Friday, September 19, 2003 | |
Time-Warner: "Never mind" It was one of the dumbest ideas of many dumb ideas during the Internet bubble, the merger of AOL and Time-Warner. The merged company now finally has declared a loud "Oops!" It just changed its name from AOL-Time-Warner to plain old Time-Warner. The merger had several things wrong with it. First, it grossly overvalued the worth of AOL. Second, it happened just as AOL was reaching its maximum influence, now declining rapidly. But above all, it grossly misestimated the amount of synergy possible between and Internet portal and a real-world business. According to a Reuters report:
This follows a yearlong power struggle in which old Time-Warner execs have gradually ousted AOL executives from power. As the Reuters report says,
The temptation was great. Time-Warmer publishing, film, TV, and music businesses would use AOL to gain killer mind space. The publications would in turn cross-promote with AOL, and build strategic, multi-channel plans for ad buyers. Finally, Time-Warner cable would help AOL go high speed. But several things happened. First, the general advertising market fell precipitately. Second, Internet advertising, in particular, lost its luster. Finally, the divisions found synergy pretty elusive. No surprise there; after all, Time magazine has never had major synergies with the movie or record businesses. If any crude pandering were tried, such as favoring Time-Warner films with cover stories and puff reviews while stiffing Sony and Disney films, whatever credibility Time retains would be quickly lost. For example, when the first Harry Potter movie came out, hopes were high, as an article called "Harry Potter and the synergy test" (The Economist, Nov 10, 2001) stated:
But it's hard to see more than a tiny effect from this promotion on the film's eventual popularity. A Forbes article from 2001 talks about "An ephemeral synergy that many now doubt even exists between the two original companies." It seems that Time-Warner is on the road of to recovery.from that disaster. Horizontal mergers can work, but not when they stray too far afield and when the business models of the two companies are so different. In the end, the synergy was wishful thinking. And the mistake will not be wiped out by a name change. 5:16:08 PM |