FREE ESSAY ON AOL TIME WARNER

AOL TIME WARNER

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. 
Bibliography
Sources:
Businessweek 
Jan 24, 2000:
Welcome to the 21st Century
The Big Grab
The Great Irony of AOL Time Warner
Jan 31, 2000
Burying the Hatchet Buys a Lot of Drug Research
The Economist 
The Record Industry Takes Fright
The Net Gets Real
Time
The Big Deal
Wall Street Journal
Assorted articles