AOL-Time Warner deal won

Consumers will not see much immediate change resulting from America Online Inc.’s merger with Time Warner Inc. announced earlier this month, according to analysts.

AOL users will gain access to Time Warner’s smorgasbord of content, ranging from music to film to magazines, though that could have been achieved by a contract between AOL and Time Warner, said Robert Rosenberg, president of Insight Research Corp. in Parsippany, NJ. Still, the merger will “enable a lot more material to be packaged under one umbrella,” Rosenberg said.

While AOL users can eventually expect faster Internet connection times through broadband pipes, which Time Warner can deliver via its existing RoadRunner service or its cable business unit, in the short term there will be few effects on consumers, according to Anya Sacharow, an analyst with Jupiter Communications in New York.

AOL and Time Warner announced plans to merge in an all-stock deal the companies value at US$350 billion. The new company, to be called AOL Time Warner Inc., will have combined revenues of over US$30 billion, the companies said. AOL chairman and CEO Steve Case will serve as chairman of the new company, and Time Warner Chairman and CEO Gerald Levin will be CEO, the companies said.

Time Warner’s businesses include cable networks, publishing, music, film, cable and digital media. Some of its best-known properties are the publications Time, Sports Illustrated, Fortune Magazine, and People, as well as the cable television networks CNN, and HBO, the movie company Warner Brothers, and Warner Music.

In the international arena, the deal will soundly strengthen the companies’ position, analysts said. Gaining international muscle is especially important given Internet trends, according to AOL president and COO Bob Pittman. Last year, for the first time, the number of international Internet users outstripped the number of U.S. users, a trend which will certainly continue.

International users are already important to the companies-for example, Warner’s music group earns nearly 50 per cent of its revenues from outside of the U.S.-and the importance of international users will continue to increase, Pittman said.

In terms of the competitive landscape, AOL will continue to be open to other companies’ content, Case said on the conference call.

“The bias should always be to partnerships,” Case said. “No single company, even Time Warner, can go it alone.”

That may be welcome news to Microsoft Corp. and AT&T Corp., the two companies most mentioned by analysts as affected by the birth of AOL Time Warner. AT&T is clearly interested in the cable industry, and Microsoft is morphing beyond software into content and services with MSNBC and many other relationships, analysts said. Case singled out Microsoft as AOL’s “largest competitor” but noted that the companies have many areas of cooperation too, which will continue.

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