Analysis: AOL/TW match made in heaven?
Published: 10 Jan 2000 18:55 GMT
AOL UK appears to be much like its parent in the US but it isn't. AOL UK is part of AOL Europe which is half owned by German media giant Bertelsmann and half by AOL in the US.
As for Time Warner (TW) that is an even bigger story. In the UK TW is known only by its incredible portfolio of media assets -- from Time magazine, to all those great movies and TV shows, and of course the Looney Tunes cartoons. In the US, as well as that, TW is the country's leading cable company and owns the most successful movie channel there, Home Box Office (HBO).
In the US the rationale for the merger is subscribers and content. Both companies have huge subscriber bases: AOL has around 20 million while TW has 13 million cable subscribers and 35 million subscribers to its franchised HBO channel. But both companies have, to an extent, the wrong content for what the subscribers will shortly want.
By the end of this year TW will have converted all its cable systems to digital interactive services and is (perhaps now that should be 'was') desperately looking for interactive content. For its part AOL is trying to move into broadband markets, principally using ADSL technology. But with little broadband content it looked like ADSL and other high speed connection technology like cable modem systems were going to prove a massive drain to satisfy. In a stroke both of these needs seem to have been largely met. AOL can provide interactive content while TW can provide endless quantities of linear content.
So in the US, the imperatives to merge in both markets look compelling. "Each is the missing piece of the other's puzzle," said a representative during an analyst broadcast.
But in the UK where TW has only a marginal presence the deal will play very strangely. It publishes European versions of some of its magazines here and that's just about that. It made a foray into the cable market but, no doubt after considerable research and much scratching of heads, it has now pulled out of that sector altogether.
In fact the general technological imperatives that are driving the US deal are, for the moment, lacking in the UK. ADSL will launch "this Spring" (according to BT) when it will be available to just six million residential and business customers. But it will be priced so expensively that take up is likely to be slow, at least initially. As for interactive cable systems, once again the UK lags way behind with only a few thousand homes served by trial systems. But there may be more movement by the end of the year.
"The US deal is a very nice fit," says Toby Scott, senior editor at industry analyst, Baskerville Communications. "As for Europe, we will have to wait and see. The European market is not only in a very different technological setting, the companies are very different too. AOL and Time Warner in Europe are very different from their namesakes in the US."
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Read more about the merger from a UK angle on AnchorDesk
For full coverage, see the AOL-Time Warner News Roundup.
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