The merger of America Online and Time Warner will create a global giant that integrates traditional media like print, television and movies with the seemingly limitless distribution possibilities offered by the internet. RFE/RL correspondent Askold Krushelnycky takes a look at what the deal means for the companies involved.
Prague, 12 January 2000 (RFE/RL) -- In a deal announced Monday, a leading provider of computer online services, America Online (AOL), said it would buy the world's top-ranked media giant, Time Warner. If the agreement goes through, it will be the world's largest corporate acquisition.
AOL provides computer users with access to its own online information services as well as to the internet, the global network that links computers around the world. The company provides its 20 million subscribers -- most of which are in the U.S. -- with computer-based news, entertainment and home-shopping services.
Time Warner is a media empire that combines the Time publishing business -- which produces the weekly Time magazine and other journals -- with Warner Brothers, a film and television company. Time Warner also owns the 24-hour Cable News Network known as CNN.
Under the deal, AOL will pay around $156 billion in stock for 55 percent ownership of the new company. The new entity has been valued at around $350 billion and is expected to generate revenue of $30 billion annually. That is more than the gross domestic product of Slovakia or Uzbekistan.
The deal gives Time Warner a way to disseminate its many news and entertainment products digitally, by computer. And it gives AOL content for its Web sites as well as access to Time Warner's extensive system of high-tech cables, which will speed up and widen the range of digital information that can be supplied to consumers.
Internet experts say the merger may also enable subscribers to use their computers to make cheap telephone calls across the globe accompanied by video pictures of the callers. Subscribers will be able order movies and television shows on demand. And they will be able to take part in an ever-increasing number of interactive services already used for such things as games and on-screen shopping.
Steve Case, the head of AOL, will become the chairman of the new company. He called the signing of the deal "a historic moment in which new media has truly come of age." But the deal is not final yet. The United States government and the European Commission must first give the deal their blessing.
Both AOL and Time Warner are based in the United States, and news of their merger has caused some disquiet that America may take such an insuperable lead in internet business.
Europe's only comparable media conglomerate, the German Bertelsmann company, is ranked sixth in size in the world. It joined up five years ago with AOL in a much looser and less wide-ranging deal than the new merger, and its future cooperation with AOL now seems in doubt.
A few years ago, when the internet first began to take off as a forum for the dissemination of information, it was hailed as a truly democratic medium. In an age when newspaper and television ownership is becoming increasingly concentrated, the internet was seen as an independent outlet. Anyone with a computer can talk instantly to anyone else, and information can flow over the Internet without censorship. The new merger, however, would seem to indicate that the concentration of news media will extend to the on-line press.
But the editor of the British newspaper "Business Age," Adrian Lithgow, told RFE/RL he does not think the merger presents a danger to freedom of information. He says that the Internet will still be able to sustain hundreds of independent providers, so there will always be choice. Still, he said, the new company with its vast product resources will have so much to offer its subscribers that competitors may be squeezed out.
Lithgow also believes that another effect of the merger will be the spread of the English language. AOL and Time Warner produce the vast majority of their Web sites, movies, magazines and other products in English.