Fribble Thoughts on an AOL/TWX Union

By Steven Mallas (Xtcr7@aol.com)
Wednesday, February 2, 2000

The market emphatically enjoys decisive catalysts, and at the beginning of the new century it was met not by a negative one -- the dreaded cyberinsectoid menace of the electronic entomological entity known as the Y2K bug -- but by a fascinating fusion of two complementary corporations that could theoretically act as an ersatz crystal ball for purposes of delineating what is to come in the future regarding media distribution and entertainment access.

I speak, of course, in reference to the proposed merger of America Online (NYSE: AOL) and Time Warner (NYSE: TWX). As the intellectual assimilation of this information continues to permeate the collective consciousness of Wall Street and beyond, of the bovine bulls and the ursine bears, of government regulators and Joe-Schmoe-Average, I cannot help but marvel at what the coming decades will decipher in terms of the delivery of content.

Why am I so awestruck? Because I'm no different than any of you out there who are right at this moment uploading my words into the internal central processing units hidden away in your craniums; I basically want to make as much money as I can -- slowly, patiently, rationally, in the Foolish way -- so I can enjoy the Holy Grail we all seek in our lives: namely, the ability through financial independence to utilize a maximal amount of free time so I can enjoy myself through quality programming.

Quality is, to be sure, a subjective and at times random occurrence; I certainly am not suggesting that the AOL/TWX hybridization will guarantee quality. But I do think it will affect in a very benign manner an efficiency of distribution of product to the masses in a highly individual, customized fashion.

Someday we will see -- in addition to conventional broadcast networks and 'Netlets and cable stations -- browser-accessible URLs that will act as quasi-HBO/Cinemax premium pay-cable entities. We will pay a monthly fee for them: say, $10, $15, $20, $X. All of a conglomerate's properties will be available to the subscriber. In the case of Time Warner, what would be on call are all the plethora sitcoms, movies, talk shows, one-hour dramas, so forth, that it owns.

The subscriber will become his/her own programming executive, stripping/checkerboarding/handpicking all of these properties as said person see fits, running a series front-to-back or running only seasons one, three, and seven; Monday at eight o'clock could be a Growing Pains episode, followed by a Full House, which in turn would lead to a nine-to-ten placement of an ER (showing only those episodes sans George Clooney). Tuesday could be the same from eight til nine but at nine might be the director's cut of The Matrix, followed by old Warner Brothers cartoons.

This is what this particular consolidation means to me: eventual essential control at an efficient price. The properties would become available to these URLs once their economic exploitability has become exhausted in all other distribution channels (e.g. theatrical exhibition, exclusive pay-per-views, whatever... those things will still be around, just as brick-and-mortars will still thrive in the world of the 'Net).

I can't wait for that day, not only as a consumer but as an investor. What it is highly indicative of is the importance of library-generation for content providers. I am long Disney, and deplore the notion of reduced production slates in favor of perceived cost-control. My message to all studios out there: as they say, content is King, and the one who has the most to offer will win. Quantity does not lead to quality, but quality can be derived from quantity due to the law of averages.

So I hereby proclaim my endorsement of the union, and I pray that the various governmental regulators will do so in kind. I think it would be great for the consumer due to the scenario outlined above, a scenario that I'm sure is on the minds of many out there. I am certainly not the only one to prognosticate a future full of URLs like I've described, but I nevertheless want to add my hat to the rack in support of it. Fool on!