Bouncing the $160 billion reality check

By Joe Schembrie
web posted January 17, 2000

Conservatives fear that the AOL-Time-Warner merger bodes more liberal control of the media. Corporate leadership reinforced this apprehension when they announced that the deal wasn't about money, but about making the world a better place. A more sincere espousal of limosine-liberal hypocrisy could not be contrived. And, my God, they even said it with a straight face.

But rest easy! AOL chat rooms won't lure any more children into liaisons with perverted adults than they do now. Time-Warner label rap music won't advocate killing more cops than it does now. And CNN documentaries (eg. Tailwind) will be just as phoney and biased and subject to libel suits as always.

Seriously, how could it get any worse?

But are liberal anti-trust fears correct, in that the $400 billion megamerger signals the Death of New Media?

Every techno-nerd knows that's a crock. This merger is actually the desperate, doomed-to-failure attempt of an Old Media dinosaur to avoid extinction.

I'm talking about AOL.

AOL was great in its day -- it introduced a mouse-driven, graphical user interface to the online world while the offline world was still beholden to the DOS Command Line. In the beginning, the 'AOL Sucks!' mantra was unfair; anyone who honestly compared services could see that AOL genuinely offered ease of use and better content.

Today, browsers are easy to use and the Web has near-infinite content. Internet Service Providers (ISPs) are, at best, simply gateways to the internet. And contrary to its massive promotion, the vestigial AOL world is today actually a road block to user-friendly computing on the Web. My hometown ISP lets me get on the Web with a single click. Reaching the Web via AOL requires several steps -- providing the user patiently endures the frustrating pop-up advertising messages along the way.

AOL evades oblivion because there are millions of technophobic grandmas and grandpas who get taken in by advertising claims that Big is Simple. But Technophobic does not mean Stupid -- and the average life expectancy of an AOL account is measured in months, as newbie net surfers realize that the shortest distance between two web sites is a straight ISP.

AOL is in danger of losing its entire user base not to some high-tech, developmental Web technology -- but to stuff that's been out there for years now. Every fourteen-year-old Web surfer knows the AOL Emperor has no clothes. So does the AOL Emperor himself, Chairman Steve Case -- which is why he's eager to buy a real media company before the AOL $160 billion reality check bounces.

This deal is about survival, not dominance.

Conservatives need not fear that the AOL/Time-Warner marriage will run conservative content off the Web. No matter how many web sites a media megacorp assimilates, some guy working out of his apartment can always start a new one for $20/month. Thanks to technology, that individual will have the same visual production quality and global distribution clout as the biggest, baddest worldwide media conglomerate.

Liberals can tuck in their anti-trust claws, too. In the short-term, the AOL-Time-Warner merger backs the embattled Netscape browser with the same level of financial firepower behind Internet Explorer -- so call off the war against Microsoft, okay, Reno?

In the middle-term, user-sophistication hearkens AOL's demise. AOL-Time-Warner assets will shrivel to what Time-Warner is today.

And then it will be curtains for Time-Warner as well.

For in the long-term, the Web will deliver radio, television, and movies directly to the consumer. Talent (aka 'Content') will entirely bypass bureaucracy-choked corporate media gatekeepers (aka 'Content Providers') such as Time-Warner.

The biggest financial news of the millennium? What we're basically looking at is a half-trillion dollars of dust in the wind. And the New Media is alive and well and the free-market is working just fine on its own, thank you!

The only seemingly-valid indictment of the free enterprise system is in regard to the appallingly hyper-inflated valuation of AOL's stock. It doesn't take a financial genius to calculate that AOL would have to dupe -- er, sign up -- well over half the families in America to justify a $160 billion valuation. And it's not that stock market day-traders believe that valuation -- they know they're involved in the equivalent of a legal pyramid-investment scheme.

So are the liberal critiques insightful in one respect -- that the capitalist stock market is overrun by a mindless pack of greedy, misguided idiots?

Well . . . yes. But idiocy doesn't go away under socialism. Under socialism, all those stock-market speculators would be highly-respected econometric forecasters with prominent management positions in the state planning bureaucracy -- flagrantly wasting Other People's Money as they run an entire national economy into the ground.

Under capitalism, thankfully, they can only impoverish themselves.

Such a deal!

Joe Schembrie is a regular contributor to Enter Stage Right.

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