Time Warner to Keep AOL, Sell Cable, and Buy...MSN?

Matthew Karnitschnig of the WSJ kicks off the morning with a Twilight Zone piece about how Time Warner may not dump AOL after all, but instead sell off cable and "double down" on the Internet by buying another big net company. 

Without commenting on the plausibility of this theory (except to say that it would be quite a change of heart), here are some thoughts:

• Oh, the irony!  The theory behind the strategy, apparently, is that cable will become increasingly commoditized and less relevant in a world with the Internet and Internet TV, etc.  It was, of course, exactly this sort of thinking that led to the "transformative" AOL-Time Warner merger in the first place.  Without concurring that cable will become less relevant (somebody has to plumb the pipes), this would lend credence to the idea that the AOL-Time Warner merger wasn't a colossal, bubble-headed strategic error, but just early. 

• The most sensible big-net-company acquisition/merger candidate is MSN.  A combined AOL-MSN would dominate online communications, and, together, would have the scale and clout that each company alone currently lacks.  The integration, management, and long-term growth strategies, of course, would be a nightmare.

• Assuming Time Warner isn't up for that challenge (and who could blame them), companies like Facebook, Bebo, Music Nation, and others fit into the company's entertainment DNA and would help offset/refresh the demographics of AOL's geriatric user base.  They also wouldn't require another bet-the-company roll of the dice.

AOL's having a 'meet the new AOL' event today, so maybe we'll get further details.

UPDATE

A reader suggests another sensible Time Warner acqusition candidate: Joost.  Any others?   (I personally think Joost would make sense but also be extremely risky, because 1) the site hasn't even launched yet, and 2) if/when Joost is owned by one of the big media companies, it will lose its status as a neutral "Switzerland" BigMedia solution.)

Comments

[echotoall]

instead of an unrealistic purchase of MSN (I doubt msft will ever let it go), AOL should focus on purchasing JOOST.

The way I look at it... sell off the old way of distribution, and enter the new way.

[Henry Blodget]

Good idea!

[L]

Henry Blodget

AOL's geriatric User Base ?????????

Eat Rat Poison and DIE !!!!!

[Henry Blodget]

I'm still an AOL user, if that's any consolation. I even pay for the subscription.

[echotoall]

"if/when Joost is owned by one of the big media companies, it will lose its status as a neutral "Switzerland" BigMedia solution"

true... but then again, so will ClownCo when it goes live. (a BIG 'when') and Big(old)Media is rejecting "Switzerland" w/their procrastination toward partnering w/YouTube/Google. (and ultimately delaying potential profits)

we must 'wait and see'... i guess.

[Kevin]

Given Google's acquisition of DoubleClick, I'd think that Yahoo's ad network looks a heck of a lot more attractive than AOL's traffic to Microsoft. Even if Yahoo's ad system isn't as efficient as Google's, it's bigger than anything else out there and there's always the possibility that Panama may eventually work. Plus, does Microsoft really have much choice at this point if they want to play/stay in the ad game?

For what it's worth (as a Valleyite myself), I doubt that promising startups will be eager to become part of the "new" AOL because of AOL/TWX's culture, history, audience, and the East Coast management structure.

My betting card would look like this:
-- Microsoft will buy Yahoo out of desperation.
-- Google will eventually buy Facebook at some outrageous price north of $2 billion
-- Either eBay or Google will buy Monster
-- Yahoo will be busy buying as many small companies as they can get their hands on, if only to get the engineers.

-Ken

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