AOL Time Warner makes Microsoft look like the corner store.John Katz
They're breaking out the champagne in Redmond.Craig Burton
The AOL/Time Warner deal is the News that Won't Go Away. It's amazing. Suddenly Microsoft is a non-issue. The feds could break it into a dozen Baby Bills tomorrow and everybody would still be looking at Steve Case and Bob Pittman, wondering if these guys can finally pipe-weld The Net to the rusty back end of TV's history. Break up Microsoft? Like, so what? All the pieces will still be caught in The Net, and better than half the people who log on to The Net have @aol.com addresses. Which is creepier: a crashy OS or a giant ISP that dumbs down the Net ?
On The Linux Show tonight(18 January 2000)
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No doubt about it: this thing is gonna be ugly. The big questions are how ugly, how soon, by what means? and for whom?
To get a bit more granular about it, here are a few questions that the Linux and Open Source communities would do well to raise:
What does this do to the Mozilla project? It'll soon be two years since Netscape released the Mozilla code, and Mozilla 5.0 is still a buggy beta. What gives?
For that matter, what about the Open Directory project? Originally titled Newhoo, Open Directory (also known as DMOZ), is what New York Times columnist Denise Caruso calls "the only free, resolutely anticommercial, openly available human-edited directory of sites on the World Wide Web." That's in her current piece, which describes the AOL Time Warner deal as "... two very wealthy old men doing comb-overs on their balding pates, trying to look hip and zippy but not quite willing to let go of the past."
How heavy can AOL really play here? John Katz, quoted in the San Jose Mercury News, thinks it could hardly get heavier. "There is no way for innovators or entrepreneurs to challenge it," Katz writes. "No one can compete with the software, the cheap access, the wide range of content. This company is bigger than many countries." For more read his Slashdot piece.
What clues does AOL get that the rest of us miss? Okay, so they make getting on line free & easy, at least for the first couple hundred hours. But there is more going on here. AOL churns a lot of customers, but many stay. And AOL has a lot of advantages we don't like to talk about. Are you a world traveler? Like to log on just about anywhere? It's great if you can get onto a locally hosted Ethernet, but if you're dialing from a series of widely dispersed hotel rooms, AOL may be your only choice. (Compuserve used to be a terrific international online service, but AOL turned it into a domestic "value brand" - a move akin to Chrysler buying Mercedes and canceling all upscale vehicle production.) And what about these AOL-only forums, chat rooms and communities? They might creep out Usenet and IRC veterans, but millions of AOL customers love them. (I might add that my all-time-favorite forum was Denise Caruso's Buzz, which ran on AOL around the turn of the nineties.)
How long can they keep talking like that before somebody beans them? Steve Case started out as a brand manager at Procter & Gamble, and he has never stopped talking like one. Bob Pittman never stopped talking like the TV executive he was before AOL recruited him. Customers are "consumers." Products are "brands." Use is "experience." The Net is a "medium," a way to "deliver messages" and other " content" to an "audience." These guys pay scant attention to how the Net steadily pushes the balance of market power over to the demand side, where patience with marketing's insults has been wearing thin for a looong time. There never was a demand market for "messages," and nothing in AOL's rhetoric - other than the word "free" - is attracting one.
Is Microsoft laughing? Let's face it: AOL has blown other mergers. It would be charitable to call Netscape and Compuserve successes. I know one acquired company (the instant messaging company Ubique, now part of Lotus) whose creators bought their technology back from AOL after it became clear that AOL's own Instant Messenger was going to smash it. (Why did AOL buy Ubique in the first place? Good question.) AOL may hold the higher stock valuation, but Time Warner is a much bigger company. The media coverage of the merger does little to express the massive size of Time Warner and its many businesses. Let's take a look:
Publishing - Time Inc. has 33 magazines, including Time, Life, People, Southern Living, In Style, Sports Illustrated, Parenting, Money, Health, Sunset and Fortune. Time alone accounted for more than 1/5 of all revenue generated by consumer magazines in 1998. Little Brown, Sunset Books and other Time imprints account for dozens of best-selling books every year.
Cable - CNN, TBS and HBO each have multiple channels, enormous production operations and massive libraries of programs. Then there is Time Warner Cable, which serves 21.3 million homes
Motion Pictures - Warner Brothers has 5,700 feature films, 32,000 television shows and 13,500 animated titles. New Line Cinema is one of the top studios as well.
Music -Warner Music Group accounted for about 1/4 of 1998's top selling albums.
Meanwhile, what's AOL got? Let's see:
There are two competing instant messaging products - ICQ and AIM - both free (the latter is bundled with AOL access software and Netscape browser downloads to Mac and Windows clients)
Excuse me, but BFD. There is nothing on AOL's side of this brand-for-brand balance sheet that suggests anything approaching a competency at managing Time Warner's holdings. Okay, Bob Pittman will be "coming home" to broadcasting. After all, he's the guy who not only created MTV, but also made it the first profitable basic cable network company. But who else from AOL is ready for this? AOL is widely regarded as highly chaotic and often dysfunctional in surreal ways (in Burn Rate, Michael Wolff described AOL meetings as large and friendly affairs for which there tended to be no institutional memory).
And then there's the matter of purpose. The only Time Warner property AOL really needed was the cable distribution business. So the irony is: AOL bought Time Warner for, of all things, its technology.
Two years ago a Microsoft executive told me that the only company that scared them was AOL. "We don't know how to compete with them," he said. "Or stop them, either." Well, maybe this time Steve bit off more than he can even see, much less chew.
"It's riskier than ever to be a big, deeply entrenched company," writes Michael Lewis in The Wall Street Journal. "So why dig even further?" He adds, "you can almost hear the brains drain."
How about that hypocrisy? Before last Monday, AOL was lobbying hard for "open access" to cable systems for all ISPs. They didn't want that "last mile" to be closed to anybody who needed it--especially since they didn't own it. Since last Monday, when AOL stood to acquire more than 20 million of those miles, AOL has backed waay off on the open access question. Now they're talking about "letting the market decide." The San Jose Mercury News quotes U.S. Representative Edward Markey, D-Mass and a member of the House Telecommunications, Trade and Consumer Protection Subcommittee: "Thousands of competing ISPs are asking whether AOL stands for 'All Others Left out' or 'All Others Let in.'"
Does this give us a new class of consumer electronics? AOL is said to be working on a new set-top box that would create a new ocean for Web and TV channel surfing and "content delivery"--its own proprietary platform. What will those new "appliances" really be up to, if AOL Time Warner has its way?
Will consumers ever give a shit about our issues? Does it matter? AOLsucks.org chants the familiar litany of the legion who hate the service (or are at least baffled by its success): iffy and slow connections, an e-mail system that can't handle attachments, big-brotherly censorship, massive security holes, and so on. Most of all, there is AOL's reliance on proprietary software for nearly everything that matters. But ease of use and simplicity are what AOL brings to everything it touches, and that neither are long suits for Linux and open source. On the other hand, real progress doesn't happen just on user interfaces. It happens deep underneath, at tectonic levels. And we - the geeks of the world - make the plates.
Are we going to pick up the gauntlet here? Paul Saffo, director of the Institute for the Future, says "We will look back on this year as marking the day that the Internet ceased to be a 'technology' and became a mass media industry. Geeks will now just go to work every day. The media guys will call the tune." Friends, this here is a gauntlet. Once again, after getting zero credit - not only for making all this possible, but creating a lot of this sky-high value as well - we are assigned to the galleys. Eat your slop, pull your oars, and trust the Captains of Media to pilot the ship. There's no place for you up here.
We changed the game before. We can change it again. Perhaps our best battlefield is instant messaging. Go to Jabber.org and compare Jabber's mission against the window-for-advertising missions of AIM and ICQ. Then check out the raw capabilities. The difference is astronomical. But the difference that really matters is that Jabber is open source. AIM is so closed that AOL sued Microsoft just for trying to make its own instant messenger compatible with it. Will AOL sue Jabber licensees for doing the same? Good question.
Browsers will be harder. Internet Explorer may be worthy of mockery on open source grounds, but it has some extremely handy features that Mozilla will need to match or beat just to stay competitive. Since v4.5, IE remembers passwords, auto-fills forms, and features much more user-friendly (and editable) histories and bookmarks than the Netscape equivalents. (Though I am very intrigued by the "wallet" feature I see in the Mozilla beta.)
What else? You tell us. AOL Time Warner is a creature built to close things down, to turn the Net into TV 2.0, to keep consumers in their proper place--at the end of the Content Tube. Are we going to do something about that?
Doc Searls is Senior Editor of Linux Journal
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