Top executives at Time Warner, which jumped into the Internet business early on when it was acquired by – and then took control of – AOL, is now considering reducing its cable-TV holdings because of the growth of the internet as a distribution vehicle for entertainment and information videos, according to a report in the Wall Street Journal.
They might ask media mogul Rupert Murdoch, who in recent months acquired MySpace.com and shed the DirecTV pay-TV service. There were strategic financial control reasons for selling DirecTV to Liberty Media, but the reason for buying DirecTV in the first place – to have a vehicle to distribute News Corp produced content – has been nullified by the Internet.
The Journal reports that some Time Warner executives “wonder whether the company wouldn’t be better off if it were to get out of cable and double down on the Web.”
Time Warner Cable, of which Time Warner owns 84% and whose shares only recently started trading, is doing very well, of course, thanks to booming sales of broadband and digital telephony. Of course, those Time Warner Cable shares could be used to make acquisitions.
Time Warner has for years been criticized for buying into the Net too early, and also for hooking up with a poorly managed, perhaps illegally run Internet company that didn’t have a broadband strategy. Now it’s being criticized for being late to buy so-called Web 2.0 companies, the ones that are into user-generated content, social networking, interactivity and multiple Web platforms.
However, it has not been criticized for investing more in AOL, but perhaps should be. It sold off AOL’s European operations but hasn’t used that money to buy or build the products and services that AOL needs to become a dominant Internet player.
AOL is a distant third behind Google and Yahoo in online advertising. It trails in search (Google), video, social networking Facebook (which hasn’t been bought up), and MySpace, music (iTunes) and mobile media.
Time Warner touts itself as the world’s largest media company. At what point will it adopt an aggressive attitude to making that content available on the Net? Rival magazine publishers to Time Warner’s Time publishing division have recently started producing entertainment and information videos for the Net.
Hearst Magazines editorial director Ellen Levine said last week, “For magazines today, producing entertaining and engaging content on the digital, television and mobile platforms is absolutely integral to success and future growth.”
Warner Bros’ library of classic movies and TV shows are a natural for the Internet. However, the only place online to find a good selection is on AOL’s In2TV network, which hasn’t received any sort of visible marketing push. Where’s the big-time strategy to rival those of CBS, News Corp, NBC Universal and Viacom?
Time Warner’s desire to have a cable TV network so no one could block the distribution path for its content to consumers is outmoded. For one thing, Time Warner Cable is a regional US service. The internet covers the world.
The paper said the matter and alternatives will be presented in an annual strategic review by the company’s board.