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Saturday Morning News

AOL-Time Warner Makes it Official

Aired January 13, 2001 - 8:19 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KYRA PHILLIPS, CNN ANCHOR: Now onto the mega merger of old and new media. AOL Time Warner is officially trading on Wall Street and on Main Street, the company says consumers are expected to see the further convergence of programs on their computers and their television sets.

CNN's Wolf Blitzer takes a look.

(BEGIN VIDEOTAPE)

WOLF BLITZER, CNN CORRESPONDENT (voice-over): The corporate marriage brought excitement to Wall Street and a new sign elsewhere in Manhattan. The companies say the merger will expand consumer choices in entertainment, communications and the Internet.

ROBERT PITTMAN, AOL TIME WARNER COMPANY COO: We have this tell me a story box which is the TV and you have this manage my life box, which is the PC, and what they're beginning to do is you're going to be sharing some functionality across the two.

BLITZER: The two, AOL, with 26 million subscribers, the largest Internet service provider, and Time Warner, which owns CNN, HBO, the Cartoon Network, an array of magazines including "Time," "People" and "Sports Illustrated" and movie and recording industry giant Warner Brothers.

WILLIAM KENNARD, FCC CHAIRMAN: We've never seen a merger of this size and scope or one that creates so many challenging policy issues.

BLITZER: The FCC imposed conditions to protect consumer interests, including making the next generation of the popular instant messaging service compatible with competitor systems and allowing competitor internet service providers using Time Warner's high speed cable lines to be able to control the content of the first screen their customers see.

KENNARD: Imagine a world in which one company controlled all of the telephone numbers that people need to communicate with one another. Well, that is the danger if we don't allow a competitive marketplace for instant messaging.

BLITZER: But that doesn't satisfy some critics.

JAMIE LOVE, CONSUMER PROJECT ON TECHNOLOGY: I think that if Time Warner had not merged with America Online, there would have been a higher prospect, that you'd have more of a pro-competitive and level playing field for the Internet.

BLITZER: Wolf Blitzer, CNN, Washington.

(END VIDEOTAPE)

MILES O'BRIEN, CNN ANCHOR: Now, whenever there's a merger like this, there is an awful lot of inflated talk about the so-called synergies and what it might mean for consumers. What is the reality, though?

Let's talk to an analyst who has some answers for us. Chris Charron is with Forrester Research. He joins us from Boston this morning.

Chris, thanks for being with us.

CHRIS CHARRON, FORRESTER RESEARCH: Sure.

O'BRIEN: All right, to what extent, let's take the contrarian view here, to what extent is a merger like this, as it relates to the consumer at home flipping through channels on their TV, to what extent is this much ado about nothing?

CHARRON: Well, I think for many consumers it is much ado about nothing. For the consumers that use AOL and Time Warner properties, they'll certainly see some impact. Primarily they'll see a lot of cross promotion and cross marketing of AOL and Time Warner properties. So if you're reading "Sports Illustrated" you will see a lot more ads for the AOL service. If you're using the AOL service, you're going to see a lot of advertising for music and entertainment kinds of properties.

But for the vast majority of consumers, they won't see a lot of impact. The digital, we've seen media fragmentation happening really for some time now as digital technologies come on board and most consumers will be using, you know, whether it's off line or online channels to go, you know, wherever they want to go and do whatever they want to do, and I think they'll still see that same freedom of choice.

O'BRIEN: The thing that held up this deal for so long, of course, there were several things, but one of the things was the cable access which Time Warner secures, some 10 million homes. I believe there are about 100 million TV households or more in the country. That's really a small percentage for all the talk that was levied on that subject.

CHARRON: Yes. I think that there's also sort of much ado about nothing on this front as well. Aside from just the numbers of households, I think the reality is is that the battle, the separation of the winners and losers does not happen on the Internet access side. It happens on the content and commerce side of the experience.

In other words, it's not so much how you, you know, what channel you turn on or how you turn on the Internet, but it's where you go and what you do once you're on the Internet or any kind of digital platform.

So although many of these internet service providers will have now equal access to consumers over the AOL Time Warner network, they really don't have equal offerings in many cases. So AOL has proven its knowledge of digital consumers and gained success because they understand content and commerce and consumers want to spend time at AOL, not just to get their Internet access service, but actually to get the content and communications they're looking for.

So on that front, I don't think it'll make a lot of difference. If Internet access did make a lot of difference, we wouldn't be talking about Yahoo! and AOL today. We'd be talking about names like Earthlink or Prodigy if that were the case.

O'BRIEN: And finally, this is the, you know, 800 pound gorilla in the media world, perhaps the only missing piece in the puzzle is a broadcast network. Care to make any predictions along those lines? Will this company be acquisitive and go after one of the broadcast networks? It certainly would have the clout to do that, the financial clout, that is.

CHARRON: Sure. They absolutely would and of course the prime suspect in this particular issue would be NBC, I think. But I think for now the companies have enough on their plate trying to integrate what are two very large and complex organizations. They have a lot of media properties and a lot of work to do on the marketing and advertising side of the business and I think it's certainly possible down the road, but I don't see it happening over the next year or so.

O'BRIEN: Chris Charron is with Forrester Research. He looks at the media business. And he joins us from Boston this morning. Thanks for being with us on CNN SATURDAY MORNING.

CHARRON: Thank you.

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