After a run of roughly 50 years, the age of network television came to an end on Sunday, Jan. 9, 2000, with the merger of America Online Inc. and Time Warner Inc.
The $183 billion merger means an era in which the TV set and the computer will merge–promising a host of changes for the average viewer.
“It’s like everybody’s been talking about this convergence for so long, and you’ve got cable and you’ve got television and you’ve got the PC and you’ve got wireless,” said Richard Bressler, the chief executive of Time Warner’s digital media arm. “And everybody’s kind of been like creeping up on it, but everybody’s scared to say it’s really going to happen, because everybody’s been predicting it for so long … I think that it takes events like this, the merger of AOL and Time Warner, to kind of really bring them together in a big way.”
The new AOL Time Warner will not only be a driving force behind those changes, it’s also positioned to become the first dominant player in this “converged” media world, with its base of power in a new Time Warner building at 10 Columbus Circle. From there, some of the biggest names in the old and new media businesses–Gerald Levin, Steve Case, Ted Turner, Bob Pittman, Richard Parsons–will have to learn to play together as they redefine leisure in the American living room.
“This means you may watch HBO on your Palm Pilot,” said Christopher Dixon, media analyst for Paine Webber.
The task of bringing together the two corporations will primarily fall to Mr. Pittman, the fresh-faced former Time Warner executive who helped launch MTV and ended up at AOL.
Fleshing out the transition team are Mr. Parsons, the politically connected Time Warner president and former chief executive of Dime Bancorp, AOL’s chief financial officer Michael Kelly and Mr. Bressler.
Those executives will report to Mr. Levin, Time Warner’s chief executive; and Mr. Case, AOL’s chief executive. The success of the venture will hinge on how successful they are at melding the two corporate cultures into one and changing the rules of television.
At the heart of the deal is access to broadband Internet cable.
Broadband is the high-speed Internet connection provided over an upgraded telephone or cable line. It’s just a thick cable packed with wires–thicker than the thing that runs into your cable box right now–and it allows more information to travel more rapidly between a server and your computer.
On today’s standard modems, which use telephone lines, video images now come up on computer screens slowly. And when they finally appear, they’re often fuzzy or pixilated. Broadband allows crystal-clear images and sound to arrive on computer quickly–the equivalent of what you get off your TV. And there’s still room on the wire for the user to send information out in the form of e-mails or telephone calls.
Time Warner has 13 million household cable subscribers and owns hundreds of miles of underground cable. In other words, it has the hardware broadband users need, the links into the houses that AOL desires. About 85 percent of Time Warner’s cable is ready to carry broadband signals. Currently, that service is called Road Runner, a program Mr. Bressler has overseen as head of Time Warner digital. (Whether Mr. Bressler maintains control over it after the merger remains unclear, but he will certainly oversee the mechanism for its continued distribution.)
Time Warner also has a host of well-established brands, like Time, CNN and HBO.
With 22 million subscribers, AOL is the leading Internet service provider, existing in a realm where Time Warner has been unable to build a real presence, despite its dominance with CNN, HBO, Warner Brothers Studios, Warner Brothers Records and the Time Inc. magazines.
With this broadband alliance, it is conceivable that one day soon, AOL-Time Warner subscribers will be able to log on and pull up archived episodes of The Sopranos , an HBO show, or the WB’s Roswell , or Warner Brothers Television’s ER at will, thus creating their own TV schedules.
Mr. Bressler said he believes many shows will be re-created for the Internet with shorter running times for shorter computer attention spans.
What about the commercials? Well, since on-line viewers would be inclined to skip through the commercials, Madison Avenue could potentially rely more on product placement. A flag may tell you that Buffy the Vampire Slayer’s pants are made by the Gap. If you’re interested, you could click on the flag and buy a pair on line, using your credit card. (Consumers spent $2.5 billion this past Christmas buying goods over America Online.)
“I certainly can see knocking off an e-mail to Mom while I’m watching ER ,” said media analyst Tom Wolzien, of Sanford C. Bernstein & Company, who predicted a Time Warner-AOL merger more than a year ago.
“The Internet, as a medium, is still, not in its infancy, but in its toddler years, so … it’s hard to say where that goes,” said Richard Parsons, the Time Warner president who is to become co-chief operating officer of the new AOL-Time Warner.
“Whether people will ever really watch HBO through their computers or whether this will all migrate onto a high-definition TV screen, I mean, who knows quite what the future holds,” he went on. “But what we are trying to do with this merger is to position ourselves strategically so we have every base covered, and we can deliver more, faster, better than anybody else can and with greater appeal to the consumer.”
Only a small percentage of consumers currently has broadband access. Time Warner’s Road Runner, for instance, has about 320,000 subscribers. With AOL, Time Warner will certainly be pushing the service–which requires the instillation of special modems by Time Warner technicians, meaning more visits from the cable man.
As broadband spreads, though, AOL Time Warner’s position looks enviable.
For instance, CBS–in the process of merging with Viacom–has radio and TV distribution, but it doesn’t own cable systems or telephone lines or anything near the Internet presence of AOL. Same goes for Disney. But at least they both own studios that produce shows. NBC, the most profitable of the Big Three networks, has neither a studio nor cable carrier nor telephone system.
Pssst: Tonight, on Roswell , Liz wants Max to play Samantha from Bewitched and use his powers improperly. [WB, 11, 9 P.M.]
Thursday, Jan. 13
One possible beneficiary of the new AOL Time Warner is Geraldine Laybourne, the former Nickelodeon chief who is launching a converged Internet and cable network for women, called Oxygen.
Ms. Laybourne’s headquarters are in New York. But until Jan. 9, it did not look likely that her network would have much of a presence on TV screens in town. The largest cable provider is Time Warner, which already carries a women’s network, Lifetime, and it had been slow to offer Ms. Laybourne local carriage.
But one of Oxygen’s key investors is America Online.
Richard Parsons, AOL Time Warner’s chief operating officer, would only say, “Oxygen? Oxygen? Well, you know, Gerry is one of my favorite people …” And then he walked away.
Ms. Laybourne’s network is set to hit the airwaves nationally Feb. 2. Tonight, on Nickelodeon, catch The Jeffersons , in which George nearly sells his dry-cleaning business. [Nickelodeon, 6, 10:30 P.M.]
Friday, Jan. 14
Just a couple of weeks before the AOL-Time Warner merger, Time Warner vice chairman Ted Turner had once again said that he was interested in purchasing NBC, despite resistance from his fellow Time Warner board members.
While Mr. Parsons did not rule out the possibility that this new corporation could one day snatch up the network, an AOL-Time Warner-NBC merger doesn’t look likely for the near future.
“Ted, I’m sure, is still enthusiastic about the broadcast network business,” said Mr. Parsons. “But, right now, we’re focused on this.”
In the deal, Mr. Turner made an initial profit of $2.5 billion on his shares, but he’s really happy, one of his colleagues said, because now he gets a chance at “world domination.”
World domination may not be as hyperbolic as one would like to assume, given the new company’s instant 125 million paid subscribers.
Tonight, on Mr. Turner’s TBS, catch Forever Young , a homespun time-travel weeper starring Mel Gibson. [TBS, 8, 8 P.M.]
Saturday, Jan. 15
Speaking of NBC, it was just on Friday, Jan. 7, when General Electric executives told NYTV: “We’re very bullish on NBC, and we have no intention of selling it.”
After the merger announcement, executives were sticking to that position–even though it is now believed that, without being aligned to a studio or a cable carrier, NBC looks weak.
The G.E. position, however, is that NBC remains a dominant brand, a network the whole country knows in an era of increased entertainment choices. It makes more money than any of its broadcast cousins, leading the pack with shows like ER (owned by Time Warner) and Saturday Night Live .
Still, executives high up the chain of command at NBC privately say they expect some sort of sale–or at least a major new partnership.
Tonight on Saturday Night Live : Freddie Prinze Jr., a very likable talent, with musical guest Macy Gray. [WNBC, 4, 11:30 P.M.]
Sunday, Jan. 16
One key concern about the merged AOL Time Warner is that its news divisions– Time , People , Fortune , CNN, New York 1, etc.–will be corrupted. The company is so big, the fear goes, that its own reporters are bound to stumble upon stories involving some part of it. Will they pull their punches? Will they be pressured to lay off? Will they get unfair advantage against their competitors on other stories? Mr. Case said No and that one priority will be “protecting journalistic ethics.”
So, who got the first interview with Mr. Case and Mr. Levin, after the merger was announced? Why, the company’s own CNN! Even local New York 1–which is, you guessed it, owned by Time Warner–got interviews with the men before other national news organizations.
Then you read the original Time Online story about the merger and see the CNN news Web site described as “competitive” and Warner Brothers as “innovative.” Honestly, that’s all probably fair. But still, the merger will certainly prompt more of these types of questions.
Right before the press conference, two television reporters stood before the complimentary fruit and coffee table when the subject of stocks came up. “Do you have any AOL?” one reporter asked the other. Today, on CNN, catch Late Edition . [CNN, 10, noon.]
Monday, Jan. 17
Richard Bressler, the chief executive of Time Warner’s digital media unit, took issue with assumptions that people will watch full-length movies and TV shows on their computer screens. Internet users, he said, have shorter attention spans, and most broadband content will likely be shorter than the average TV show.
Then again, the pioneers of television thought the same thing. In the Nov. 29, 1975, issue of TV Guide , former NBC executive Leslie Raddaty wrote of those early days: “When NBC was preparing to take the giant step into television, the vice president in charge of that department made a careful study of the new medium and came to the conclusion that the viewing public just couldn’t concentrate on a program for a whole half-hour.”
Tonight, catch a rerun of Warner Brother’s hourlong No. 1 drama, ER , on Time Warner’s TNT. [TNT, 3, 7 P.M.]
Tuesday, Jan. 18
Speaking of mergers (sort of), is the unheard-of news collective formed by Fox, CBS and ABC about to get even bigger? NBC and CNN had been pointedly excluded from the news-video-sharing agreement, which was announced late last month.
After it was announced, NBC press representatives began publicly saying it was “curious” that they weren’t included in the strange alliance, and they were eager to find out why.
Representatives from both NBC and the new news alliance confirm that the new group will brief NBC on the consortium in the coming days. Sources at NBC said executives from the new group approached the network and offered the briefing.
Of course, the news alliance probably had to do that, lest it face an antitrust lawsuit.
Then again, consortium executives have said NBC would be welcome to join the collective if it so chose.
Tonight, catch a little World News Tonight , with my favorite anchorman, ABC’s Peter Jennings. [WABC, 7, 6:30 P.M.]