AOL and Time-Warner Merge (Part 2 of 4)
Analysis
The public face on this deal is that it represents the convergence of
entertainment and technology. What AOL actually gets from the transaction is
access to a cable network system – the broadband, home-entry point it has been
seeking. In addition, it gets a significant stable of very rich, popular
content sources, including Time, Sport Illustrated, TNT, TBS, CNN and a
plethora of other publications, music, video, audio and broadcast properties.
The expectation is that AOL will be able to leverage the Internet-based AOL
community to drive viewership, use and purchase of those properties.
What Time-Warner gets is simple: a 30% premium on its stock and a chance to
distribute $18 billion in debt.
Let’s return to the concept of the convergence of entertainment and
technology. Yes, this is likely to occur; and, in fact, it is already
occurring. The Internet itself represents a new form of entertainment. What
this deal represents is the convergence of the new transmission medium with the
old entertainment. Our view is that the Internet has, and will continue to
offer, new types of entertainment that have been heretofore impossible. Hence,
looking at the Internet component of this deal as simply a way to drive
entertainment (content) to well-profiled and targeted eyeballs, is missing the
disruption the Internet has had and will have on traditional broadcast industry
and entertainment.
Look for the first fruits of this marriage to bloom in the spring, when AOL
launches its broadband, AOL Plus offering. That should be the point at which we
see CNN news content being distributed to AOL customers connecting via
broadband.
Part 3 - In this Jungle, this Quiet Jungle, the Lion
Sleeps Tonight: Wither Microsoft?
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