Wednesday, Jul 9, 2008
For starters, let's be clear that both AOL and Time Warner would eagerly secede from the broader Net if they could figure out how. At the Monday press conference announcing the merger, executives repeatedly pointed out the common ground between AOL and Time Warner: Both run subscription-based businesses. What they didn't add is that both companies' cultures share a closed-access mind-set.
Cable providers like Time Warner are legal monopolies in the communities they serve. And we should never forget that AOL, though it has spent much of the past year on a campaign for its own "open access" to cable providers, has spent most of its history as a closed-door online service. It opened itself to the Web and Internet only when doing so became a matter of survival in the mid 1990s, as it became clear that the Internet's vast commons would kill off the proprietary services. To this day, AOL maintains acre upon virtual acre of its clunky, closed-door proprietary pages.
Today's Net consumers have evolved a stubborn mind-set toward those who would exact toll-like subscriptions from them. People expect to pay someone for Internet access -- for the general "pipe." Then they expect to be able to pick and choose from an array of content and services that are supported by advertising. They paid once at the ISP office; why should they pay again?
Outside of the porn world, only a tiny handful of Web sites are able to charge for access -- like the Wall Street Journal Online, which I suspect most subscribers are writing off as a business expense, and much of whose content is now available for free on MSNBC. Sites that once waved the "subscriptions are the future" banner, like Slate and TheStreet.com, have retrenched in an ad-supported mode.
I'm guessing that the executives in AOL Time Warner's boardrooms are hard at work trying to reverse this trend. Let's listen in on how their strategy session might go:
"How can we monetize our content assets in the broadband future?" (Yes, they do talk that way.)
"People pay to rent videos," says the guy with the black marker, scrawling his bullet points on the board. "Surely, in the broadband future, they'll pay for movies-on-demand and music-on-demand and, if we play our cards well, news- and information-on-demand."
"But if we put this stuff out there digitally it'll get pirated. It'll lose value. People will pay once to download and then copy the files, share them with friends."
"Our mass-market customers are scared of hackers and security risks and privacy invasions, anyway, and they just hate dealing with their screwy computers. What if we re-architect the Net and build a new kind of network for them -- one that's safe for them and us? We'll control the back-end technology so we can make everything easy and convenient, which is what AOL's known for, and also make it safe for our copyrights. We'll be the service provider and the content provider. We'll throw in Internet e-mail, of course; people want that. But the rest will be ours. It'll run on dedicated appliances -- no more crashing PCs to worry about. We'll offer all the great proprietary stuff we already run, like chat and buddy lists, of course. Then we'll give 'em all our brand names in a variety of monthly packages, just like we do with our cable TV properties, at a bunch of different premiums. No more mucking around with the messy Web -- you'll get all quality content all the time, kid-filtered and neatly organized. And we'll know who the customers are and what their credit card numbers are. They can pay for their monthly service and their e-commerce charges on the same bill."
"I love it! What do we call it?"
"'Full Service Network' has a nice ring."
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That, of course, was the name of Time Warner's ill-fated interactive TV experiment in Orlando, Fla., in the early '90s. Almost certainly, the new AOL-Time Warner is itching to revive some version of it -- whether along the lines of my nightmare above or in some other form.
Will the public go for such a scheme? One big reason the Orlando effort flopped was that it cost Time Warner far too much per household. Smart pricing would be essential for any new-millennium effort to revive the consumer-friendly, fee-based interactive TV idea. Still, AOL understands smart pricing, and the stock market today may well be willing to underwrite the cost of building such a network, which seemed prohibitive a decade ago.
What will really make or break any such plan is how receptive customers are to an online corporate theme park (Bob Pittman, the AOL exec who will be calling a lot of shots in the new conglomerate, once ran an amusement-park chain). If enough millions of people opted for that kind of service, we could witness a kind of commercial Balkanization of the online world. Such a return to the pre-Internet days of proprietary services and closed gates could send today's Internet shrinking back to where it began the '90s -- as a fringe community of scholars and smart kids.
It may all come down to which is stronger: the public's appetite for convenience and a mall-like experience online, or its hunger for the kind of unpredigested hurly-burly today's Internet still provides.
I can't predict that outcome. I wouldn't want to underestimate the spunk and intelligence of the millions of Internet users who in a few short years have turned the network into an astonishingly rich pool of human knowledge and interaction. But I don't want to underestimate the persuasive powers of the world's largest media corporation, either.
I do know one thing: AOL-Time Warner's interests are now aligned opposite those of a freewheeling, independent Internet. So let's give 'em hell -- while we still can.
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