Time Warner's other subsidiaries include film production and distribution (Warner Brothers, Castle Rock, New Line), home video (Warner Home Video), and theatrical film exhibition (over 1,000 screens internationally). The Time/Life magazine publishing divi­sion, founded by Henry Luce in 1922, includes Time, People, Sports Illustrated, and In Style, and accounts for nearly a fifth of all magazine advertising revenues. Time Warner's book-publishing division includes Warner Books and Little, Brown and Company. Time Warner has stakes in various online media, including the Netscape browser, Compuserve, MovieFone, In­stant Messenger, and America Online, the largest sin­gle internet service provider.

Although Warner Brothers had diversified its film business into the recording industry in the 1920s with the advent of sound movies, it only became a full­-fledged diversified media conglomerate when Steve Ross's Kinney Corporation acquired it in 1969. Ross renamed it Warner Communications, Inc., and expanded into cable, publishing, and video games (for the Atari computer). Ross's management strategy was to foster competition and creative autonomy among divisions in order to attract and retain creative and managerial talent. WCI was known for its fractious internal politics, usually smoothed over by favors from Ross, a polymath with a taste for sweeping gestures and private jets. In 1989, looking to merge with a partner with complementary media holdings, Ross won a protracted legal battle with Paramount over Time Inc., publishers of Time magazine. However, the resulting merged company, Time Warner, went heavily into debt to finance the merger. When Ross died from cancer a few years later, bitter internal debates among Time Warner's film, music, and publishing divisions over "synergy" resulted in a protracted power struggle.

By 1993 Gerald Levin emerged the winner. Levin, a lawyer by training, had joined Time in 1972 when it acquired a small cable company in Manhattan known as Home Box Office. In 1976 Levin convinced Time to put HBO on a satellite feed (rather than microwave or landline) to deliver exclusive sports and film programming to local cable-operating systems. This innovation galvanized the growth of national cable networks and the subsequent increase of cable penetration into the majority of U.S. homes. Levin had paired an old distribution system (cable wires) with a new one (satellite feeds); he would attempt to replicate this early success throughout his tenure at Time Warner.

However, tensions over "synergy" simmered throughout the 1990s. For example, the film division refused to sell pay-cable rights for its films to HBO for less than what it thought it could receive from other pay-cable services. Warner Music was reluctant to license its artists' work to the film division. Conflicts among the divisions reflected concerns that each would suffer reduced divisional profits if forced to sell their products at a discount to buyers within the conglomer­ate. Thus, despite occasional successes such as the fran­chise of Batman feature films, the concept of "synergy" fell from favor. In 1996 Levin reversed his course toward streamlining the conglomerate and instead over­saw   the   purchase   of   cable   magnate   Ted  Turner's company (TBS, TNT, CNN). The absorption of Turner's cable networks solidified Time Warner's mar­ket   power   in   television:   its   combination of  cable­ operating systems in top markets with Turner's highly rated cable networks gave Time Warner strong negotiating leverage with competitors. Time Warner also developed an interactive television service, the Full Service Network. Unlike one-way cable service, this was a two­ way distribution platform that could provide video-on­-demand, retail sales, games, and communication services. However, the technology and implementation costs remained too high in the mid- 1990s; Time Warner was forced to take large losses on its investment.

By the late 1990s, Internet networking and the World Wide Web threatened to replace or converge with television as the next mass-distribution platform. Levin oversaw a number of online initiatives at Time Warner, including Pathfinder, an attempt to link Time Warner's companies through the Web. In 1999, concerned that Time Warner would lose its competitive edge because of its dependence on "old media" businesses such as magazines and film, Levin reached an agreement with Steve Case, then head of America Online, to merge the two companies.

America Online had evolved from a small online game company to the largest single Internet service provider (ISP) in the world, peaking at over 20 million subscribers in 2000. Case's clever marketing strategies for AOL were rooted in his own experience as a frustrated online user in the 1980s. Case realized that if the online experience could be easy to use, fun, and affordable, it could reach a mass market. Instead of trying to sell its software to consumers wary of computers, AOL freely distributed millions of copies of its software through mass mailings. Having had a free introduction to the service, users then paid AOL based on time spent online. By 1992, AOL had overtaken competing ISPs, redesigned itself to provide its subscribers access to the rest of the Internet from within AOL, and changed its pricing to a flat monthly fee. Noting that most subscribers preferred user-generated content such as chat rooms. AOL also reversed its relationships with professional content providers. such as Newsweek magazine. Rather than paying to display repurposed content, AOL asked the providers to pay for access to AOL users' screens. This not only reduced overhead but generated a new form of revenue for AOL, as content providers accepted AOL's terms in order to maintain access to millions of potential customers.

However, AOL's rapid success and subsequently overvalued stock exposed the company to hostile takeover attempts (from powerful companies such as Microsoft). Case also knew that the dial-up Internet access market would begin to shrink once broadband Internet access became more available. Broadband, whether over DSL phone lines or cable lines, offered the possibility of larger markets for online content and services. Case's selection of Time Warner as a merger partner was thus predicated in part on Time  Warner's control of cable-operating systems in top markets. After having had little success in convincing other cable operators to offer AOL broadband services over their wires, Case and Levin theorized that the combination of AOL's online services brand with Time Warner's cable pipes would give AOL Time Warner a competitive advantage. 

The merger of AOL and Time Warner, announced in January 2000 just before the collapse of the dot-com boom in April 2000,  was completed  in  January 2001. In order to gain regulators' approval for their merger, AOL Time Warner had to contend with claims by competitors that its online and cable market dominance would create "bottlenecks," which would allow AOL Time Warner to discriminate against unaffiliated content providers. AOL Time Warner had to  guarantee competitors' access to its cable  lines. Confident  that they could aggregate the conglomerate's  100 million subscribers, Case and Levin argued that the conglomerates cross-promotion of AOL online services (both dial-up and broadband), Time magazine subscriptions, Time Warner cable subscriptions, as well as HBO subscriptions, would provide a stable source of revenue as well as fuel for rapid growth. AOL Time Warner would be positioned to become the market leader in entertainment technology services such as video-on-demand, interactive television, and broadband.

However, by 2003, as Time Warner's stock price suffered severe decline, the merger was heavily criticized by investors for pursuing the aim of media convergence at the cost of its core businesses. Broadband penetration lagged behind optimistic estimates, and the feasibility of interactive television was unclear. Conflicts between Time Warner executives and AOL executives broke out into the open. The number of AOL's dial-up subscribers flattened out, and its advertising revenues dropped drastically after the collapse  of many of its dot-com advertisers. AOL, rather than being the "crown jewel" of the new, merged company, threatened to pull down the value of the entire conglomerate. A series of executive resignations followed, including Levin and Case, who continued to insist that their vision that "convergence is the wave of the future" was accurate despite the market's slowness in accepting it.

Renamed Time Warner in 2003, CEO Richard Parsons reduced the conglomerate's debt by selling less profitable divisions, such as Warner Music Group, and its interest in the cable network Comedy Central. Al­ though the AOL Time Warner merger did not immediately result in a "fundamental transformation of the media and communications industries," as Case had claimed in 2001, Time Warner's focus on amalgamation as its key strategy for managing risk and reducing competition continues to shape the structure of the television industry, as well as the media and entertainment industry at large.