INDUSTRY & COMPANY BUSINESS
AOL Time Warner is the world’s leader in Internet technologies, e-commerce services, interactive services, and web brands. AOL started up in 1985 and initially offered limited online services for then a relatively small market of personal computer users. Today, it serves more than 27 million members of its flagship AOL service, along with more than 2.8 million CompuServe members, 80 million registered users of ICQ, and more than 34 million registered users of the Netscape.com service. AOL also operates some of the most popular services on the World Wide Web, including Map Quest, AOL Instant Messenger, AOL MovieFone, Spinner.com and Null Soft’s Winamp, and Digital City, Inc. With its major focus on providing convenient easy-to-use services for mass-market consumers, AOL has played a major role in creating the consumer online experience worldwide, and is leading the development of the next generation Internet. With this focus on consumers, AOL seeks to build a global standard as central to people’s lives as the telephone or television and perhaps even more valuable. Through its strategic alliance with Sun Microsystems, the company develops and offers easy-to-deploy, end-to-end e-commerce and enterprise solutions for companies operating in the net economy. AOL has always been known for providing the most convenient and easiest-to-use interactive service available. The Company pioneered technologies like Keywords for simple navigation, and the Buddy List to enable instant messaging by showing, which of member’s contacts are online. The flagship service offers members a complete package of online features, including the popular My Calendar to organize busy schedules, You’ve Got Pictures to view and share family photographs online, a built-in multimedia player to enjoy the Web’s growing trove of rich audio and video content; and much more. The service can be accessed using any high-speed connection, or by dial-up connections from virtually anywhere in the world.
AOL has also leaded the way in protecting members’ online privacy and security. The service’s built-in Parental Controls offers the best available tools for parents to protect their children from inappropriate online content, choose whom they may or may not receive e-mail from, and even limit the amount of time they spend online. Our cutting-edge privacy protections give online shoppers the highest degree of protection for their credit card and other personal information. AOL is also the only global interactive services provider, offering AOL services in 16 countries in 8 languages. At the same time, AOL offers the leading local services on the World Wide Web. The Company’s Digital Cities, Map Quest, and MovieFone brands that help consumers keep convenient track of what’s happening in their own hometowns.
INDUSTRY TRENDS AND FUTURE
The Internet industry encompasses all companies engaged in creating, developing or processing electronic information through a computer network system. Many of these companies are a direct outgrowth of the computer software industry. Though the Internet is not new, growth of this industry has taken off in the past four years due to the commercialization of the World Wide Web part of the Internet. The World Wide Web allows publishers to create electronic publications with text graphics, pictures, data, and in some cases, voice over the Internet. Users with a special program called a browser allow them to access these highly specialized publications through their personal computer. Since the Internet involves no real barriers to creating publications, virtually anybody can create information and distribute it over a computer server. Internet commerce is expected to reach more than $400 billion in sales by the year 2002, according to IDC. Consumers will use this new commerce medium because it offers some comparison-shopping and convenience. Consumers can compare prices from different retailers almost instantaneously with a personal computer hooked into the Internet. However, traditional shopping will not go away. Consumers will still do window shopping for higher unit value goods and considered purchases that are expensive and risky. But, straight repurchase and low unit value goods such as CD’s, books, and certain clothing items, electronic commerce offers the greatest timesavings. In 1998, there were 10 million consumers who purchased goods on-line. By the year 2002, this figure is expected to quadruple to 47 million consumers.
AOL is the world’s leader in interactive services as well as the larges media company in the US, making it the fourth largest company in any industry in the US. AOL Time Warner, for the three months ended 9/00, revenues increased 34%to $1.98 billion. Net Income rose 91% to $345 million. Revenues reflect growth in the number of subscribers and increased advertising income. Earnings reflect growth of higher margin advertising.
AOL Time Warner has strategic concepts that define their organizations capabilities. One of these concepts has been to continuously throughout the years make technology simple for its consumers. A second concept would be the offering of simple e-business solutions to the market. These core competencies have proven to be a strength that can be strategically applied to a wide array of products and markets.
Customer care seems to be one of AOL’s greatest strengths. They offer a complete package of online features, on-line privacy and security, parental controls, and magnificent customer service. Their determination in creating a loyal customer base has paid off. Other strengths, which AOL posses are:
· Generation of Revenue- an estimate of AOL revenue breakdown suggests that it can generate over one billion dollars of sponsorship and advertising revenue, which is about 2.5 times that of Yahoo’s revenue.
· Brand name- the AOL brand name is involved in so many different markets that when it comes to selling, what the customer will know is the AOL brand name.
Because of the merge, Time Warner is now required to open up their cable systems to rival Internet providers. This would result in more Internet companies on Time Warner’s cables, which would increase competition and decrease the amount of profit that AOL was set to make from the deal. An additional weakness would be:
· Stockholder premium- as a result of the merger AOL issued a premium to the Time Warner stockholders, which ended in them getting one and a half shares for the each Time Warner share that they currently owned. This premium could prove expensive in the future, as AOL is obligated to make payments on the combined company’s debts.
· Local Government- this merger has raised issues of concern because it has created a threat to monopolize the industry.
America Online and Time Warner will have many opportunities to combine their assets to create unique new expanded services to drive increased consumer usage, and marketing and promotion capabilities to fuel rapid growth for their shareholders and employees. Some of these opportunities include:
· Music: The combination of Time Warner’s prestigious music labels and roster of established stars and new artists with America Online’s online marketing and e-commerce capacities will create powerful music destinations.
· Entertainment: America Online’s AOL TV and MovieFone combined with Time Warner’s cable networks and Warner Bros. movies and television will provide valuable programming, cross promotional, and e-commerce opportunities.
· Technology: AOL Time Warner will be able to develop and leverage technology across all of the businesses, creating new opportunities to expand services and share infrastructure.
· Broadband: AOL Time Warner’s ability to offer the finest content will expand the already growing number of consumers seeking to access the Internet at high speeds via cable modem, DSL, wireless or satellite.
Top of the list of concerns for AOL is the introduction of broadband as a threat, a shift to free dial-up access. The emerging trend of free dial-up access offered by NetZero and its sort is threatening to devour AOL’s access fee, which is still the bulk of and estimated to be as high as 75% of its revenue base. Additional threats to AOL Time Warner are:
· Highly competitive market – Microsoft as well as other formidable competitors are trying to dominate the Web-browser market and discourage innovation and competition, this would affect AOL dramatically more serious in its potential consequences for a competitive new media environment.
NATURE OF CHANGE
This is the largest merger in U.S. corporate history. America Online’s merger with media giant Time Warner has created a multimedia behemoth. The two corporate giants will join through a stock swap worth $350 billion. The new company will be known as AOL Time Warner Inc. Steve Case of AOL will serve, as Chairman and Gerald Levin of Time Warner will be CEO. AOL Time Warner will be a premier global company delivering branded information, entertainment, and communications across rapidly converging media platforms and changing technology.
The merger will combine Time Warner’s vast array of world-class media, entertainment and news brands and its technologically advanced broadband delivery systems with America Online’s extensive Internet franchises, technology and infrastructure, including the world’s premier consumer online brands, and unmatched e-commerce capabilities. AOL Time Warner’s unparalleled resources of creative and journalistic talent, technology assets and expertise, and management experience will enable the new company to dramatically enhance consumers’ access to the broadest selection of high-quality content and interactive services.
By merging the world’s leading Internet and media companies, AOL Time Warner will be uniquely positioned to speed the development of the interactive medium and the growth of all its businesses. The new company will provide an important new broadband distribution platform for America Online’s interactive services and drive subscriber growth through cross marketing with Time Warner’s finest brands.
AOL Time Warner’s brands will include AOL, Time, CNN, CompuServe, Warner Bros., Netscape, Sports Illustrated, People, HBO, ICQ, AOL Instant Messenger, AOL MovieFone, TBS, TNT, Cartoon Network, Digital City, Warner Music Group, Spinner, Winamp, Fortune, AOL.COM, Entertainment Weekly, and Looney Tunes. In addition to fully integrating its brands into a digital environment and bringing them closer to consumers, AOL Time Warner will have a wealth of creative resources to develop products specifically suited to interactive media.
This deal has broad outcomes for the entire Internet sector. For example:
· AOL can use its Internet experience to leverage Time Warner’s prominent media properties which have yet to be a factor on the Net
· Time Warner cable, which reaches 20 million homes, gives AOL the missing piece of its broadband strategy
· The potential advertising and e-commerce synergies are huge
· AOL TV and MovieFone can link with Time Warner’s cable systems and Warner Bros. movies
· AOL’s Instant Messenger gets a boost via Time Warner’s ability to offer local telephony over cable
Bottom line: More opportunities to access content for consumers. And plenty to keep government trust busters busy as they investigate what this new multimedia powerhouse is all about.
The profit structure of AOL Time Warner will change because it’s no longer solely dependent on its Internet services for revenue. With the acquisition of Time Warner, the largest media monopoly, they will now have proceeds coming from Time magazine, CNN, Warner Bros. People magazine, Looney Tunes, Fortune, the Warner Music Group and HBO, which are all Time Warner names. Once combined with their already existent and successful services such as the AOL service, CompuServe, and ICQ, AOL Time Warner will prove to be to bring-in huge revenues.
ADDRESSED CHANGE & OPPORTUNITES
CHANGE, WILL IT WORK?
AOL Time Warner has a lot of momentum and exceptional chance of becoming very profitable if their growth prospect matches that of what analysts have said this company is capable of. In order for this to happen AOL Time Warner has to be able to smooth out some of its rough edges, for example anti-trust issues, FCC regulations, and its broadband court battle. I personally believe that the change that this company has undergone will prove to be successful in the long-term.
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Comment: very informative, you could have used written more about your own opionion and how are they trying to address their strategic issues Rating: 8
Comment: Impressive essay and has given me a lot of insight into the topic Rating: 10