Twenty-two million people see the Net through America Online's eyes. In other words, for a huge chunk of the online population, "the Internet" means clicking open an AOL browser and being channelled directly into news and entertainment sites chosen by AOL. To be "chosen" by AOL, is to land the golden goose of traffic -- even if it is a paid privilege. For many online media companies that live on the open Web, the traffic that comes from "placement" before AOL's eyeballs is a big part of their bottom line.
Now AOL is merging with Time Warner, which has an enormous stable of its own news and entertainment properties -- so what will that mean for AOL's relationship with the media companies it has long milked for cash? Will AOL favor Time Warner media properties over other content? Wouldn't it make sense for AOL to feature its own CNN news service rather than, say, that of CBS, which is currently featured in AOL's news channel?
"AOL has been very agile about figuring out business models that work for them, and they have got the whole industry eating out of their hand," muses Marleen McDaniel, CEO of Women.com, which has long enjoyed a distribution relationship with AOL. (Salon.com also has a content distribution arrangement with AOL.)
Although McDaniel says she's excited about Women.com's future with AOL, she says, "It's going to be harder and harder for independent companies; it would be very hard to start a new media company today."
Few new media executives are likely to say anything too negative about AOL or make public their concern that Time Warner's content might push theirs out of AOL, (either admission could be suicide), but some Web content companies are bracing for change. After all, AOL could now tap content from the Warner Music group, Warner Bros. and New Line Cinema, cable channels like CNN and HBO, magazines like Time, People and Fortune plus countless Time Warner books and Web sites.
"Why would you want to go help another record company when you can help your own company?" asks David Goldberg, CEO of Launch, a music portal currently featured on AOL's music channel. "There will probably be a whole lot of shifting around of those deals -- if they don't currently have a big deal with CNN and they have a big deal with someone else, CNN is going to get a better deal. Within the bigger media areas of AOL I think there will be a lot of fallout."
Lew Harris, editor-in-chief of E! Online (featured in AOL's entertainment channel), disagrees: he's not at all worried that AOL might start favoring Entertainment Weekly (Time Warner's entertainment magazine) over his content. "We have found for the most part that AOL has been as unrestrictive as anybody can be -- they have their own entertainment portal, Entertainment Asylum, and they have never pushed people away from us to Asylum." Although he does add," I may end up eating these words in two years."
AOL, for its part, insists that it won't be favoring its own media properties; it says it wants a variety of content providers. "We have no plans right now to interrupt the agreements that we have," says Wendy Goldberg, spokeswoman for AOL. "We want the best that there is, everything that our members want to see on the service -- and that means a number of content providers. It's premature to discuss what AOL will look like moving forward, but even today we have all kinds of providers and agreements, and what we want is to continue to provide that."
Although AOL once attempted to generate its own proprietary content -- such as the Entertainment Asylum and Thrive, both of which grew out of AOL's now-defunct Greenhouse Studios content wing -- these days it relies primarily on outside content.
But the privilege of being one of those content partners does not come cheap: Most companies pay millions for the right to display headlines, links, logos or other content across AOL's properties. Premium partner PlanetOut, for example, is forking out $18 million over three years for placement across AOL's various services (for a potential one billion impressions). Others are luckier: NetNoir says it pays nothing for the privilege of distribution on AOL, although spokeswoman Beverly Greene would not elaborate on how the site landed such a deal.
NetNoir and PlanetOut both grew out of AOL's Greenhouse Studios, and are both part owned by AOL (20 percent and 12 percent, respectively). And both hope that the merger may give them a chance to distribute their content across the news services, magazines and cable channels in Time Warner's purvey.
"Everywhere we turn, as we think about Time Warner and their different brands, we see opportunity," says Megan Smith, CEO of PlanetOut. "It's a natural fit to imagine all kinds of things we could do with Time Warner."
But most online media companies don't expect the merger to turn their world upside down. (Heather Redmond, vice president of business development at Atom Films finds it inspirational: "Maybe," she laughs, "we'll be buying Disney in two years.")
Besides, there's a whole world online that has never had distribution on AOL and has no interest in pursuing it. Even if AOL manages to corner the majority of the Web's traffic, there will still be plenty of adventurers who explore beyond the proprietary interface.
"The only trend that I think is more amazing than AOL's constant ability to outlive all the doomsayers is the Web's ability to just keep generating new voices and people's willingness to adopt new experiences," says Steven Johnson, editor in chief of the feistily independent Feed. "It would have been pretty easy to just go to Pathfinder three years ago, but everybody ended up going to eBay. The Web itself is too powerful for even the largest media company in the world to stand in its way."
Shares