With AT&T-Time Warner, convergence is back
Business Management

With AT&T-Time Warner, convergence is back

They’re using the C-word again. Ever since the disastrous 2001 deal that saw AOL and Time Warner come together, convergence has been a dirty word but now AT&T and (again) Time Warner think the time has come for media and communications to go hand in hand.

AT&T wants to pay over $85bn to acquire Time Warner in a move it says “combines Time Warner's vast library of content and ability to create new premium content that connects with audiences around the world, with AT&T's extensive customer relationships, world’s largest pay TV subscriber base and leading scale in TV, mobile and broadband distribution.”

It may sound like a failure to listen to the lessons of history but the implicit argument that AT&T is making here is that the AOL/Time Warner story was one of a failure of execution and, perhaps, a case of being too much, too soon. When the then America Online CEO Steve Case announced his intention to create AOL Time Warner his company still had a strong grasp of the online world but consumers were about to step off proprietary platforms in favour of the open web and the dotcom boom was about to end.

Also, those were primitive days in terms of technology with many early surfers using dialup connections and smartphones only just emerging. These factors plus infighting at AOL Time Warner contributed to what Time Warner’s biggest shareholder, the colourful media tycoon Ted Turner, later called “one of the biggest disasters to have occurred to our country”.

The bet that AT&T and Time Warner are making 15 years on from that calamitous collision is that the time really has come for premium content from Harry Potter to the Cartoon Network to sit alongside companies that own the delivery pipes for that content. This time they might be right and companies from Disney to News Corp see similar synergies but the complexity of bringing together companies from two different worlds should not be underestimated even if those worlds are beginning to cross over. Previous attempts to diversify have not all been happy: think of AT&T’s acquisition of NCR in 1997 as it attempted to gate-crash the IT sector. And of course the dark shadow cast by AOL Time Warner will take a while to recede.

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Martin Veitch

Martin Veitch is Editorial Director at IDG Connect

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