After the inevitable dilation of pupils at the sheer scale of the America Online-Time Warner deal wore off this week, the media and the markets got down to the hard business of figuring out whether the megamerger was a Good Thing. Disagreement was rife. You could get whiplash just reading the op-ed columns of the Wall Street Journal.
First libertarian theorist Peter Huber cheered "the beginning of the end of the old mass media" and declared that this deal was "far bigger than what happened before in Gutenberg's, Marconi's and Bell's old galaxies." The "analog stragglers," Huber thundered, are "history."
Then columnist Holman Jenkins expressed doubt that the deal would even hold together -- and if it does, that it represents "the last crazy Internet valuation" and a pop to the "Internet bubble."
Then Red Herring editor Anthony Perkins applauded the merger and declared AOL boss Steve Case to be "a strategic genius with a capital G" for trading in his company's inflated stock for the more tangible assets of Time Warner.
Then author Michael Lewis declared there were "no good reasons" for AOL to buy Time Warner -- and that in a decade the whole "obscenely large" conglomerate would be broken up into its component corporate atoms.
It's good to see the experts have such a handle on these important stories.
Whether the deal is a Good Thing depends, of course, on your definition of good, which depends on where you sit. The financial press spilled gallons of ink assessing who outsmarted whom in the merger chess game. If, like me, you own no stock in either company, that won't hold your attention for long.
From a different direction, the media critics came out in force to make the obvious and irrefutable point that the merger would further concentrate the ownership of media in a small number of corporate hands. But they had trouble nailing down exactly how the deal would hurt public access to news and information.
Neither the horse-race handicappers nor the media-monopoly hand wringers focused on the issue that matters most to Internet users like me, and those of my readers who've corresponded with me this week. They and I still harbor hope for the Internet as a new medium with an unprecedented openness, diversity of voices and populist power -- a global Speaker's Corner that gives millions of individuals the chance to reach millions of other individuals and to choose their sources of information from a vast newsstand.
This openness is a direct result of the way the Internet and its underlying protocols were designed over the past three decades by engineers and computer scientists who wanted to enable communication in new ways. The technical choices that guarantee this openness at the heart of the Net's technology -- decentralized packet routing, an emphasis on transparency over security, a "many-to-many" rather than "one-to-many" architecture -- are the very same factors that tend to trip up big corporations that wish to bend the Net to traditional marketing ends or use it to replicate the old-fashioned relationships of broadcast media.
Over the past decade, the geeks and the marketroids have struggled for the soul of the online world -- and so far, the geeks have won. The Internet itself is their baby, and it has triumphed over all the also-ran closed networks that dismissed it as "too complicated" and "too scary" for the average Joe. But the marketroids have roared back over the past five years in an effort to bend the Net into a compliant shape.
The only question that really matters this week in the wake of the AOL-Time Warner deal is whether it can tip the balance in this continuing tug of war.
With AOL's free-disk carpet-bombers now on the same team as Time Warner's book- and music-club promoters, the new corporate colossus is the ultimate marketroid machine. Others have failed to fence in the Net; can it succeed?
Or, as some of my e-mail correspondents put it, as long as we can still go where we want and do what we want on the Net, why should we care what AOL-Time Warner does?
For starters, let's be clear that both AOL and Time Warner would eagerly secede from the broader Net if they could figure out how. At the Monday press conference announcing the merger, executives repeatedly pointed out the common ground between AOL and Time Warner: Both run subscription-based businesses. What they didn't add is that both companies' cultures share a closed-access mind-set.
Cable providers like Time Warner are legal monopolies in the communities they serve. And we should never forget that AOL, though it has spent much of the past year on a campaign for its own "open access" to cable providers, has spent most of its history as a closed-door online service. It opened itself to the Web and Internet only when doing so became a matter of survival in the mid 1990s, as it became clear that the Internet's vast commons would kill off the proprietary services. To this day, AOL maintains acre upon virtual acre of its clunky, closed-door proprietary pages.
Today's Net consumers have evolved a stubborn mind-set toward those who would exact toll-like subscriptions from them. People expect to pay someone for Internet access -- for the general "pipe." Then they expect to be able to pick and choose from an array of content and services that are supported by advertising. They paid once at the ISP office; why should they pay again?
Outside of the porn world, only a tiny handful of Web sites are able to charge for access -- like the Wall Street Journal Online, which I suspect most subscribers are writing off as a business expense, and much of whose content is now available for free on MSNBC. Sites that once waved the "subscriptions are the future" banner, like Slate and TheStreet.com, have retrenched in an ad-supported mode.
I'm guessing that the executives in AOL Time Warner's boardrooms are hard at work trying to reverse this trend. Let's listen in on how their strategy session might go:
"How can we monetize our content assets in the broadband future?" (Yes, they do talk that way.)
"People pay to rent videos," says the guy with the black marker, scrawling his bullet points on the board. "Surely, in the broadband future, they'll pay for movies-on-demand and music-on-demand and, if we play our cards well, news- and information-on-demand."
"But if we put this stuff out there digitally it'll get pirated. It'll lose value. People will pay once to download and then copy the files, share them with friends."
"Our mass-market customers are scared of hackers and security risks and privacy invasions, anyway, and they just hate dealing with their screwy computers. What if we re-architect the Net and build a new kind of network for them -- one that's safe for them and us? We'll control the back-end technology so we can make everything easy and convenient, which is what AOL's known for, and also make it safe for our copyrights. We'll be the service provider and the content provider. We'll throw in Internet e-mail, of course; people want that. But the rest will be ours. It'll run on dedicated appliances -- no more crashing PCs to worry about. We'll offer all the great proprietary stuff we already run, like chat and buddy lists, of course. Then we'll give 'em all our brand names in a variety of monthly packages, just like we do with our cable TV properties, at a bunch of different premiums. No more mucking around with the messy Web -- you'll get all quality content all the time, kid-filtered and neatly organized. And we'll know who the customers are and what their credit card numbers are. They can pay for their monthly service and their e-commerce charges on the same bill."
"I love it! What do we call it?"
"'Full Service Network' has a nice ring."
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That, of course, was the name of Time Warner's ill-fated interactive TV experiment in Orlando, Fla., in the early '90s. Almost certainly, the new AOL-Time Warner is itching to revive some version of it -- whether along the lines of my nightmare above or in some other form.
Will the public go for such a scheme? One big reason the Orlando effort flopped was that it cost Time Warner far too much per household. Smart pricing would be essential for any new-millennium effort to revive the consumer-friendly, fee-based interactive TV idea. Still, AOL understands smart pricing, and the stock market today may well be willing to underwrite the cost of building such a network, which seemed prohibitive a decade ago.
What will really make or break any such plan is how receptive customers are to an online corporate theme park (Bob Pittman, the AOL exec who will be calling a lot of shots in the new conglomerate, once ran an amusement-park chain). If enough millions of people opted for that kind of service, we could witness a kind of commercial Balkanization of the online world. Such a return to the pre-Internet days of proprietary services and closed gates could send today's Internet shrinking back to where it began the '90s -- as a fringe community of scholars and smart kids.
It may all come down to which is stronger: the public's appetite for convenience and a mall-like experience online, or its hunger for the kind of unpredigested hurly-burly today's Internet still provides.
I can't predict that outcome. I wouldn't want to underestimate the spunk and intelligence of the millions of Internet users who in a few short years have turned the network into an astonishingly rich pool of human knowledge and interaction. But I don't want to underestimate the persuasive powers of the world's largest media corporation, either.
I do know one thing: AOL-Time Warner's interests are now aligned opposite those of a freewheeling, independent Internet. So let's give 'em hell -- while we still can.
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