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Merger in the first degree

Merger in the first degree

Australia can expect to see the consolidation of a number of new and traditional media companies in light of the $US350 billion AOL/Time Warner merger.

In fact, the unprecedented size of the marriage of the two corporate giants is the only surprising factor of the deal, according to local industry pundits.

Driving such mergers is the long-term impact broadband and digital technologies are expected to have on the communications' industries, according to LookSmart Australia's vice-president of strategy and development, Hank Kingman.

Kingman said the merger offered both companies a number of significant advantages over their independent entities.

"The consolidation of AOL and Time Warner is a merger that creates opportunities through association," Kingman said.

While Time Warner gains the advantage of AOL's online subscribers and content distribution ability, AOL gains access to Time's massive cable infrastructure, Kingman said.

"Although the scale of the merger is unprecedented, the reasoning behind it is fairly straightforward," Kingman said.

Web advertising company BMC Media's chief operating officer, Shane Murray, said "marriages" between content and distribution companies would become commonplace in Australia.

Murray said considerably more opportunities would arise for independent publishers, content providers and other media organisations to merge, or converge, for their own advantage.

Murray said the new era in media would see a degree of consolidation resulting in a small number of large controlling companies, and highly specialised smaller companies.

"I don't think the government will allow one controlling company to prevail," Murray said.

Asked whether he thought Telstra would attempt to merge with Fairfax, Murray said: "There's a very strong feeling in the marketplace questioning 'why not?'".

Cable and Wireless Optus' (CWO) national media manager, Stephen Woodhill, said cable is the way convergent technology is going.

"We've [CWO] put a lot of time and money into having the best cable in the world," Woodhill said.

"When stuff converges, it converges with the use of cable. So this is a vote of confidence in cable networks," he said.

Woodhill said Optus had completed a similar deal with Excite in the US.

In response to the merger, local media stocks performed well on the ASX yesterday, including News Corp, which rose $4.05 to $18.60, and PBL which lifted $1.10 to $12.60.

The performance of media stocks also lifted the All Ords 58.8 points to 3161.9.


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