Money

With Time Warner Break-Up Near, Expect AOL to Suffer Sad Fate

| by Reason Foundation

Internet and email provider AOL, which bought Time Warner a little
less than a decade ago for $147 billion (and in many way signalling the
peak of the tech-bubble-boom; a year later AOL Time Warner was writing
off $99 billion in losses), is being sent out to face the 21st on its
lonesome. The split should be complete by year's end:

"Becoming
a stand-alone public company positions AOL to strengthen its core
businesses, deliver new and innovative products and services, and
enhance our strategic options," said Tim Armstrong, AOL's chairman and
chief executive officer. "We play in a very competitive landscape and
will be using our new status to retain and attract top talent."

Rots o' ruck, buddy, especially if you can't stop talking in corporatese. More here.

This
final breakup scene reminds me of the absolute hysteria that the AOL
Time Warner merger whipped up at the time, when nothing less than the
fate of the Republic was at hand. The new behemoth on the media block
would, don't you know, never print any news critical of anything
vaguely related to any of the companies or interests of AOL Time
Warner.

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The web and cable shows/sites would just become uncritical
shills for every goddamned product under the sun and real journalism
would take a backseat to the sort of celebrity jock-sniffing that
drives so much traffic to The Huffington Post.
We would never again hear a critical word uttered about the Batman
franchise, gazillionaire fatcats, that Man in the White House, or ever
get to see a Woman there. You know the drill.

Back in 2000, I
wrote about the heavy burden of market dominance, when a company often
has to start giving away its product to maintain its market share. That
was a situation that was overtaking AOL at just that moment, which was
giving away ever-larger numbers of free hours of access to lure
customers.

In a relatively free market, companies get
big and stay big primarily by giving people what they want—and often
more than they want—at pretty good prices. They may be brutally
competitive with other firms but they tend to put on kid gloves when it
comes to the customer.

Examples of this abound throughout the
economy, where the big kids on the block tend to act more like buddies
than bullies: Think of Coca-Cola, which dominates the U.S. soft drink
market with a 44 percent share (and two-thirds of fountain sales).
When's the last time Coke raised its prices? Over at least the past 20
years, a 2-liter bottle of Coke—or Diet Coke, or Caffeine Free Diet
Coke, or Cherry Coke, or any of its proliferating sub-brands—has rarely
wandered out of the 99 cents-$1.50 range.

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The same goes for
McDonald's, which rules the U.S. fast-food market with a 43 percent
share. McDonald's is so desperate for customers that it's held prices
essentially constant over the past two decades, while boosting portion
sizes (burgers, fries, and drinks are all bigger than they used to be),
expanding its menu, and building elaborate play structures for kids
while simultaneously throwing increasingly sophisticated toys at them.
In the case of McDonald's, such tactics have not even been particularly
successful: Despite maintaining its top niche position, the Golden
Arches continues to leak market share to an increasing number of rivals.

More here.

At
its peak, AOL had something like 27 million dial-up subscribers (it
also had a ton of bring-your-own-access customers) and it still has on
the order of 6 million dial-up folks, along with a number of popular
content sites (best known is TMZ) and other services (AIM is still the
king of instant messaging). The email service went free years ago of
course, and there are literally millions of legitimate complaints from
users scattered around the intertubes like so many Jack T. Chick tracts
hoping to be read. And don't even get me started on Time Warner's early
rollout of the Roadrunner service, which seemed to be run by Wile E.
Coyote based on its ability to deliver only bangs for the buck in the
late '90s.

But as an AOL user since 1993, I'd like to say that
for all the abuse the company and its users took over the years
(remember back when Usenet groups would snobbishly flame you for simply
having an AOL address? Recall all the moral panics about the anonymity
afforded users by dint of weird handles back when most services were
enforcing transparency in email identities?), it was almost always
there when I needed it, just an overly expensive phone call away. Which
is far more than I could say for most of the ISPs I tried out in the
early 1990s, including a couple of university-based ones.

Good
luck AOL, lingering on into the future like an A&P grocery store, a
fading retrovirus of a once vast commercial empire reduced to virtual
nothingness. I'll be happy to bore my grandchildren with tales of AOL's
past grandeur when they note that weird unused icon on their thumbnail
computers from MSAPPLE in the year 2040.