Web gurus opine elegantly on deal of century

By Jeremy Schlosberg
 
     It’s the merger of the century!
   Okay, the century’s only a few minutes or so old, but that hasn’t stopped the hyperbole from flowing in response to the first big new media story of the year.
    What’s it all mean?
    Neither new media nor old media will be the same again, say all.
    "This is the largest internet media event yet," says Clay Shirky, professor of new media at Hunter College. "No one will be able to sit out the upcoming round of copycat or counter deals."
    And quite a round of deals Shirky figures it’s going to be.
    "Expect the world's media space to be transformed radically within a year."
     To some new media proponents, the deal establishes the ascendancy of the new.
    "It looks like ‘the path’ finally found Time Warner," says Michael Tchong, editor of Iconocast, a web marketing and advertising newsletter. 
    "It's the best example of new media usurping old. And not a moment too soon. Time Warner looked positively punch drunk, after all their failed online escapades."
    But others argue the opposite: It's a case of the new realizing how much it needs the old.
    "This sends a wakeup call to the rest of the internet world that they’re not an island unto themselves," says Tim Meadows, vice president of marketing for Net Ratings, the web measurement firm. "To succeed, they need to play to all facets of people’s media consumption."
    To be sure, however, the merger also deals a blow to old media stalwarts, since it seems to demonstrate once and for all that a traditional media company cannot on its own conquer the internet.
     But it also works the other way, as so many note, giving AOL near-instant access to a base of 13 million cable subscribers it could never develop on its own, allowing it to quickly leap into the broadband market and all that it offers.
    "I think we're looking at bundled high-speed access packages for those folks," says Tom Hespos, a new media consultant.
    Also interesting is how much AOL covets Time Warner’s music business; some suggest music was a key element in driving the entire deal—another example where the new really needed the old.
    A special report released yesterday by internet analyst firm Zona Research underscored this idea that the emergence of AOL Time Warner signals a new way of looking at all media.
    "The reality is that both of these megafirms have been evolving into what we believe to be the next generation of content provider," notes the report. 
     "The notion of discrete internet content versus old media is being challenged, if not eradicated by this proposed merger."
     Knowledgeable observers have long recognized that for true forward movement in the media world, the two sides would have to blend more than butt heads.
   "I think that for AOL one of the major fascinations has always been traditional media and offline distribution," says Anya Sacharow, an analyst with Jupiter Communications. "So in Time Warner AOL gets that type of partner—and access to all the traditional media it could want: print properties, cable, TV, film.
    "That’s a major advantage for AOL as an internet company," she says. "The implications for marketing as well as cross-media synergies are tremendous."
    As much as anything, the almost elegant logistics behind the deal illustrate how much this is about integration rather than subjugation, say many new media types.
   "AOL was tremendously canny in working out the holdings of the new company," says Shirky. "Although their market cap is almost twice that of Time Warner's, the asset split is only 55/45 in favor of AOL. This is a brilliant way of climbing down from an overvalued stock without causing investors to head for the aisles."
    But what Shirky is most impressed by is how the deal ratifies what he calls the "economy of scale strategy."
   "On a network with high fixed costs in building infrastructure but low per-unit costs in terms of reaching additional users or serving additional content, and with no point of diminishing return, as every point on the network is theoretically equidistant, the argument AOL Time Warner is advancing is that the biggest companies do the best."
     This is food for thought indeed, assures Shirky.
    "Every Media Metrix 50 company and every one of the big seven media players are going to have to examine their blended online/offline strategy with this in mind, and either copy this deal somehow or announce why they think its a bad idea and what their counter-strategy is."
 

-Jeremy Schlosberg is the senior editor for new media.