Will The AOL-Time Warner Deal Sink Microsoft?
By Stephen Lawton
How will the AOL-Time Warner deal du jour affect
Microsoft? Will it be the beginning of the end? Is this a threat to the
world as we know it? Does anyone really care? This is a deal that really
rocks and rolls.
Will the America Online (AOL)-Time
Warner deal be the beginning of the end for Microsoft? That question was
posed to me by one of our contributing editors shortly after the "merger
We concluded that the deal had nothing
to do with technology, but it could have interesting side effects.
If AOL-Time Warner wanted to turn the
operating system business on its ear, it could partner with a Linux software
developer to create consumer-class applications. Imagine not only getting
your e-mail, movies, news and sports through a cable-modem-enabled AOL
link, but running Linux-based apps from AOL, your application service
provider. Who needs Microsoft when you have a Netscape-based browser (do
you really think AOL will keep Explorer as its default browser if it's
going after Microsoft?), Linux applications and Linux thin clients? This
scenario should make Microsoft reconsider the competitive landscape.
IBM is putting
its weight behind Linux, and what makes Microsoft think other big systems
vendors won't follow? This deal du jour is expected to be the catalyst
for several other megadeals, none of which are likely to be good news
to Bill Gates. During the antitrust trial, Gates liked to say Microsoft
won't be No. 1 forever, and his firm is indeed facing challenges. In this
column I've called on the industry to stand up to Microsoft, and this
is the second time AOL has. I expect we'll see more challengers soon.
The AOL-Time Warner deal marks the
first time the Net has been validated as an entertainment medium.
For the first time you'll have a company
develop the book, make the movie, distribute it by cable, create an Internet
community for it and review it in the popular press. Have I forgotten
anything? Sure, most of that was in place before, but adding AOL's 20
million customers creates an awesome audience for building a community.
It's a vertical monopoly. (Ouch, there's that "M" word again.)
But despite all of the rhetoric about
synergy, business opportunities and the merging of new and old media,
a deeper, more sinister reason underlies the merger. Forget that Steve
Case, AOL's chairman and CEO, initiated the discussions in October 1999.
It doesn't matter that Gerald Levin, Time Warner's chairman and CEO, will
maintain day-to-day control of one of the world's largest entertainment
enterprises. And forget that media mogul Ted Turner made a cool $3 billion
with the stroke of his own pen.
In reality, Time Warner needed a fall
guy to take over one of the company's biggest PR headaches ever. The real
reason for the merger - which pleases Turner and wife Jane Fonda to no
end - is that now someone else is responsible for working out the Atlanta
Braves' John Rocker problem, and Ted and Jane don't have to worry that
one of them will get stuck with Rocker if they decide to split permanently.
For a complete list of Time Warner's
holdings, go to the Columbia Journalism Review's Web site at www.cjr.org/owners/time-warner.asp.