Jan
13
2000

AOL-Time Warner:

Dawn of a Golden Age, or a Blow to Media Diversity?

The last few media mergers have attracted an enormous amount of press attention, and this was certainly true when America Online (AOL) announced its plans to buy media giant Time Warner on January 10.

Nonetheless, certain issues were obscured in the initial press treatment of the deal, which has been called the largest business merger of any kind in history.

In their enthusiasm for the merger and the new company's plans for high-tech ventures, much of the media overstated the immediate ramifications of the deal: NBC's Tom Brokaw (1/10/00) referred to "a whole new universe created overnight," while USA Today (1/11/00) likened it to "one of those rare events that seems to change the world overnight," comparable to "the 13 colonies defeat[ing] the British."

USA Today also featured one expert who said "the network news anchors-- Jennings, Brokaw, Rather- are really dinosaurs at this point," while another ingenuously pondered a future where magazines would be available through AOL that "I can take and read whenever I want."

CNN's Crossfire co-host Bob Novak also imagined a day when one could "connect with AOL, push some buttons and--kazam!--you get Crossfire right on your little screen." (It's worth noting that video of Crossfire is already available on CNN's website.)

When not daydreaming about the possibility of seeing pictures on-line, many outlets turned their attention to the personalities behind the companies. AOL's Steve Case was called a "revolutionary" by ABC (1/10/00) and a "boy wonder" by NBC (1/10/00), but perhaps the most important public relations event of the day was the fact that "new" media CEO Steve Case wore a tie to the press conference announcing the merger, while "old" media CEO Gerald Levin wore no tie. This stunt was mentioned three times the next day by the New York Times (1/10/00), including a front-page story, "AOL Chief Relaxes a Dress Code but Not His Vision of the Internet."

When Time Warner's Ted Turner made the comment that he approached the merger "with as much or more excitement and enthusiasm as I did on that night when I first made love some 42 years ago," ABC's Sam Donaldson added this helpful context on his ABC webcast: "Mr. Turner is at the moment 61 years of age."

What could the coverage of the largest business merger in history have focused on instead? Here are several core issues that received little scrutiny from mainstream ("old") media:

OPEN ACCESS: AOL was a major player in the fight for "open access" to high-speed cable lines, seeking guarantees that cable lines would be open to competitors in the same way that phone lines are. But now that AOL will own Time Warner's cable lines, will its commitment to open access change?

Mainstream media reported AOL CEO Steve Case as saying that it would not. A New York Times editorial (1/11/00) said of Case: "Now he will own the cable wires himself, and he promised yesterday to commit the new company to open access." ABC's Nightline reported (1/11/00): "And today, clearly mindful of their critics, AOL and Time Warner executives insisted their new company would stay open to other providers of Internet content."

But most media failed to note that AOL and Time Warner were attempting to redefine the concept of "open access." On the same Nightline broadcast, Time Warner CEO Gerald Levin declared:

"We're going to take the open access issue out of Washington, and out of city hall and put it into the marketplace, into the commercial arrangements that should occur to provide the kind of access for as much content as possible."

Clearly, Levin is not talking about regulatory guarantees of access to cable lines, but the potential for competitors to buy access on AOL/Time Warner's terms. This is the opposite of "open access." The Washington Post (1/11/00) accurately portrayed AOL's new position on the access question as "a stunning reversal."

AOL & PRIVACY: Critics of AOL have long argued that the company's incessant marketing, censorship of on-line discussions and privacy/security problems have been contradictory to the founding principles of the internet. In 1997, AOL was forced to cancel their plans to rent subscriber's telephone numbers to outside telemarketers after a wave of complaints that such a deal would violate AOL's promise to its customers (San Jose Mercury News, 7/25/97). Nonetheless, this ability to collect data on their clients is a large part of what makes them incredibly appealing to other companies who crave that kind of demographic information to market products and services

THE MARKET: Very little of the current media discussion comments on the fact that AOL's value in this merger is based largely on its stock value, which like many other so-called "tech stocks" is wildly overvalued. The New York Times (1/10/00) dramatically noted that "yesterday it was the shares of Time Warner, with its storied legacy reaching back to Henry Luce, that leaped in celebration, like some neglected waif rescued by a wealthy benefactor." Readers had to search to find the information that in terms of actual sales, Time Warner dwarfs AOL, $27.7 billion to $5.2 billion. Though NPR's All Things Considered (1/10/00) was accurate in reporting that the combined company "will have annual revenue of about $30 billion," this statement would also be true of Time Warner if it did not merge with AOL.

THE FUTURE: On CNN's Millennium 2000 special (1/2/00), CEO Gerald Levin offered his evaluation of the future of media. Given what occurred a few days after this program, Levin's words seem all the more powerful-and disturbing.

Global media, said Levin, "will be and is fast becoming the predominant business of the 21st century." So predominant, in fact, that the media business is now "more important than government. It's more important than educational institutions and non-profits."

"We're going to need to have these corporations redefined as instruments of public service," continued Levin, "and that may be a more efficient way to deal with society's problems than bureaucratic governments."

Still attached to the democratic accountability of those "bureaucratic" governments? Too bad, says Levin, since corporate dominance is "going to be forced anyhow because when you have a system that is instantly available everywhere in the world immediately, then the old-fashioned regulatory system has to give way."

If, as the CEO of the planned AOL/Time Warner combine envisions, media will be such a powerful force in the 21st Century, shouldn't the media business have some competition--and some democratic controls?