Time Warner With Aol Essay, Research Paper

On January 10, 2000, one of the largest, most powerful mergers was announced to the world. Media giant Time Warner will join forces with the Internet superstar, America on Line. The $183 billion dollar deal is the biggest in history. In the recent past, there has been a wave of merger-mania, both in the United States and in Europe. The merger of the Millennium is between America on Line and Time Warner. The AOL Time Warner deal represents the joining of the Old Media with the New Media. Not only is it a marriage of different approaches, the two CEO’s are very diverse individuals. The two companies are quite different, in nearly every aspect. Some of the divisions of Time Warner have been around since the 1920’s, while the youngster, AOL is a mere fifteen years old. The quick paced, new up starting Internet companies never thought in a million years they would ever need the old stand-by media organizations. “The Internet will revolutionize everything”, that is what their beliefs were. They were fearless and believed themselves to be invincible, but things have changed. The Internet has put the world only a mouse click away and it has changed the world. The fact of the matter is the world of the Internet is extremely competitive and in order to survive, you must invest huge sums into your marketing campaign, in some cases up to seventy percent of a budget. The one thing that you can always could on in this word is change, and there are going to be some major changes in the realm of the high tech companies. The ‘techies’ are going to have to realize their need for and have to learn how to form lasting relationships with the ‘old stand bys’ in order to keep up with today’s world. Time Warner is, for the most part, a stable reliable organization. Time Warner’s holdings include many magazines, Time, Sports Illustrated, Money and Fortune just to name a few. Time Warner also possesses Warner Brothers Studio, Warner Music (which recently acquired EMI Music), Turner Classic Movies and an array of television stations. A partial list of the broadcast networks includes CNN, TNT and HBO. Time Warner is also the second largest cable television provider in the country. They have also recently invested huge sums of money into their cable system to prepare it for Roadrunner technologies. Roadrunner is an alternative to a standard Internet service provider account (ISP). Roadrunner allows a user to send and receive as much information as they desire and unprecedented speeds. Time Warner has played around with their own Internet company, Pathfinder, with little success. The world of the Internet is so cutting edge that unless a company pays very close attention to it, chances for success are very low. This fact brings the importance of a joining with an organization such as AOL into the light for Time Warner. America on Line realizes the value of a company as established as Time Warner. AOL is a New School organization. Steve Case and Bob Pittman also had the foresight to see the impact of a joining of their company with Time Warner. They could create the largest, most powerful service provider in history. America on Line comes into the deal offering it’s cutting-edge technologies and the love of the American people. AOL has continually updated its system to make using the Internet easy for anyone. They have removed the phobias that many Americans have experienced. AOL has developed its very own vast world where you can find nearly anything you could possibly want to. AOL’s domain is perfectly safe and so simple to navigate. At present, AOL has over 22 million subscribers. Americans love AOL and all the features it has to offer. AOL has something called Instant Messenger, which allows you to communicate instantaneously via your computer with anyone, anywhere. They offer multiple e-mail accounts with each dial up account. What this means is in a household, each member can have their own e-mail address at no additional charge. AOL makes the Internet so easy to navigate and unlimited access is offered for about $20.00 per month. Time Warner needs AOL to move forward in today’s world and AOL needs Time Warner’s vast customer base and diverse advertising options. AOL can slice their advertising budget considerably by utilizing all of Time Warner’s diverse outlets. Just imagine, on every network, in every magazine and even at the beginning of every film produced within the Time Warner family AOL is mentioned. The exposure would be phenomenal! If you examine the other side, on every AOL web page there is a mention of a Time Warner media division or a promo for a newly released Warner Brothers film, just imagine the number of people who would be exposed to it. The numbers are staggering. AOL is also very interested in Time Warner’s cable company holdings. The quality of what you see on your computer is dictated by something called bandwidth. A bandwidth is the amount of information that can be sent and received by your computer. A large bandwidth would allow you to watch a television show or a movie on your computer. Most connections to the Internet are established via a standard telephone line. This type of connection does not provide a large bandwidth. AOL has plans to develop AOL TV in the future and in order to make that vision a reality; they need to be able to offer a larger bandwidth to their existing customers at a reasonable price. The merger with Time Warner is certainly a step in the right direction to achieving this goal. At present, AOL’s ‘walled garden’ for all their subscribers is very small bandwidth friendly, but as the company has always done in the past, it will continue for bigger and better for its customers. Steven Case of AOL, the boyish entrepreneur has consistently beaten the odds with his ability for seeing a world-altering vision and not letting go until he has made it happen. His forward thinking concerning the merger with Time Warner has been compared to the gutsy moves of Alfred Sloan at General Motors back in the 20’s. Sloan outdistanced himself from the competition by constructing an automobile “for every purpose and every purse.” He left the competitors in the dust by gaining control of more of the automobile market than anyone else. Case is a forward thinker and has the drive and ambition to make practically anything work if he wants it bad enough, and he wants the merger with Time Warner to be a success. A second merger that happened in the month of January was between pharmaceutical giants Glaxo Wellcome and SmithKline. This merger has been in the works for nearly two years and has finally become a reality. The joining of these two companies will create the largest drug company in the world. The conglomerate Glaxo Wellcome SmithKline will have the opportunity to discover more new drugs than anyone else, having a research and development budget in excess of four million dollars and a sales and marketing team of over forty thousand to sell the drugs. The only other pharmaceutical company that can compare in size to Glaxo Wellcome SmithKline is the giant Merck and Co, with yearly sales around 20 billion. Merck and Co will see its patents on a few key products expire in the next couple of years. Although CEO Gilmartin remains true to his stance that Merck needs no one, he did add that the company may be forced to “rethink its position.” The pharmaceutical industry has been consolidating for years and appears that this trend will continue. There has also been a sizable increase of mergers in Europe. In the year 1999, the value of European mergers soared to 1.5 trillion dollars. This figure is nearly double the $988 billion dollars recorded in 1998. The emergence of a common currency, the Euro, has made the mergers much easier and more appealing. Once the expected mergers within a country’s boundaries have been exhausted, companies feel comfortable crossing the border to another country. Paul Gibbs, of J.P. Morgan stated that 60% of the action in Europe last year crossed national borders. Experts expect this trend to continue in Europe. One French banker made the bold prediction that one third of the top forty blue chips in France will either gobble up, or be gobbled up by another company in the coming year. I believe that the mergers and super mergers are going to continue in the future. I also believe that these transactions are going to become necessary for businesses to remain competitive and to not fall to the wayside. The joining of mega media giants AOL and Time Warner is going to start a trend and I believe we will see many more combinations of similar companies in the future. Companies will be forced to play this merger game if they want to stay alive and remain successful. This, I believe, is the trend for the new millennium and it is a trend that will become a new way of doing business.