What's the most important asset of the newly formed AOL Time Warner (AOL) ?

Probably you, dear reader.

That was the message that AOL Time Warner executives hammered home again and again on Wednesday morning, at the first half of a

daylong meeting that the company called to explain its vision of the future to Wall Street analysts and high-rolling investors.

If you're a subscriber to a Time Inc. magazine, a member of the America Online service, or a watcher of the HBO television channel, you're the key to the company's growth, executives said. You're people who, according to CEO Jerry Levin, make AOL Time Warner not just a media company, not just an Internet company, but a company in "a different zone."

And, investors appear to believe, a slightly more lucrative zone. AOL Time Warner's shares were up $1.40 at midday, trading at $55.71.

The Consumer Relationship

Nearly all of the executives who faced the Wall Street audience Wednesday said the same thing, though with a slightly different spin. "If I had to use one word for AOL Time Warner, it would be 'subscriptions,'" said Levin. The key asset, Chief Financial Officer Mike Kelly said, are the company's 130 million paying customers. "The basic building block of value in this company starts with the consumer relationship," said co-Chief Operating Officer Bob Pittman. "The highest value is people who ... pay you."

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Now, the interesting part is what AOL Time Warner says it can do because of this. If you just think the company is in the business of selling advertising, you're thinking too small. Advertising comes out of companies' media budgets, says Pittman, and that would mean AOL Time Warner is fighting for pieces of a tiny media-buying pie. But AOL Time Warner can offer companies more than mere advertising as it seeks to move consumers from branded advertising to an actual sale.

For instance, it can deliver detailed information about the products consumers might want to buy, through properties such as AOL and Time Inc. magazines. And it can actually help execute the sale, through online commerce over AOL. So that means AOL Time Warner is going after trillions of dollars in spending, not the $125 billion Pittman says is in the media pie. "We've expanded the boundaries of that and gotten into budgets that are much bigger," he says.

AOL Time Warner says its cash earnings per share growth will grow 25% to 30% in 2001, while its revenue growth over 2000 is expected to be in the 12% to 15% range. The fastest-growing revenues for the company are expected to be advertising and commerce, projected to grow 18% to 22% for the full year. Earnings before interest, taxes, depreciation and amortization are expected to be up 30%, and free cash flow -- $920 million in 2000 -- is expected to more than double in 2001 and grow at a 50% compound annual growth rate over the next several years. Levin acknowledged that the company faces a risk relative to executing on its grand plans, but he said he was comfortable AOL Time Warner could handle the risk. "You should stop haircutting the company for that," he told his audience.

The Vision Thing

To get a larger chunk of this spending requires a company with a unified vision, and executives let drop various anecdotes about ways they were trying to get different units to work together. In addition to regular meetings of CEOs from different divisions, there are meetings in which ad sales people (if you'll pardon the expression) from different divisions discuss how to coordinate their activities.

The change in AOL Time Warner's compensation plan, explained co-COO Dick Parsons, was designed to get people in various divisions working for the overall good of the company, not just the success of their particular division. Promotions on the AOL service over the last year have snared 750,000 new Time Inc. magazine subscriptions, up from the 500,000 reported in October. And AOL is also being used to sell cable TV subscriptions.

While the company, which said growth this year will be coming primarily from its AOL and cable operations, still expects to hit the 2001 financial goals it set last year -- revenue of $40 billion and earnings before interest, taxes, depreciation and amortization of $11 billion -- it cautioned that some of what it was talking about wouldn't happen overnight. For example, Parsons said the company's experiments with online music wouldn't translate into revenue for two or three years.

But the company insists it will get it all done. Chairman Steve Case, in the context of AOL Time Warner's assertion that it had enough resources to make $50 billion worth of acquisitions over the next three years, said one of the numbers he was tracking was when the company would get to a trillion-dollar market cap (it's around $235 billion now); the other was when it would get to $100 billion in annual revenue, from south of $40 billion in 2000. Another executive made a joke about the goal, but it appeared that Case was only half joking.