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But has the media landscape truly changed? Will the nature of deals, going forward, really be different following the creation of this monstrous media mammoth? And what will this mean to UK and European companies? More importantly, what should investors on this side of the Atlantic make of these supposedly earth-shattering events?
The initial question on the lips of many investors was: could a similar deal be replicated over here? This week the share prices of many leading media companies have soared on the back of this idea. Thus sector leader BSkyB (LSE: BSY), the satellite broadcaster, has shot up by more than third since the deal was announced. It already seems to cross the current media divide between platform and content provider.
Other slumbering UK media giants have also looked revitalised. Publisher of the FT Pearson (LSE: PSON) has moved ahead more than a quarter over the week and Reuters (LSE: RTR) has gone up by over a fifth. Even Qualiport holding Emap (LSE: EMA) has jumped 17% during the past few days. Overall, media companies (all those placed in that sector of the FTSE All-Share Index) have leapt 15% this week.
But can these re-valuations be justified in the long run? Or is an almighty hangover brewing up for these dominant players in the realms of old media?
If the Time Warner types of companies in this deal have enjoyed spectacular rises in the short term, how then have the AOLs of the piece prospered? Freeserve (LSE: FRE) has only improved 4% this week. At first the stock declined on Monday before rising roughly 12% today.
Other Internet access providers in the UK have also taken time to re-adjust to the new environment. Affinity Internet (LSE: AIH), which can boast over 600,000 subscribers through the loyalty ISPs it runs for different associations, rose by more than a quarter but much of this jump happened today as well.
In addition BT (LSE: BT.A), which runs LineOne amongst other popular services such as BTClick and BTInternet, has only moved ahead 7%. This, though, has perhaps more to do with other issues such as the continuing battle between Vodafone AirTouch (LSE: VOD) and Mannesmann for mobile pre-eminence in Europe.
However, talk of telecoms is perhaps more relevant in this debate about the impact of the AOL Time Warner deal on European affairs. It is perhaps in this respect that the two sides of the Atlantic differ more sharply.
Perhaps one of the most gleaming prizes AOL sought in Time Warner's impressive portfolio was the CNN cable network. This allows AOL immediate access to the 13m subscribers to CNN's service in the US and many others beyond the American shores. CNN is the second largest cable provider after AT&T stateside.
This will allow AOL to provide broadband Internet access for its many subscribers seamlessly by adapting CNN's cable network when the technology becomes widespread. It is this cable and broadband aspect of the mega-deal that is most interesting and exciting when looking at it from a European perspective.
Consequently this week, cable telecom companies look particularly strong. Energis (LSE: EGS), 46% owned by the National Grid (LSE: NGG), soared 26%. Telewest (LSE: TWT) has gone up 21%. Colt (LSE: CTM) has jumped 20% and Cable & Wireless (LSE: CW.), which announced a $1b European Internet investment yesterday, leapt 16%.
These are the companies to look at when considering a British or European AOL Time Warner-style tie-up. In many ways the American deal looks as if it is unique to its particular marketplace, and won't be repeated elsewhere.
This is for one simple reason. In the US local telephone calls (including those to the Internet) are free but most Internet access providers, including dominant player AOL, charge a small flat rate subscription. This fee is gradually declining.
In the UK the situation is reversed. Most Internet access providers, including Freeserve, the domestic dominant one, charge nothing for their service. However, local telephone calls are far from free, although telecom providers are gradually lowering fees or else offering a cheaper package based around a monthly flat rate.
I must throw my hands up and admit I don't know the continental Internet scene in intimate detail but I think the telecom structure for most EC countries is similar and the free ISP model prevails over the AOL subscription product.
The largest source of revenue for free ISPs is currently the cut of connection fees they get from telecom companies. Freeserve has realised this and is attempting to turn itself into a portal and web destination of choice, like Yahoo! (Nasdaq: YHOO).
Nevertheless, it's quite easy to see where the long-term value lies in the UK Internet game. The cable and other telecom companies will offer the broadband access across Europe which the Internet and digital TV will demand. These broadband providers will offer the platform which content makers need to display their wares.
Hence Cable & Wireless Communications (the consumer arm of C&W in the process of being sold off to NTL) has quietly been building up its portfolio of addictive Internet content properties. Similarly all the European cable companies, including the UK's ONDigital joint venture between Carlton (LSE: CCM) and Granada (LSE: GAA) as well as French groups Canal Plus, Vivendi and NTL amongst others, have been attempting to buy seriously addictive content providers. These include soccer teams such as Manchester United (LSE: MNU), Celtic (LSE: CCP) and Newcastle United (LSE: NCU).
In a sense, these mini-alliances between those who enable the broadband access to happen (the cable companies) and those who offer some intriguing content to entertain users are already happening in the UK and Europe. Think of the former as the platform providers, in other words the stage, and the latter -- content providers -- as performers on the stage.
Naturally the market is far more fragmented as fewer people proportionately are online than in the US. But the AOLs of Europe are the cable telecom companies (and don't their valuations just show it!). Expect more media content tie-ups with them over the next few years as consolidation takes place.
Long term pure ISPs, like Affinity, which offer free access but rely on connection revenue, will wither unless, as Freeserve does, they provide startling content which keeps users coming back for more. The cable telecom companies seem to provide the platform for broadband in Europe. And of course the mobile operators shouldn't be forgotten as the wireless Internet is born.
Seen in this context the AOL Time Warner deal looks severely defensive. AOL knew its fast-growth stage was nearing an end as most people in the US were already connected to the web. The management cleverly locked in their profits by linking up with a media mammoth which was desperate to get involved in the new age realm to avoid its own decay.
Now I'm going to batten down the hatches and prepare to fend off all the brickbats coming my way from those who claim these two lumbering giants moved mountains on Monday. See you on the Fool's Eye View message board.
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