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Strategies & Market Trends : ahhaha's ahs
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To: GraceZ who wrote (251)10/14/2000 2:31:27 PM
From: ahhahaRead Replies (1) of 24758
 
There is no valid profit model in the future for AOL if AOL can't merge with TWX. Where is the profit in telegraph? AOL needs TWX to become something more than just another ISP. TWX gives them weight which keeps them above putting foot on the changing quicksands of distribution technology.

The weight doesn't come from "content" alone. That aspect is part of the show to sell and it could sink them fast in the mire if they merge under the FTC constraints. Specifically, they have to give Excite (which is to be differentiated from @Home) equal access or equivalently, they have to offer their subs the Excite option or MSN, Earthlink, etc. The TWX advantage is diluted by this competitive factor, since their current model is tightly bundled, and leverages off the bundle through added value services.

The added value services of the near future have to be delivered via high speed. Current HFC fiber is an absolute minimum for doing this. Copper in all forms is inadequate. So AOL must find a migration path to X-band.

The problem is that X is unknown, so the only thing AOL can do is prepare for the unknown by having a robust market presence in place when the equation is solved for X. They can clout with their weight to guaranteed existence. Without TWX this advantage disappears and forces them to look to alternatives.

I believe that the merger isn't in either company's interest. TWX, bound in the bundle, shuts itself off from other channels. AOL is stuck in TWX's distribution mire and X may be more difficult to realize within too narrowly defined parameters which always come in a closed instantiation of X.
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