| Ecommerce's Monthly Talking Point - January 2000 Convergence is the beginning, not the end It looks like convergence has two key preconditions: logic, and timing. It's always been logical that media and Internet companies should get together. The Internet is a form of delivery that seeks content and audiences; 'old' media look to flood new channels, and to maximise revenues on developed content. This logic has been public property since 1995. But why is January 2000 the right time for Time Warner and AOL to get together? The mainstream media has greeted the marriage as if the logic had only just presented itself to the world's consciousness. The markets are rewarding media companies with improved valuations on the assumption of further mergers. It's as if Time Warner hadn't already spent big on the web: anyone remember Pathfinder? It's as if Disney hadn't already spent big on the web. It's as if Murdoch wasn't already running online services back in 1986. Convergence has already happened. It hasn't always generated revenues. But times have changed. The ubiquity of the web, and in particular the growing credibility of music and video delivery via the net, make the new technologies a greater opportunity (or threat) to the established content producers. This is the moment when business hormones catch up with business logic. AOL Time Warner makes sense as an entertainment force, but there are bound to be parts of the combined package that won't contribute to that goal. I'd expect to see some capabilities being shed in the pursuit of entertainment purity. Otherwise this new behemoth runs the risk of mistaking the virtuous glow of convergence for the real line-by-line, niche-by-niche challenge that lies ahead. Great credentials are great to have; but this business is (surprise, surprise) about winning profitable customers, and keeping them. |