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