Over the past year or two, the telecom, media and Internet industries seem to have been caught in a spiral of ever-larger mergers. Earlier this month, AOL took this trend to a whole new level when it announced it would acquire Time Warner to form AOL-Time Warner.
Over the past year or two, the telecom, media and Internet
industries seem to have been caught in a spiral of ever-larger mergers.
Earlier this month, AOL took this trend to a whole new level when it
announced it would acquire Time Warner to form AOL-Time Warner.
In announcing the world’s largest corporate merger ever, AOL chairman
Steve Case revealed his motives to be on a mammoth scale: ’I don’t think
this is too much to say that this really is a historic merger - a time
when we’ve transformed the landscape of media and Internet. This is a
once-in-a-lifetime opportunity to make the Internet as central to
people’s lives as the telephone and television’ (Atlanta
Journal-Constitution, January 11).
Over the past year, CARMA has reviewed coverage of many of the
mega-mergers in a variety of industries. But none of them has captured
the media’s attention like the surprise announcement of AOL-Time Warner.
Coverage of the AOL-Time Warner merger most often focused on the
symbolism of the union. Media reports portrayed AOL as relatively young,
but indisputably the leader of the new media of the Internet age, while
Time Warner was presented as much more established - the largest of the
traditional media companies. Journalists noted that it was the new media
company that was acquiring the old. The Boston Globe (January 11) quoted
an analyst who stated that with this merger, ’the distinction between
Internet and old media is getting obliterated.’
Many reports also focused on the valuable synergies the union will
create for the two companies. Coverage was peppered with images of
cross-marketing possibilities that could be undertaken using the various
well-known brands that would all be under the AOL-Time Warner name. For
AOL, the deal was seen as providing access to Time Warner’s ample media
content and access to high-speed cable wires, while the latter would
benefit from AOL’s online distribution.
While many recent mega-mergers seemed to have been in response to other
mergers, this one was seen as a whole new paradigm - the merger of
’clicks and bricks’ on a gargantuan scale. An editorial in The San
Francisco Chronicle (January 12) was among those reports that forecasted
a wave of further mergers in response to AOL’s move: ’Other cable, media
and Internet firms are expected to pair up for survival ... It’s not
Preliminary coverage indicated that federal regulators should review the
merger closely, simply due to the sheer size of the resulting company.
However, the majority of reports also suggested that the operations of
the two companies do not have substantial overlap and the union is
likely to be approved by antitrust officials.
One common concern was whether the two companies could avoid a clash
between AOL’s more casual corporate culture and Time Warner’s more
traditional one. Merrill Lynch analyst Henry Blodget expressed concern
to The Washington Post (January 12) that many acquisitions have failed
for lack of cohesion and a common identity.
If this merger does receive regulatory approval, AOL-Time Warner can
expect to have an unprecedented reach to almost all media that Americans
browse, read, listen to and view.
- Evaluation and analysis by CARMA International. Media Watch can be
found at www.carma.com