The Net Media Play Everyone Wanted

It's been hard to escape the panting on Wall Street and in the press for a genuine, no-fooling Net media company. Now that it looks like one has finally come along with America Online Inc.'s takeover of Time Warner Inc., you can just about feel the heavy breathing on the back of your neck. Outlets dubbed the news "historic" and "profound" and covered the doings with page-one splashes and fat story packages.

On one angle everyone agreed: The sheer size of the deal made it big news. The Times of London pegged the new company's worth of $350 billion as more than the output of Russia. The top executives' hauls are worthy of a Brink's truck: AOL founder Steve Case, who will be chairman of the AOL Time Warner, is thought to be worth more than $660 million, and the share options of CEO Gerald Levin approach $100 million, according to the British newspaper. To the Financial Times, the venture's high-end price tag makes perfect sense. It's "the logical result of the spectacular rise" in Netco valuations. But the pink paper also pointed out that other attempts to mix Net assets with those of traditional media - most notably last year's effort to merge Lycos with USA Networks - have crashed and burned. Now that Time Warner has put the step in AOL's cool, Case has to convince the stock market that goosed-up Net valuations can survive within a traditional media conglomerate.

Despite the saturation coverage, most outlets were equally skeptical of whether AOL Time Warner's got game. The Washington Post ran plenty of warm-fuzzies on local company AOL, but even its page-one play questioned whether the baggage of old media - Time Warner's hefty debt keeps coming up - might sink AOL's buoyant stock, which was down $2 at yesterday's close. "What's the AOL shareholder getting out of this?" J.P. Morgan Securities media analyst Richard MacDonald asked the Post. "And are they going to value the company the way AOL is valued?

In other words, is it old media becoming new media or new media becoming bricks and mortar?" Most hate to admit it, but the answer is that no one has a clue.

"Neither the old nor the new is going anywhere. These animals clearly need each other," the Post's Mark Leibovich concluded.

The New York Times was positively giddy over the merger, dubbing it an "Internet Triumph" and running high with this quote from Thomas Weisel Partners analyst David Readerman: "The nerds have won." But Steve Lohr's front-page analysis also eyeballed the deal as a gamble for both parties. Time Warner has risked putting someone else behind the wheel as it tries to ride the fast track to Net riches. Just the task of integrating Time Warner's music, movies and television holdings with AOL's core service should preoccupy the new company for months, analysts told the San Jose Mercury News.

Eventually the press got around to its favorite topic: itself. The prospect of an AOL-Time Warner union elicited plenty of heavy breathing from the media on the issue of conflict. Should consumers of information worry about the potential ethical conflicts that could arise as AOL Time Warner's media properties cover their parent company? The media thinks they should. San Jose Mercury News columnist Dan Gillmor panned the chokehold that AOL will have on information. "AOL has been ethically challenged throughout its existence," he wrote. "I hate to see Time Warner, which has had its own ethical troubles but generally shows high journalistic standards, fall into such hands."

The Boston Globe noted the first inkling of trouble came when CNN's Willow Bay found herself in the awkward position of interviewing her bosses, Case and Levin. It's not easy to ask hardball questions of the guy who signs your paycheck. Is that what the big corporations are counting on?

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