By Frank Ahrens
Washington Post Staff Writer
Thursday, November 16, 2006
AOL chairman and chief executive Jonathan F. Miller will be replaced by Randy Falco, a top NBC Universal executive, in a surprise high-level shake-up announced last evening by AOL parent Time Warner Inc.
Falco is president of the NBC Universal television group and has worked at NBC since 1975.
"A key to Time Warner's digital future, AOL is showing early success in transitioning to an advertising-focused business model, and Randy is a first-rate choice to ensure AOL realizes its promise," said Time Warner Chairman Richard D. Parsons. "We thank Jon Miller for his four years of farsighted leadership during a difficult time at AOL. We wish him well as he moves into the next phase of his career."
His ouster cements Miller's place as a transitional leader for the Dulles new-media pioneer. He has been overseeing the company's radical turnaround from a subscription-based model to an advertising-supported company with good results. Ad sales for the most recent quarter at AOL were up 46 percent, the company reported this month.
"Rarely do you come into an organization with as many challenges as AOL faced when I arrived and then have the great satisfaction of putting it on sound footing," Miller said. "I've had that opportunity at AOL over the past four years, and I'm proud of what we've accomplished."
In many ways, AOL is moving from being an Internet company to being a media company that provides content, and NBC is becoming an Internet company in addition to a media company, as all networks are trying to do.
With his experience as head of NBC advertising, Falco may be able to lure ad dollars traditionally spent on television to AOL. And Falco has long-running relationships with NBC-owned and affiliate stations at a time when AOL is seeking more video content, much of it local.
"While we believe AOL made the right move to shift to a free-portal model, it remains to be seen how AOL can maintain [and] grow its share of eyeballs . . . long-term, as new entrants are taking share and mitigating the need for AOL," said analyst Richard S. Greenfield, managing director of Pali Research. "Beyond its core [instant-messaging] and e-mail base, where is AOL's growth going to come from, versus a MySpace, YouTube, Facebook, ABC.com [and other sites] that didn't really exist two years ago?"
Though Falco is well-liked at NBC Universal, his exit may have been prompted by the perception that he has hit a glass ceiling at the company, which is owned by General Electric Co. Falco's boss, NBC television chief Jeff Zucker, is seen as the successor to NBC Universal chief executive Robert C. Wright. Before Zucker's elevation to No. 2 at the company, Falco reported only to Wright.
Miller joined AOL in August 2002 at its lowest point, inheriting Justice Department and Securities and Exchange Commission investigations of the company's accounting and the fallout of the merger with Time Warner, which led to massive financial restatements.
Since then, Miller has overseen the layoff of 1,000 employees and watched millions of subscribers leave AOL's dial-up access service as it has struggled to adapt to the high-speed Internet era.
A lifelong media executive and a natural salesman, Miller got executives at Time Warner to buy into a 180-degree rethinking of AOL. It would allow dial-up subscribers to leak off and hope to make up the lost revenue by selling more advertising, now that more users have fast Internet access. It was a risky gambit. As America Online, AOL made its name and profits as a subscription service, charging a monthly fee for dial-up access to the Internet. At its height in 2002, AOL had 26 million subscribers, a number that is down to 15.2 million.
When this year's third-quarter advertising numbers started coming in after the switch-over, Miller was surprised by how strong they were. "I'm looking at all these stats and saying, 'Oh, my God, it's actually happening,' " he told reporters and editors during a visit to The Washington Post this month. The company still faces challenges. Despite the rise in ad revenue, lost subscribers dinged the total revenue figure, which was down 3 percent in the quarter.
Still, the question: Now that AOL is gaining traction, why replace the top executive?
One source close to the changeover speculated that Miller's strength may be in turning a business around, while Falco's is in operations, now that AOL is seen to be on the right track.
Miller would have liked to stay in his job, said the source, who spoke on condition of anonymity because of the sensitive nature of Miller's exit.
Time Warner shares rose 10 cents yesterday, to $19.98. After bottoming out at less than $10 a share in summer 2002, the company's stock price generally has climbed since.
Falco is a broadcasting veteran, joining NBC out of college and working his way up through the finance and advertising side before moving to programming in 1993. Falco has been NBC's go-to executive for its Olympics coverage since 1992.
Miller came to AOL after running the interactive parts of Barry Diller's USA Networks (now InterActiveCorp), where he oversaw such businesses as Ticketmaster and Match.com. He also worked at Nickelodeon, Paramount and the National Basketball Association's television operations.