America Online's Proposed Merger with Time Warner Sets Stage for Industry Consolidation

Strategic Insights -

The proposed takeover of Time Warner by America Online is set to strengthen the company's position in the European market, where the Internet remains fragmented along national boundaries. Despite the Internet's borderless nature, American companies continue to dominate the European online market, with Yahoo, Microsoft, and America Online controlling three of the five most heavily visited sites in Britain, France, and Germany. The merger, if successful, will give America Online access to Time Warner's vast library of content, including movies, television shows, books, and news services, which are highly popular in Europe.

Key Takeaways:

  • The proposed merger between America Online and Time Warner will strengthen the company's position in the European market, where American companies like Yahoo, Microsoft, and America Online dominate the online landscape.
  • About 70 percent of Internet content still originates in the United States, making it difficult for European companies to develop pan-European offerings.
  • The merger will give America Online access to Time Warner's vast library of content, including movies, television shows, books, and news services, which are highly popular in Europe.
  • Analysts believe that the merger will strengthen America Online's ability to compete with companies like Freeserve, which provide free Internet access, by giving the company premium content that can attract subscribers.
  • The proposed merger has already had a positive impact on European media stocks, with shares of Canal Plus S.A. and B Sky B P.L.C. rising 17.1 percent and 12.5 percent, respectively.
  • The merger will give America Online ownership of two of the world's biggest traditional media conglomerates, Time Warner and Bertelsmann.
  • Philip Lakelin, a senior analyst at Analysys Ltd., believes that the merger will give America Online the content needed to expand its subscriber base in the face of free Internet access providers.

Statistics:

  • About 70 percent of Internet content still originates in the United States.
  • Shares of Canal Plus S.A. rose 17.1 percent to 140 euros ($144) in Paris.
  • Shares of B Sky B P.L.C. rose 12.5 percent to 1,011.5 pence ($166) in London.
  • The proposed merger will give America Online ownership of two of the world's biggest traditional media conglomerates, Time Warner and Bertelsmann.
  • The merger will increase pressure among rivals for alliances and mergers.
  • The closest thing to "pan-European" Internet services are those owned by American companies like Yahoo, Microsoft, and America Online.

Sources:

  • Mediametrix
  • Forrester Research
  • Bloomberg Financial Markets
  • MediaMetrix
  • Company reports