The announcement last week of America Online’s merger with Time Warner should finally convince the declining number of naysayers that the Internet is here to stay as a major player in communications and media.
The mega-merger allows each company to get a piece of the Internet future they couldn’t get alone. Time Warner brings to the table an enormous cache of content while AOL provides the next-generation audience and e-commerce potential unavailable in traditional media.
Time Warner has been ripe for a big Internet play ever since they scrapped their Pathfinder web site – a site so overcrowded with choices that it suggested a stamp collection from the Publishers Clearing House sweepstakes. While Time Warner was still smarting from their 500-channel Full Service Network pipe dreams of interactive television in the early 1990s, the failure of Pathfinder demonstrated they needed some professional Internet assistance in leveraging their vast content.
AOL survived its mutation from a proprietary online service and is now the leader of gateway Internet usage, being the preferred provider for Internet newbies. Let’s not forget that while Internet usage has grown exponentially over the last five years, we still have well over half the U.S. population to go! (And there are still people, like Greg’s parents, who need to first install phone jacks in place of their hard-wired phones before they can think about plugging in a modem anywhere.)
AOL also has had no real broadband strategy, which most analysts say is the next step for anyone serious about Internet and media convergence. Time Warner with its RoadRunner service may be able to provide that broadband, despite its limited users now.
“You’ve got your music label in my chat room!”
But this is more than just putting television on your computer or about putting the Internet in your TV. This merger creates a globally important company that will have – and is already having – a huge impact on consumers as well as on anyone who has to deal with the media, from advertisers to marketers to public relations professionals.
In our own articles from the mid-1990s we characterized the Internet and the web as the “great levelers,” as the medium that allows smaller businesses and alternative ideas to be heard alongside the large traditional media conglomerates. But as the web has gone from an information superhighway laden with billboards to a congested thoroughfare lined with strip malls, the character of the Internet has changed.
Why Buy the Cow When You Can Charge for the Milk?
AOL has partnered with other content providers for a long time – most often charging them for the privilege of publishing their content on AOL. So why buy now? AOL may have determined their piecemeal approach to content partnerships would not push them to the next level: that of serious player.
Along came Time Warner, the number-one media entertainment company in the world. Their media properties (i.e., Bugs Bunny and CNN) are the best branded in the industry. This merger gives AOL a cohesive content strategy they could not have accomplished on their own.
For Time Warner, the granddaddy of traditional media companies, the fragmentation of audiences posed a serious threat to their bottom line. Time Warner needed a way to bring back together these disparate audiences into manageable groups (something 500 channels certainly wouldn’t have helped).
It’s not about watching TV on the Internet, but rather about creating a true new media network. Many analysts agree we’ll see more of these mega-media mergers over the next couple years. Some are whispering about Yahoo, Disney, and News Corporation being primed for such a merger – although not necessarily together.
Do They Have a School for New Media Platitudes Like This?
At the merger press conference, Steve Case sounded eerily like archnemesis Bill Gates when he said the merger was about “the company’s potential for innovation and choice” and “serving consumers.”
What does this really mean for consumers? Critics and advocacy groups call it “herding” media consumers into groups that can be homogenized. They are warning against mass distribution and the “corporatization” of information.
The Internet, unlike the broadcast airwaves, is not considered a public trust, although enormous public resources were used to create it. In other words, content providers on the Internet are not beholden or accountable to their audiences, except in creating consumers out of viewers and readers.
For public relations professionals, it means more and more flacks are pitching fewer and fewer media outlets, creating a bottleneck. Although there’s much talk and theory about targeting messages, too many PR newbies think the only road to salvation is a story on network television or the front page of The New York Times.
For both consumers and public relations professionals, the gatekeepers are reclaiming what was once theirs: the management of the American consciousness. But to achieve that, AOL and Time Warner now that they’re a combined entity need to prove that their waning market share in the present and their convergence failures of the past are somehow behind them.
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