IPcentral Weblog
  The DACA Blog

Tuesday, May 17, 2005

Media Deconsolidation, Part 8: Time Warner Spin Off of AOL Likely
(previous | next)

How quickly we all forget the collective hand-wringing and mass hysteria that was generated by the announcement just five years ago that AOL and Time Warner would be merging. As journalist Matt Welch has noted, when the deal was announced, the Chicken Little crowd came out in full force with claims that the AOL-Time Warner deal represented "Big Brother," "the end of the independent press," and a harbinger of a "new totalitarianism."

As it turned out, Welch notes, AOL-Time Warner was "the Big Brother who never was." In fact, by April of 2002, just two years after the marriage took place, the firm had reported a staggering $54 billion loss. Losses grew to $99 billion by January of 2003. And then in September of 2003, Time Warner decided to drop AOL from its name altogether. It would be an understatement to say that the merger failed to create the sort of synergies (and profits) that were originally hoped for.

And as Fortune reported yesterday, Time Warner CEO Dick Parsons announced that he would consider entirely spinning off AOL as a separate stock if the division's latest business strategy doesn't work.

Here, again, is an example of just how dynamic the media marketplace is and why the media critics' "sky-is-falling" rhetoric is so unwarranted. When media companies--no matter how large or small--fail to deliver something of value to the public, they will perish. We've recently been witnessing a wave of media divesitures and DE-consolidation that has reversed much of what we saw taking place in the late 1990's.

In some cases, the "synergies" that many media operators hoped for simply did not develop. Combining various media properties and personalities proved much more difficult than expected. In other cases, technological change and the rapid evolution of the media marketplace overtook them and nullified any advantages that might have been gained from the mergers.

Regardless, as I have said many times, this is an example of a well-functioning, competitive marketplace at work. Media critics think any merger or acquisition is all just part of some sort of grand conspiracy to destroy democracy or competition, but in the end, things sort themselves out and we end up with an ever-expanding universe of media options at our disposal. In sum, despite what the Chicken Littles predict, the sky never falls. Seriously, ask yourself a simple question: Do you have more media options and outlets at your disposal today than you did 5 to 10 years ago?

posted by Adam Thierer @ 11:10 AM | Mass Media

Share |

Link to this Entry | Printer-Friendly

Post a Comment:

Blog Main
RSS Feed  
Recent Posts
  EFF-PFF Amicus Brief in Schwarzenegger v. EMA Supreme Court Videogame Violence Case
New OECD Study Finds That Improved IPR Protections Benefit Developing Countries
Hubris, Cowardice, File-sharing, and TechDirt
iPhones, DRM, and Doom-Mongers
"Rogue Archivist" Carl Malamud On How to Fix Gov2.0
Coping with Information Overload: Thoughts on Hamlet's BlackBerry by William Powers
How Many Times Has Michael "Dr. Doom" Copps Forecast an Internet Apocalypse?
Google / Verizon Proposal May Be Important Compromise, But Regulatory Trajectory Concerns Many
Two Schools of Internet Pessimism
GAO: Wireless Prices Plummeting; Public Knowledge: We Must Regulate!
Archives by Month
  September 2010
August 2010
July 2010
June 2010
  - (see all)
Archives by Topic
  - A La Carte
- Add category
- Advertising & Marketing
- Antitrust & Competition Policy
- Appleplectics
- Books & Book Reviews
- Broadband
- Cable
- Campaign Finance Law
- Capitalism
- Capitol Hill
- China
- Commons
- Communications
- Copyright
- Cutting the Video Cord
- Cyber-Security
- Digital Americas
- Digital Europe
- Digital Europe 2006
- Digital TV
- E-commerce
- e-Government & Transparency
- Economics
- Education
- Electricity
- Energy
- Events
- Exaflood
- Free Speech
- Gambling
- General
- Generic Rant
- Global Innovation
- Googlephobia
- Googlephobia
- Human Capital
- Innovation
- Intermediary Deputization & Section 230
- Internet
- Internet Governance
- Internet TV
- Interoperability
- IP
- Local Franchising
- Mass Media
- Media Regulation
- Monetary Policy
- Municipal Ownership
- Net Neutrality
- Neutrality
- Non-PFF Podcasts
- Ongoing Series
- Online Safety & Parental Controls
- Open Source
- PFF Podcasts
- Philosophy / Cyber-Libertarianism
- Privacy
- Privacy Solutions
- Regulation
- Search
- Security
- Software
- Space
- Spectrum
- Sports
- State Policy
- Supreme Court
- Taxes
- The FCC
- The FTC
- The News Frontier
- Think Tanks
- Trade
- Trademark
- Universal Service
- Video Games & Virtual Worlds
- VoIP
- What We're Reading
- Wireless
- Wireline
Archives by Author
PFF Blogosphere Archives
We welcome comments by email - look for a link to the author's email address in the byline of each post. Please let us know if we may publish your remarks.

The Progress & Freedom Foundation