EM: How will the $8 billion stock acquisition of Turner strengthen Time Warner and, pos
Mr. Levin: I'm very excited by the prospect of putting Time Warner and TBS together because they really are a perfect fit. These are businesses and people we know intimately.
I'm very comfortable with this, probably more so than any other single business transaction I've been involved in because of the 8 history, the people, and the quality of the Turner networks and libraries.
There are two words I don't use: "synergy" and "vulnerability." Synergy is an often misused word. .*.*. I think we should always be vulnerable to change. We should be held accountable for the highest standard of performance, which ultimately is measured by total return to shareholders.
EM: Can't you also use Liberty's 9% stake to thwart the advances of an unwanted suitor?
Mr. Levin: Yes I could, but that's not the intent.
EM: So when John Malone says he intends to be a passive and supportive investor long-term, you don't see circumstances changing so that he might at some point attempt to take over Time Warner?
Mr. Levin: No. I'm a realist. I'm not naive. But also, I am not cynical. John Malone should be taken at his word. That is his intention.
EM: What will you specifically set out to do now that you couldn't have done before?
Mr. Levin: What [the deal with Turner] enables us to do is to drive home the strategy of Time Warner, internally and externally. It provides a position to articulate a very strong programming, production, distribution, multimedia strategy, where the value creation comes from teamwork that extracts value from various parts of the company.
Until now, that hasn't been necessary because the merger of Time Inc. and Warner Communications did provide these opportunities. What TBS does is make it crystal clear there are so many opportunities in programming, in news, in cable networking and worldwide distribution.
This transaction, and my position as a result, will alter the culture of Time Warner. That's why I consider this a fresh start.
EM: What will Ted Turner begin to do after the merger?
Mr. Levin: I think Ted will be working very closely with the studio and TBS to enhance the Turner networks, whether that is the Cartoon Network or a converted WTBS. At the same time, the Turner networks and Ted can be extremely helpful in the development of the WB Network.
As we look at the collection of networks and programs that can be offered internationally in Asia, Europe and Latin America, I think Ted, the studio and HBO have a very powerful platform to work from. We've already started to do that.
EM: To what extent will strategic equity partnerships continue Mr. Levin: Strategic partnerships are important in this new world because the assignments are so large and nobody has the individual expertise.*.*.
We do want to grow in the three growth areas of cable: telephony and telecommunications, personal computer-based broadband PC cable and digital interactive television. They all require relationships and partnerships.
U S West has actually been very helpful getting our telephony activity up and running. With the onset of new telecommunications legislation, the whole area of local telephony and long distance is going to start melding. We probably will need additional partnerships in order to have a full telecommunications package.
Does AT&T's restructuring better facilitate a partnership with Time Warner?
Mr. Levin: It probably does. We have had and are having ongoing discussions with AT&T, but nothing I can describe.
EM: Anyone else
Mr. Levin: Strategically our focus would be on new media and people who are players there or who have an orientation in new media.
EM: Such as Microsoft?
Mr. Levin: Don't count on that, but someone like Microsoft.
EM: An AT&T partnership would be supplemental to a regional Bell operating company relationship, which you have with U S West. How would you describe your relationship with U S West in light of your differences and the lawsuit it has filed against Time Warner?
Mr. Levin: Well, it's very difficult when it is in the context of litigation.
EM: I know you fully support what you are doing to develop a broadcast network of your own in the WB. Are you interested in merging it with UPN or acquiring an existing full-fledged broadcast network?
Mr. Levin: The WB is very important. It's a branded family-entertainment service that uses not just our own programming but that of several different suppliers. Most importantly, the WB is a significant distribution outlet for our animated programming.
Our intention is to build this network with Tribune as a partner, with some cable distribution to get some additional coverage, and now with the promotional and programming capabilities of TBS.
EM: You've talked to GE and NBC before about buying into or
Mr. Levin: Right now the rules would prevent it, so it is hard to speculate.
EM: Are there discussions under way to bring NBC News in the loop with CNN and Time Inc.?
Mr. Levin: There are always ongoing discussions, but nothing that I would point to right now.
EM: What have you learned from your Full Service Network operation in Orlando?
Mr. Levin: We now have a three-stage development process for digital activity: the first is telephony, the second is broadband personal computer activity. Both represent variable cost upgrades delivering information through a personal computer. The third and final stage is the Full Service Network, a complete digital and interactive path using television as a display unit.
We've always said that was going to be the development process, and that the FSN was the last of three stages. But it has been important for us to get into the marketplace to learn and understand.
What it has done for me is to indicate not that it always takes longer than what you think but, in fact, the key to the future of cable is digital technology. I am totally committed to the on-demand concept-getting the material on demand and being able to stop it and manipulate it. It has to be the ultimate goal of where all these systems should be.
EM: So, when do you make the jump from where you are now to it becoming a viable, profitable mass market business?
Mr. Levin: Telephony builds over the next 18 months; PC cable is in the next 21/2 years; and the Full Service Network is in the next four years.
EM: Where do you see this company two to five years after you close the deal with TBS, and what do you see as your own situation at that time?
Mr. Levin:....I am a very tenacious and a very passionate believer in the strength of what Time Warner represents. I expect that will become very clear in terms of our share price, and the quality of our information and entertainment, and the enjoyment people will have working with and being in Time Warner.