January 10, 1990, marks the official founding of the media conglomerate Time Warner, created by the merger of the publishing giant Time Inc. and the entertainment firm Warner Communications. The deal, which was valued at $14 billion, created what was then the world’s largest media and communications company, and was engineered by Steve Ross, the Warner CEO.
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The transaction was controversial, but few could disagree that Ross made off well, netting himself $196 million and guaranteeing him the job of company chairman for the next decade. Unfortunately, less than three years later, Ross was dead of prostate cancer, at age 65.
Although Ross lacked the educational credentials and corporate grooming of a typical CEO, he made up for those qualities with charisma and vision. It was with those natural talents, and a great deal of personal warmth, that he was able to move in a relatively short time from the funeral business to parking lots to control of a movie studio and record company, with a fleet of corporate jets and a list of friends who included Steven Spielberg, Barbra Streisand, Pele and Henry Kissinger.
Those who dream all day
He was born Steven Jay Rechnitz on April 5, 1927, in Flatbush, Brooklyn. After his father, a builder, lost his business during the Depression, he changed the family name to “Ross” and looked for work in another field. When Max Ross was on his deathbed, he gave his son the following advice: “There are those who work all day, those who dream all day, and those who spend an hour dreaming before setting to work to fulfill those dreams,” as the New York Times recounted in its 1990 obituary for the son. “‘Go into the third category,’ Max told his son, ‘because there’s virtually no competition.’”
Ross attended a private school in Manhattan on an athletic scholarship, served briefly in the United States Navy at the end of World War II and spent two years at a junior college in upstate New York. When he married Carol Rosenthal in 1953, he went to work for her father’s funeral-home business, the Riverside Memorial Chapel. Seeing that the firm had a fleet of limousines sitting idle at night, Ross suggested leasing them. When that went well, he started his own car-rental agency, before joining forces with Kinney, then New York’s largest parking-lot company.
By 1961, Ross was president of a company that included the funeral home, the parking lots and an office-cleaning business, and within months took it public. The tilt toward show business came in 1966, when Ross bought the Ashley-Famous Talent Agency. Three years later, he added Warner Bros.-Seven Arts, which included both the movie studio and record company, to his stable, for $400 million in stock.
Soon after, the company began to shed its non-entertainment businesses, renaming itself Warner Communications in 1971. Most significantly, it began buying cable-TV companies, at a time when that industry was still in diapers.
Ross had great business acumen, but he also had the ability to choose good managers and give them a wide range of independence. Combined with a very generous compensation policy, he got excellent results with, for example, the record group, run by Ahmet Ertegun and Robert Morgado, reaching revenues of $3 billion by 1991.
What Ross didn’t have was a significant financial stake in the company he was growing: When the merger took place – technically, it was the Waspy Time Inc. that bought the very Jewish Warner Communications – Ross owned less than 2 percent of its stock. Nonetheless, he ended up as the new company’s sole CEO. And when the deal went through, joining the forces of an empire that owned some of the world’s leading magazines and HBO with one of its largest movie, TV and music companies, it saddled Time with more than $11 billion in debt.
In the 25 years since Steve Ross’s death, Time Warner has had to transform itself on a number of additional occasions. Most recently, this past October, AT&T announced its intention to buy the company for $85 billion. A very big transaction, no doubt – but one that lacks the drama or sparkle of a Steve Ross deal.