AOL TIME WARNER - PowerPoint PPT Presentation

Loading...

PPT – AOL TIME WARNER PowerPoint presentation | free to download - id: e14c-ZWYyZ



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

AOL TIME WARNER

Description:

News media properties sold to company with no commitment to news ... Bundles content at discount (e.g. ABC News and People mag) In Progress ... – PowerPoint PPT presentation

Number of Views:209
Avg rating:3.0/5.0
Slides: 15
Provided by: oboydb
Learn more at: http://www.csupomona.edu
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: AOL TIME WARNER


1
AOL TIME WARNER
  • A Failure of Synergy?

2
Reasons for the Merger in 2000
  • Concentration of value
  • Value of merger 300bn when announced, 145-183
    bn in Jan. 2000 and down to 96-106 when deal
    complete in 2001
  • Original combined annual revenues of 30 billion
  • AOL-TW became worlds fourth largest corp twice
    as big as nearest direct competitor, Viacom
  • AOL had high capital value but lower in revenues
    TW had lower capital value but higher in revenues

3
Reasons for Later Disappointment
  • Original value of deal significantly overpriced
  • AOL paid for TW with stock was to fall, so TW
    stockholders lost out badly
  • Growth now very slow
  • Many people who go high speed choose not to
    maintain AOL subscription

4
Attractions of Synergy
  • Fusion of
  • old media with new media
  • content with content delivery
  • clients

5
  • Economies of scale
  • deliver same media products to more outlets
  • deliver existing product over Internet
  • cross-promotion of AOL TW media products
  • selling of audiences to advertisers
  • create giant database of private information
  • more muscle for international expansion

6
  • Innovation
  • create new media product services for Internet
    delivery
  • facilitate online music revolution
  • accelerate race to high-speed service
  • accelerate development of narrowcasting
    linking products with niche consumer demographic
    groups

7
Concerns at the Time
  • High-speed movie delivery not yet matured
  • Most households not yet receiving high-speed
  • AOL privacy concerns
  • News media properties sold to company with no
    commitment to news
  • Open access for content providers
  • No benefits to general public
  • competition weakened
  • Higher entry costs
  • popular culture content

8
One Year Later (Apr. 2002)
  • Value of stock down by two-thirds
  • Advertising downturn crippled AOL
  • High debt plus falling stock price made it
    difficult to do deals (e.g. with Comcast)
  • Market hostility to spin exaggerations of
    performance

9
  • Potential loss of cable subs
  • Slowdown in new AOL clients loss of high-speed
    service clients
  • Some big film hits (e.g. Lord of the Rings),
    boosted in part by AOL cross-promotions
  • Customers resent exclusivity
  • Synergy benefits reduced by need to use content
    from other sources and to distribute through
    other channels.
  • Different divisions value editorial independence

10
Two Years Later
  • Debt at 27.5 bn
  • Selling off non-core assets to ease debt burden
  • not all easy to sell in poor market
  • Link with entertainment assets has been of little
    value to AOL, and TW does not need AOL

11
  • AOL founder Steve Chase resigns as chairman of
    the group
  • Vice-chairman Ted Turner resigns
  • AOL operating profit falls from 1.4 bn in 2002
    to under 800 m in 2003
  • Dumping AOL not easy because few buyers (many
    lawsuits against AOL)
  • Reduced intra-company spending on advertising on
    its own cable systems

12
2003 and Onwards
  • AOL members begin to defect to cut-rate dial-up
    competitors broadband rivals in a price war.
  • Loses 846,000 subs April-June 2003 alone
  • Almost all its 9 bn revs come from narrowband
    subs who pay 23.90 monthly log on by phone
  • Only 10 of new broadband subscribers choose AOL.
  • AOL competitors (MSN, Yahoo) are cheaper.

13
  • AOL strategic response to competition is not to
    reduce prices, but improve content
  • AOLs new offerings
  • Billed as door-way to brand-new online content
  • Help subs tap into growing of TW music, video,
    mag content
  • Live online performances and concerts
  • Net-only TV vignettes
  • Bundles content at discount (e.g. ABC News and
    People mag)

14
In Progress
  • Numerous suitors lining up to buy AOL, potential
    profit for TW
About PowerShow.com