By D. Lyn Hunter, Public Affairs
Posted January 19, 2000

While America Online's takeover of Time Warner created quite a news splash -- it headlined in virtually every newspaper and newscast across the nation last week -- the event is not historically significant, in and of itself, says David Levine, associate professor at the Haas School of Business.

"Certainly the dollar amount is big, but the merger itself isn't that important," he said. "Consolidation among large media, communications and technology companies has been a trend for the last 10 to 15 years. The trend is important, but not any single deal."

Mergers of this sort are a natural progression, said Levine. Traditional media companies, such as Time Warner, want to increase their presence on the Internet but have had trouble breaking into this market on their own. Internet companies are desperate for content, such as entertainment and news, to fill their ever expanding services.

"If this particular merger didn't happen, AOL would still be looking for content and Time Warner would still be looking to enhance their Internet presence," said Levine. "It's only a matter of time."

Levine predicts more mergers will follow, however, history has shown that the marriage of big corporations doesn't always work.

"When Time and Warner merged earlier this decade, it was very difficult." he said. "I foresee a mass exodus of good people on both sides, and AOL will probably end up selling off some of its Time Warner property."

Because many Internet stocks are overvalued, he said, the merger could spell danger for Time Warner stockholders.

"The bubble will probably soon burst," said Levine of the continued rise of Internet stock, "and those who own the relatively stable Time Warner stock are now more vulnerable because of the merger with AOL."

Business and profits aside, the big concern, says Levine, is the loss of diversity in information, a view shared by emeritus journalism professor Ben Bagdikian.

"When the control of media, which has such important social significance, becomes so narrow and powerful, it raises serious questions," said Bagdikian. "We now have just a handful of companies exerting an enormous amount of influence."

Bagdikian said he is especially concerned with the effect on politics and the national agenda. "Politicians pay attention to the media because it controls their image and influences what issues they decide to take on.

Mass media and the Internet are now linked, and with the eventual melding of computers and TV into one device, mergers like AOL/Time Warner will erode the diversity of information available to the public.

A possible solution resides in anti-trust litigation, but Bagdikian is not confident it would work. "It's hard to turn back the clock once something like this has been settled."

A better idea, he said, is a return to FCC regulations that require broadcasters to provide evidence that they are serving the needs of the community -- such as giving access to local groups and presenting more educational programs -- before their license could be renewed.

January 19 - 25, 2000 (Volume 28, Number 18)
Copyright 2000, The Regents of the University of California.
Produced and maintained by the Office of Public Affairs at UC Berkeley.
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