It's official: There's now more than one Goliath online.
After years of viewing Microsoft as the 800-pound gorilla in the Internet business, the world woke up Monday morning to news of America Online's purchase of Time Warner. Oh, it was formally called a "strategic merger of equals" in the press release -- in deference, no doubt, to the many egos atop the Time Warner hierarchy. And it's true that Time Warner's Gerald Levin gets to be CEO of the new company.
But over on the AOL.com site a headline reported, "AOL To Buy Time Warner for $166B" -- and that's the truth. The new company may be named AOL Time Warner, but in this equity-crazed age, what counts is the ticker symbol. And AOL's 55 percent share of the new company means that stockholders will type "AOL" into their browsers to see how the combined entity is faring in the market.
On the surface, what happened Monday is simple: AOL, the leading provider of dialup Internet service, needed a strategy for moving its customers forward into the much-ballyhooed world of high-speed "broadband" access, controlled by telephone companies and cable TV operators (such as Time Warner). Time Warner, the ungainly media conglomerate, needed a credible way to salvage its Internet strategy after a decade of failure in the digital realm -- from the colossal flop of its "Full Service Network" interactive television experiment to the spectacular flameout of its misconceived Pathfinder Web portal.
Put the two companies together and you get something like Monday morning's press conference announcing the deal: A torrent of references to "synergy," "one plus one equals three," "the media value chain," "the convergence of media, entertainment and communications," and "new benefits to consumers." You also get an avalanche of hype: One analyst declared, "It is probably the most significant development in the Internet business world to date."
There's no question that the combined company -- which weds AOL and Netscape to the full Time Warner stable of cable networks and cable service operators, publishing firms, movie studios and music companies -- will boast impressive market share and power. If Microsoft still thinks it has a chance to challenge this colossus in the media business, the software company is even more arrogant than its enemies paint it.
But that doesn't mean the future is necessarily golden for AOL Time Warner.
Here's what the people on that press conference podium didn't say: These companies leapt into bed not because they felt confident but because they felt insecure.
Time Warner has spent more money on the Internet with fewer results than any other media company. AOL is afraid of missing the broadband bandwagon. Both companies see their new corporate spouses as perfect mates who can remedy their own inadequacies. And everybody knows what happens in marriages like that.
Once the dust settles from the analysis of who got the better deal financially, the question AOL and Time Warner will both face is: Can a merger on this scale work on the Internet? Will AOL's proven expertise at making the online experience easy and accessible be of any use to Time Warner as it tries to straighten out the jumble of its online properties? How will Time Warner's cable services help AOL conquer the broadband universe if the combined companies remain committed to the "open access" that AOL has been campaigning for over the past year?
Other questions we're already hearing: Are there more old media/new media weddings on the way? Does Yahoo buy Disney? Does Microsoft defy the feds and try to purchase AT&T?
What all these questions take for granted is a phenomenon today's news confirms: Corporate media power really is getting scarily concentrated. Just as the crazy weather patterns of the last few years are forcing even naysayers to think about the likelihood that global warming is for real, so today's merger ought to give even the most die-hard free-marketeer cause to stop and wonder where we're going.
Two years ago, Jeff Berg of the Hollywood agency ICM declared, "By the year 2000 there will likely be 10 to 15 media structures that will determine what we see and hear." So far, the year 2000 seems to be bearing him out. The Internet will remain a great incubator of new ideas, small companies and innovative media -- but let any of them become too valuable and one or another of the behemoths will snap it up.
Two mysteries remain after Monday's press conference. First, why did every exec feel compelled to mention the deal's "positive impact on society" -- Ted Turner, who threw his 10 million or so shares of Time Warner stock behind the deal, even declared it would "create the most exciting and socially conscious company the world has ever seen."
What's going on? Is the new AOL Time Warner going to become the Ben & Jerry's of media? Or are all these men hoping to forestall any potential regulatory obstacles to their merger by sending these carefully worded "good citizenship" signals?
The other mystery is how the companies managed to keep this massive, complex deal so completely a secret, with nary a leak in sight. These are both media companies, right? What kind of journalists work for them, anyway? Or could the tight lid on this story be a harbinger of the kind of controlled presentation of the news we can expect to see more and more of as the media falls into ever fewer corporate hands?
Watching Gerald Levin answer questions from his own employees at the AOL Time Warner press conference, broadcast over his own networks (or on the AOL Web site, where I saw it), you just might get a glimpse of the future. More and more, it seems, this is the "new media."
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