Missing the Point on AOL/Time Warner

The “worst merger in history,� as acknowledged by chief architect Steve Case, is quickly disintegrating into the largest pile of sour grapes in history (or as the NYT put it, “a mountain of ill feeling�). Watching the uproar over AOL/Time Warner is like sitting in the bedroom of a bad marriage imploding, with all the resentment, recriminations, and regrets rising in a vitriolic crescendo. Even level-headed observers like Jeff Jarvis can’t help but express their disgust (I only owned a small handful of AOL shares, and I’m disgusted).As typically happens when emotions and tempers flare, sober analysis falls by the wayside. So it’s not the least bit surprising that most of the shouting over AOL/Time Warner is missing the point. Andrew Serwer at Fortune avoided drinking from the poisoned punch bowl when he pointed out:

The real issue for TWX: figuring out how to distribute copyrighted material in a digital world. I say the stock doesn’t really move until they figure out that riddle.

Then yesterday comes news of blood on the walls at Time Warner:

Time Inc., the world’s largest publisher of consumer magazines, Tuesday announced a restructuring of its business operations–laying off 105 employees, including high-profile managers such as corporate Ad Sales Chief Jack Haire, Time magazine President Eileen Naughton, and Richard Atkinson, executive vice president in charge of Time Inc.’s news and information group. But unlike the staff reductions taking place at major newspapers such as The New York Times and The Los Angeles Times, the Time Inc. cuts are mainly on the business side. Less than 20 of Time Inc. layoffs affect its editorial department. Nonetheless, the restructuring of Time Inc. is another telling sign of the pressures confronting print media as publishers try to make the transition to a digital publishing world–and the shift of advertising budgets toward digital media, especially online.

So Time Inc is making it’s painful transition to “a digitial publishing world� in which the Google revolution has increasingly commoditized publisher’s distribution channels. At the same time, everyone is anxious to unlock the value of AOL after realizing (quite suddenly) that the business can be reborn as an ad-supported distribution channel. Having come to their respective “realizations� about the future of their businesses in a post-Google age, you would think that one of the few premier distribution channels and the owner of some of the best known content brands would have cause to consider the possibility that their marriage could, finally, with all due irony, deliver on it’s originally ill conceived promise.
But of course the drive to “unlock the value� of the stock, after so much equity pain, leaves little room for imagination.