Bob Pittman Addresses AOL's Downfall, Surviving Digital Change

Bob Pittman Headshot - P 2012
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Bob Pittman Headshot - P 2012

The former co-COO of AOL Time Warner was among the panelists at the Milken Institute Global Conference on Tuesday.

At one time, AOL was the Internet’s premiere “walled garden” of services and content. But the removal of that wall that began in 2006 “was probably the downfall of AOL,” Bob Pittman said Tuesday.

“Facebook is the second walled garden after AOL. They are really smart and they are not letting anybody mess with their walled garden,” said Pittman, the former co-COO of AOL Time Warner who is now CEO of Clear Channel Communications.

Pittman was reminiscing about his yearlong stint at the former AOL Time Warner while speaking at the Milken Institute Global Conference at The Beverly Hilton, where 3,000 attendees paid as much as $6,000 apiece for full access to four days of panel discussions, parties and keynote speakers, including one scheduled Wednesday from President Bill Clinton.

Pittman also noted, somewhat ironically, that Clear Channel, a relatively old-fashioned company consisting of radio stations and billboards, reaches 237 million Americans, giving it a bigger reach than either Facebook or Google in the U.S.

Joining Pittman for a discussion on “evolving media” was conference founder Michael Milken, Dish Network chairman and co-founder Charlie Ergen and News Corp. deputy chairman and COO Chase Carey.

Milken noted the massive, creative destruction that has occurred in media by contrasting several large numbers:
-       In the 1950s it cost $2 million to store a megabyte of data. Now, it costs one penny.
-       In 2002, Netflix was worth $160 million and Blockbuster was worth $4.5 billion. Today, Blockbuster is essentially worthless and Netflix is valued at $4.5 billion.
-       In 1997, Apple was worth $1.65 billion and Sony was worth $34 billion. Today, Apple is worth $554 billion and Sony’s value has dropped to $16 billion.

Surviving such turmoil, said Pittman, depends on giving the customers what they want, even when it is counterintuitive, like with manipulating the sound quality on radio.

“Radio stations today compress the devil out of the sound,” he said. “They don’t get loud and soft, they stay the same volume all the time. We’re monkey-ing with the sound to make it what the customers want.”

Ergen said he’s doing just that by transforming Dish and sister company EchoStar into providers of mobile video, broadband and voice services.

“It doesn’t have to be that you drop three calls in New York City,” he said of the voice initiatives coming from his companies. “It doesn’t have to be that you get a bill you don’t comprehend. It’s that way because you only have two big companies in the business. But we’re going to change that.”

Ergen also lamented his decision to split Dish from EchoStar in 2007.

“In hindsight, I’m not sure what the strategy was,” he said.

In the next five years or so, he said cryptically,  “We’ll probably shake up our shareholder base a bit because we’re going to be a different animal as we go forward.”

Carey spoke of “explosive growth” for the satellite TV industry in Latin America, Asia and other parts of the developing world. InIndia, for example, there are as many as 40 million subscribers to the halfdozen or so operators – a News Corp. subsidiary being one of the larger ones – whereas about five years ago there were zero.

The panelists praised pioneers in the tech-media business Akio Morita, the co-founder of Sony who died in 1999; Apple CEO Steve Jobs, who died last year; and Time Warner CEO Steven Ross, who died in 1992.

“We can only imagine what Time Warner might have been like had he not passed away,” Milken said of Ross.

Ergen said things are changing so fast in his industry that “experience” is no longer among the top three things he looks for when hiring, and Pittman agreed, using Facebook as an example again.

Pittman said one way he saves money in newsgathering is to shy away from hiring experienced and expensive assignment editors and the like, and just allow staffers to throw a variety of stories on Facebook. The ones that “catch fire” will be the ones that make it on air at Clear Channel radio stations.

Digital advances, Pittman said, are causing chaos, but Clear Channel is embracing Internet and mobile radio because he’d rather cannibalize from traditional radio than allow someone else to, much in the same way Apple has cannibalized the iPod with the iPhone.

“Chaos is very much a part of doing something new,” he said. “We’ll deal with the chaos.”