Tuesday, January 11, 2000
Impact will be felt, from Looney Tunes to Time
BY CLIFF PEALE
The Cincinnati Enquirer
If you think the billion-dollar mergers seemingly happening every day don't affect your life, consider the $178 billion stunner announced Monday.
When America Online Inc. buys Time Warner Inc. in the biggest corporate merger of all time, it can put CNN programming on AOL networks. It can mail out free AOL promotional disks with every Time or Sports Illustrated magazine. Or it can put free teasers for Time Warner movies or music onto more than 20 million home computers.
Just as no deal has matched the dollars changing hands here, none has matched its potential to affect virtually every corner of American pop culture — from the aging magazine reader to the middle-aged movie viewer to the teen-ager surfing the Internet. Even to the toddler watching Looney Tunes.
All are media and Internet brands that will be accumulated in this new company.
For local AOL user Christine Fiorini of Colerain Township, the deal could provide immediate impact. Her Internet access comes through Time Warner Cable's high-speed Road Runner service, which could soon see AOL services like Instant Messenger, Digital City and MovieFone, the two companies said.
“Since I already have the cable modem, if I'm going to get AOL services, maybe I could consolidate some of these things,” Ms. Fiorini said.
With more than 20 million subscribers, AOL is the acquirer in the deal, which will create a company with a $350 billion market capitalization called AOL Time Warner Inc.
If it closes as expected by the end of this year, the merger will be the clearest sign yet that Internet companies are quickly catching and joining traditional media empires as the lead providers of information and enter tainment to every American consumer.
Some believe that's not such a good thing.
“We're talking about this brave new frontier, where all of these things can become competitors of one another,” said James Brock, an economics professor at Miami University. “But what is happening here is the opposite. As a result, we begin to lose the potential for that competition, that innovation.”
Others see it differently.
Craig Spies of Hartwell, another local AOL user, said the possibilities are endless, including downloading Time Warner movies through a personal computer or ordering cable TV over the Internet.
“Who knows where it's going to go?” he said.
The deal is only the latest in a series of media mergers, including the $36 billion deal marrying CBS Corp. and Viacom Corp. announced last year. But it is among the first moves by an Internet company to buy a mainline media provider.
AOL shareholders will own about 55 percent of the combined company, and AOL Chairman Steve Case will take the same title after the merger is done. He called the deal “an historic moment in which new media has truly come of age.”
“We've always said that America Online's mission is to make the Internet as central to people's lives as the telephone and television, and even more valuable, and this is a once-in-a-lifetime opportunity to turn this promise into reality,” he said.
The two companies touted growth opportunities including marketing Time Warner music and entertainment content over AOL's online networks, and combining AOL's “instant messaging” with Time Warner's local cable systems.
But they also outlined several agreements that would immediately combine some of the two companies' strengths, including:
• AOL promotional disks will be distributed through Warner Bros. retail stores and promotional mailings.
• AOL will feature Time Warner's InStyle magazine.
• Time Warner and AOL MovieFone will cross-promote Time Warner movies.
• AOL members could get discounts on Time Warner magazine subscriptions, cable subscriptions and movie passes.
While Miami's Mr. Brock contended that merging companies get “stodgier” as they get bigger, the two conglomerates insisted the deal would intensify their search for new technologies.
“The value of this merger lies not only in what it is today but in what it will be in the future,” said Bob Pittman, president and chief operating officer of AOL.
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