Perspective: Media regulations need review in the global deal frenzy

A clear conclusion emerges from the AOL-Time Warner deal. It symbolises the rehabilitation of old media after years of insecurity in the face of the dizzying rise of new media. It is most evident in the decision of Steve Case, the AOL founder, to pay a 70 per cent premium for Time Warner’s shares and ask the latter’s Gerald Levin to be chief executive.

A clear conclusion emerges from the AOL-Time Warner deal. It

symbolises the rehabilitation of old media after years of insecurity in

the face of the dizzying rise of new media. It is most evident in the

decision of Steve Case, the AOL founder, to pay a 70 per cent premium

for Time Warner’s shares and ask the latter’s Gerald Levin to be chief

executive.



The timing could not have been better, as the speculation about the

internet stock bubble bursting threatens to become self-fulfilling.



This reminder of the old mantra that ’content is king’ has led to a

positive re-rating of media stocks. This matters a lot in the UK, where

the sector is regarded with more suspicion. UK media companies can only

dream of the 590-fold increase in the value of AOL’s shares since it

floated in 1992. Comparative minnows, they have been criticised for

their lack of internet strategies.



But, over the past week, more than one old-media company will have

suddenly developed a new-media strategy: get bought by Microsoft or

Yahoo!. While Yahoo!’s Martina King will become one of the most-lunched

women in Britain, what would really be in it for the internet

companies?



Bertelsmann aside, which European media company really matters on the

world stage? The long-term benefits of giving up autonomy, agility and a

roaring share price are not without risk. Having said that, the need for

content should prove stronger. As for the internet companies, the UK’s

largest, Freeserve, is valued at a ’mere’ pounds 5 billion. By contrast,

there’s Microsoft at dollars 575 billion or Yahoo! at dollars 107

billion.



Alliances are likely to be the way forward in Europe. There are no

massive deals to be had. Acquiring a European internet company is

unlikely to transform a media company’s fortunes, and vice-versa.

Neither buyer nor seller is large enough to make the money work.



Here in the UK, the spotlight shines - inevitably - on the

regulators.



This week Flextech’s Adam Singer described his own pounds 10 billion

deal with Telewest as ’paltry’ in the light of AOL Time Warner,

commenting: ’Britain looks shamefully parochial at the best of

times ...’ Will the AOL merger encourage the Government to relax

cross-media ownership rules?



Carlton’s proposed merger with United News and Media is not a ’huge

deal’ beyond these shores. However, both Granada and ITV’s advertisers

are bleating. The irony is that while advertisers such as SmithKline

Beecham and Glaxo huddle together in the harsh global business

landscape, they deny media owners the same opportunity. A change of

attitude is required.



It’s time for UK media to make a quantum leap. Media ownership

regulations must catch up with global consolidation, with business and

technology.



The alternative is for UK media companies to become a global footnote.



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