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OPINION: AOL, meet Time Warner -- R.I.P. the Dot-com Era

January 12, 2000
Web posted at: 8:46 a.m. EST (1346 GMT)

by Sean M. Dugan


(IDG) -- Do you remember that semi-recent James Bond movie Tomorrow Never Dies? The one with the Rupert Murdoch-like media mogul bent on ruling the world? Well, I fully expect the next 007 villain to be a thinly veiled version of AOL's head honcho, Steve Case.

By this point, you've heard the news of American Online's mega-merger with media powerhouse Time Warner. In what amounts to the biggest merger in history -- at least for the moment -- AOL has bought Time Warner for $190 billion in stock. This is the part of this deal that you should pay attention to. All the talk of a "merger" really obscures the key fact that AOL did the real buying. AOL stockholders will have 55 percent of the new AOL Time company and Steve Case will ascend the throne to become chairman of the behemoth. AOL swallowed Time Warner.

The world has truly changed. Do the math, and you'll find the new AOL Time Warner easily jumps into the Fortune 100 list. And given AOL's recent rate of revenue growth, expect it to climb that ladder rapidly. Welcome to the end of the Dot-com Era.

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It all started when a scrappy little start-up named Netscape debuted on the market in 1995 to a then-stunning single-day gain. The Internet Dot-com Era of over-valued tech stocks had begun. Like a license to print funny money, the mind-bogglingly high valuations of tech companies eventually gave them the ability to buy old-school companies in stock-trade deals. Now we've reached a turning point as the new dot-com companies consume the old, creating a new definition of a company for the 21st century. Essentially, we've seen the creation of a new-old media company, one that has institutional maturity and at the same time has staggering growth potential.

So what does it all mean, besides boggling the minds of those of us who remember when you couldn't send AOL e-mail over the Internet but only to other members? Well, you can bet there'll be a flurry of mergers in the post AOL-Time world, as media and ISP rivals scramble to fortify themselves against this new behemoth. AOL-Time presents an imposing presence, covering access to content effectively. The media landscape has certainly tilted in the way that San Francisco tilted in 1906. You can bet that Time Warner properties such as, well, Time, Entertainment Weekly, Sports Illustrated, etc., will become tightly integrated with AOL's media properties. Also expect to see lots of Warner Brothers movies and the WB's TV shows where the characters prominently use and just love their AOL ("Dawson and Buffy, you've got mail...").

Time Warner squandered the brand of dozens of media properties with the ill-conceived Pathfinder site, which finally had the plug pulled this year. It ranks as one of the greatest Internet fumbles. Now we see a company that specializes in leveraging content on the Web, purchasing the content-creation machine of one of the world's largest media organizations. Perhaps the message here is that if your company flubs its Internet play and can't figure it out, expect to get bought up by the company that does it right.

It looks like AOL is well on its way to ruling the world. That's a message that should both shake and stir the Internet strategist of any company.

Special Report: New media mergers

You've Got Content
January 11, 2000
AOL and Time Warner to merge
January 10, 2000

Few antitrust fears for AOL Time Warner
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15 largest Internet-related merger&acquisition deals of all time
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Is AOL-TW merger only the beginning?
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Time Warner, AOL to merge
(The Industry Standard)
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