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sees a rise of ifs and buts
Morning-after reactions to a major merger
As we enter mid-week of the second week of the new millennium and day three of what is being touted as a new millennium for media, at least some of the euphoria over AOL's takeover of Time Warner is beginning to subside.
The gnats are beginning to emerge. A rising chorus of critics are publicly anguishing over whether the merger represents a further concentration of power in the hands of fewer and fewer media titans. (It's worth noting, without sounding overly cynical, that most of these critics write for newspapers that have long maintained monopoly dominance in their markets, so at the least they have some knowledge of the threat of which they write.)
Some shareholders, recovering from early moments of rejoicing, are beginning to worry that's they've been jilted.
In what may be a record, a shareholder filed suit yesterday in Delaware, within a day of the merger's announcement, complaining that her stock was undervalued in the deal.
And she owns Time Warner stock. AOL stockholders are expected to march to court in droves, since the deal values that stock well below its market value.
The market is also taking a more sober look at the deal. AOL Investors yesterday voted with their feet.
AOL on Friday was 74, fell to 71.75, a drop of about 3 percent, on Monday upon news of the merger deal, and by the end of yesterday had fallen to 64, a drop of 13.5 percent.
Time Warner leaped from 66 on Friday to 90 on Monday, but by last night had fallen to 86.
Media people, meanwhile, while still generally warm to the merger, are beginning to look at the deal for what's in it for them, quite sensibly.
They are not finding a lot, as Jean Pool, media director at J. Walter Thompson, discusses in our second lead story today ("Amid merger mania, a powerful dissenting voice: Horsefeathers; JWT's Pool: 'This is not the second coming').
All media deals are announced as offering advertisers the opportunity to buy across media platforms, and the suggestion is always that there will be cost savings. But as Pool points out, cross-media deals, where they do occur, are designed to benefit the seller, seldom the buyer.
Meanwhile the papers are full of stories picking the deal apart, looking for the heroes behind the deal and telltale evidence of the coming new media millennium, consuming thousands of words in the process. Indeed, this merger, though only days old, may be the most analyzed in history as The Wall Street Journal, New York Times and Los Angeles Times each churned out dozens of stories.
As all the stories point out, one thing is certain amid all the uncertainties of this deal; More such deals will follow.
And here the prognosis is not good. As Media Life's Dave Lindorff is quick to point out, the market tends to be especially brutal to the me-too deals that inevitably follow mergers of the size of AOL-Time Warner.
Competitors, suddenly anxious, tend to link up in quickie marriages, one after the other. If the first deal made sense, or appeared to make sense when it was announced, the deals that follow make less and less sense.
Unhappiness, shareholder suits and messy breakups always seem to follow.
But for all the writing on the deal, the one critical element of the merger remains an unknown, as Pool points out.
That's how well the new company is merged and run, and by whom. At this point, it's unclear whether Time Warner's Gerald Levin or AOL's Steve Case will ultimately assume control. They are radically different cultures, as they are radically different managers.
There won't be any answers anytime soon, and in the meantime expect a lot of chaos and crossed signals at each as managers struggle with what programs must move ahead and which are to hang in limbo as the new corporate order is worked out.