown weary of infighting at the company, exhausted from the traveling and worn down by the prospect that turning around AOL would take more work than he had ever imagined.

For three months, he’d been trying to revive AOL while still working as COO of the combined company. Pittman was stretched about as thin as he could go, and AOL was still sputtering.

“He had been getting a pounding and he did not see a way to turn it around,” said AOL marketing whiz Jan Brandt, whom Pittman had brought back into the top echelons of the company upon his return. “And there was no end in sight.”

Indeed, for Pittman, there was no end in sight for the time it might take to fix AOL, especially because of how badly he and his team had alienated the entire Time Warner management.

The New York Post even began running a regular “Pittman Meter,” an obnoxious graphic that offered assessments ranging from whether he was “toast” to “safe” on any given day.

Mostly, Pittman was burnt to a crisp.

With increasingly skepticism that he could fix the problems at AOL, Pittman went to Parsons before the July 4th holiday weekend and told him he wanted out.

“I can’t do this anymore,” said Pittman to Parsons, who urged him to think things through over the weekend.

But the weekend put him over the edge, when the New York Times–whose reporter, David Kirkpatrick, had become a favored outlet for disgruntled Time Warner executives to vent—ran a scathing piece detailing Pittman’s failure to turn things around at AOL and suggesting there was a target on his back.

“Executives and shareholders are united in more or less open revolt,” wrote Kirkpatrick. While the story referred to discomfort with the departed Levin too, it singled out Pittman explicitly.

“Most of all, Time Warner executives have turned their ire specifically at one man–Mr. Pittman, a former America Online executive who became chief operating officer after the merger,” it read. “He angered many Time Warner executives with what they called his brusque manner … he developed a reputation for brashness, ruthlessness and success at America Online, and he applied the same tactics at Time Warner on his return.”

As if channeling the Time Warner side’s anger, Kirkpatrick summed up their message: “Now many executives from the former Time Warner wish the merger would go away, and, barring that, they wish that Mr. Pittman would.”

In the article, Parsons was quoted offering a rather tepid defense of Pittman: “People get angry and that anger has to be attached to something or someone,” he was quoted as saying. “Some of it has been attached to Bob and I am not sure if it is entirely fair.”

Well, not entirely, Parsons’s quote seemed to indicate to me–but maybe it’s a little fair! This deft response definitely did not look good for Pittman.

And with Parsons firmly ensconced in the CEO position and no place higher up on the ladder for Pittman to go, what sense did it make for him to keep fighting what was, for the foreseeable future, a losing battle in which he would probably end up getting tossed out anyway?

With the executive ranks blaming him and the board losing faith that he could turn AOL around, Pittman had no chance of regaining any credibility as COO.

“Pittman left on own steam, but he knew what was coming,” said one board member, who actually admired Pittman.

Pittman wanted to announce he was leaving, but Parsons asked him to delay the news until the board could approve a new management structure in mid-July.

His plan was to promote Time Inc.’s Don Logan and HBO’s Jeff Bewkes to the top of the AOL Time Warner structure, effectively splitting Pittman’s duties into two positions, both of which would report directly to Parsons.

Logan would head the Media and Communications Group, the subscription and ad businesses that would include Time Inc., Time Warner Cable, the Interactive Video Unit, Time Warner Books and AOL.

And Bewkes would run the Entertainment and Networks Group, made up of HBO, New Line Cinema, The WB, Turner Networks, Warner Bros. and Warner Music.

Getting the pair interested in the arrangement would be difficult, given the recalcitrance both had felt toward the merger in the first place.

But it was critical for Parsons to pull this off, since Logan and Bewkes were considered the best and most successful operators in the company, though they were vastly different in personality and style.

Logan, who had been the CEO of Time Inc. since 1994, was one of the most admired managers in the company, especially within his division, where he was openly revered for turning around the fortunes of the magazine publishing house.

An Alabama native, he was the son of a housewife and a welder for the state highway department. Logan went to Auburn University as a math major, and worked his way through school as a computer programmer for NASA in Huntsville. He continued his studies–specializing in abstract math–at Clemson University, and went on to pursue a doctorate part-time the University of Houston.

While in Texas, he worked for Shell Oil, creating research tools in the search for oil, but he found big-company life too slow.

Answering an ad for a Birmingham, Ala., publishing company called Progressive Farmer, later renamed Southern Progress, Logan worked first in data processing and fulfillment and later in direct marketing.

Time Inc. bought Southern Progress in 1985, and Logan was running it by 1986.

Admiring Logan’s reputation for consistent results, [former Time Warner CEO Jerry] Levin brought him to New York in 1992 as Time Inc.’s president and COO. Logan got the CEO spot two years later.

Logan fulfilled Levin’s expectations by goosing the magazine division’s results dramatically, turning in 41 consecutive quarters of earnings growth and tripling its cash flow.

Logan managed all this while affecting a folksy Southern image as a good old boy who just loved to go fishing. (He had even appeared on the cover of Field & Stream in a feature about jungle fish.)

Pretty much everyone I asked about Logan felt the need to mention his fishing, as if it were mysterious and complex part of his nature–imagine that, a fishing math major!

In the company newsletter, Logan was quoted as noting that business was a lot like fishing, in that they both require “persistence and patience.”

The burly Logan might have had true “down home” bona fides, but he was as smooth as any city slicker in leading the potentially divisive troops at Time Inc.

His greatest strength appeared to be in leaving people alone, yet demanding performance as a price for that independence.

“He was a straight talker in a culture of bullshit and platitudes,” said former Pathfinder executive Linda McCutcheon. “And he believed you grew incrementally to greatness.”

The very qualities that were so admired at Time Warner were derided by AOL’s top brass, who considered Logan a typical Time Warner corporate timeserver and not much of a risk taker.

“He thought growing at five percent a year was a great accomplishment,” said the voluble [AOL ad exec] Myer Berlow. “He was not exactly the kind of person who welcomed us.”

The AOLers expected more rapport with Jeff Bewkes, the glib and good-looking head of HBO.

Much as everyone mentioned Logan’s interest in fishing, the word Time Warner people invariably used to describe Bewkes was “handsome.”

And he is indeed a handsome man, slim and tall with a curious mix of Hollywood glamour and vague preppiness that suited the more conservative elements of the company.

“Golden boy” had long been a defining image for Bewkes, who was a graduate of Yale University and Stanford Business School (again, that heady mix of traditional East Coast and trendy California).

The impact he made was a strong one–an executive comfortable with both Hollywood talent and deal makers alike.

Bewkes came to HBO many years previously, and worked in the finance and marketing departments. He was considered a winner even in his earliest days.

“We all used to assume he would eventually be the boss,” said a former AOL executive Mark Walsh, who worked with Bewkes at HBO. “He had this air of the inevitable about him that was very appealing.”

His star rose quickly and he eventually became the chairman and CEO of HBO, building a close-knit team around him that was responsible for burnishing the somewhat dull image of the pay-cable channel to an edgy sheen with such huge hits as “The Sopranos” and “Sex and the City.”

This conspicuous success quickly attracted AOLers, who identified with Bewkes’s more outgoing style and considered his passionate, entrepreneurial nature akin to their own.

They could not have been more wrong about his regard for AOL, though–Bewkes was one of the first executives to complain internally and loudly about the idiocy of the merger deal.

He wasn’t shy about challenging Steve Case’s dreamy ideas of convergence in company meetings, and he could pull it off because his HBO success gave him such credibility.

Bewkes’s ability to move with comfort through all parts of the company made everyone assume that he was headed for bigger things.

That included AOL, which Bewkes was asked to fix in early 2002. It was a position he’d quite smartly turned down, obviously aware that grabbing onto that sticky situation would hurt him.

Pittman really had no choice in being the one to take on AOL–although I joked to him when he went back to Dulles that he’d just been handed a tar baby that he’d have a hard time pulling away from without damage.

That was finally clear when the company announced his departure–which had been widely leaked in newspapers–on July 18.

As usual, his public statement had an odd mixture of spin and truth to it.

“I’ve decided that after a new CEO is in place at AOL, I won’t return to AOL Time Warner as chief operating officer,” he said. “Having worked so hard to build the AOL service and brand, and after then going through the merger and the last 18 months, it’s time to take a break.”

Managers and staff at other company divisions greeted the news of Pittman’s departure and the ascension of Logan and Bewkes with joy.

“The Taliban have been routed,” joked irrepressible Time Inc. Editorial Director John Huey, in what was a common sentiment.

Finally, Time Warner had taken back the company from the horrible invaders. The gloating ran rampant.

Media pundit and New York columnist Michael Wolff, who had worked with Time Warner on its various failed Internet efforts, took a dim view of the glee in his “This Media Life” column.

Wolff correctly asked: What had Time Warner really won by purging Pittman–who walked away with a fortune–and where would that leave the company?

“Of course, taking it out on the guy who outsmarted you does not, in turn, make you smart,” he wrote in his slap-down style. “[Pittman] doesn’t hang around a disaster area. This is show business. If the show flops, you close it. Onward and upward.”

AOL’s early CEO Jim Kimsey, who had long been enjoying his retirement, was even more direct, dialing Pittman up on the phone.

“Is this the unemployed Mr. Pittman? Because this is the unemployed Mr. Kimsey,” he greeted Pittman. “Congratulations–you moved Osama Bin Laden off the front page!”

But while Time Warnerites rejoiced in their hope that the merger turmoil was finally over, the company’s troubles wouldn’t leave the front pages for a long time to come.

We’ll see if that has changed at all, after Time Warner announces its second quarter earnings later today.


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Another gadget you don’t really need. Will not work once you get it home. New model out in 4 weeks. Battery life is too short to be of any use.

— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus