Content is king again - so long as it can also enjoy widespread access to Internet users. That message was driven home this week by the revelation that America Online (AOL) is swallowing up Time Warner at a huge premium to create a multimedia monster whose market value approaches the gross domestic product of Mexico.
The new digital century was barely ten days old when AOL, the single most popular gateway to the Web with 22 million paying customers, stunned the business world by announcing what was then a $166bn buyout of Time Warner, the planet's largest stockpiler of copyrights. The combination immediately set the merger and acquisitions field ablaze with any number of copycat merger scenarios as rival studios and Internet companies begin contemplating how to play strategic catch-up with what is to be known henceforth as AOL Time Warner.
In one transforming swoop, new media was seen to have come of age and the venerable entertainment industry dragged feet first into a point-and-click universe governed by a novel set of rules and players.
The deal, the largest corporate union yet attempted, fuses AOL with a stable of brands that include Warner Bros, New Line Cinema, HBO and a host of internationally-known entertainment networks. Accelerating the day when Internet connects with as many living room television sets as office computers, the merger also gives AOL coveted entree to Time Warner's 13 million cable TV subscribers in the US. A large number of those cable watchers will start being offered more expensive high-speed broadband services by the end of this year, allowing them constant access to a range of web-based services including streamed video images. AOL is banking this its prized cache of Time Warner media assets will help persuade those subscribers to make the switch.
More immediately, the two companies will join forces in a barrage of cross-promotions, drawing on Time Warner's pre-eminence in direct marketing and AOL's carpet-bombing tactics that helped fuel its phenomenal growth in the last five years. Already AOL Moviefone, the service that allows film-goers to order advance theatre tickets over the phone or over the Internet, has already committed to promoting films distributed through Warner Bros. A glimpse of the product placement future was previously provided by Warner's 1998 hit, You've Got Mail, which took its name from the familiar voice message alerting AOL users of incoming messages.
Although the breathtaking size and overwhelming scope of the pending nuptials has worried consumer advocates and politicians, it is still expected to win the blessing of the various federal regulatory bodies since the two companies have such minimal overlap. The European Union, however, might prove more nettlesome: AOL's pacts with Germany's Bertelsmann and France's Vivendi could well raise anti-competitive concerns in Brussels, although neither alliance is a market-leader among local web-users. Either way, the monopoly probe will help determine the EU's criteria for evaluating the coming wave of convergence likely to sweep over the continent.