The blogosphere, technogeeky section, is abuzz with post mortems for AOL, most notably Doc Searls‘ and Dave Winer’s response. The thing that set the boys (are they the Cheech and Chong of the blogosphere?) off was the recent report that AOL had taken some write-downs of the value they’ve been claiming on their balance sheets for the amorphous “good will” associated with AOL and the cable properties. This doesn’t mean they really lost money:
The company reported a fourth-quarter net loss of $44.91 billion, or $10.04 a diluted share, including the $45 billion write-down.
The charge reflects an accounting rule change requiring the company to lower the value assigned to assets on its books to something closer to the market value, based on a variety of factors. But the accounting charges are largely symbolic, and investors often disregard them.
The company reported that its fourth-quarter cash flow, excluding certain special items, grew 16 percent, to $2.8 billion, on an 8 percent increase in revenue, to $11.4 billion.
So revenues are up and cash is increasing, even though earnings are basically flat. That’s not great, but it’s not exactly teetering on the brink of bankruptcy either.
The AOL/Time-Warner merger doesn’t make sense as a synergy proposition unless AOL has a way to deliver TW properties to its customers, which means broadband of some kind. AOL has tried, for many years now, to work out deals that would give them access to broadband networks, and in fact one of the prime reasons for going after TW was to get theirs. See, the other cable companies didn’t want to play with AOL, probably because they knew AOL would end up in the driver’s seat.
Given where AOL started, it’s actually hard to fault their business strategy, and anybody who can run off Ted Turner by moving CNN toward the center isn’t all bad by any measure. So maybe the question for the critics is where AOL goes from here, given that they’re a business that isn’t going to make it on “information wants to be free, man” and “copyright is theft, dude”.
Everybody says they need to push broadband, but they’re already doing that. They make most of their money from dirty chat, and they probably understand that well enough not to let it shrivel up and die. They have a portal business and a server business, acquired with Netscape, so that’s covered.
Maybe their real problem is that they don’t get Tivo, because that’s the convergence point between the net business and the media business (I think so anyway, but Tivo doesn’t get the Internet). So if you’re a TV freak and you don’t care about running your own website, and let’s face it, most people don’t want the bother, the Internet is a great way to search for shows and otherwise control your Tivo (or its more net-aware successor, like Moxi). The Tivo is a receptacle for selling movie and TV downloads, not the PC, although the PC is great for finding stuff.
So maybe what AOL/Time-Warner needs to do is forget about the Internet and broadband, and get themselves some nice Tivo-type property to really make the synergy work. Then they can upgrade the book value of their “good will” instead of sending out bad vibes and like, bumming everybody out, you know.
Aol/TW already owns a Tivo-like property. They have recently introduced a DVR into some markets (including Austin). Unfortunately, I don’t think they really get it – they just want to get in on the “Tivo thing” and not feel left out.
There’s not enough detail in that announcement to tell if they “get Tivo” or not. It seems to me that we’ll have proof that they do when they offer movies-on-demand through their Tivo, which really would leverage the synergy and all that good stuff.
I agree with you whole heartedly – I think a TiVO type property makes sense. I said as much in my recent piece which is on my weblog. it is nice to know that others feel the same way. I think the big problem with AOL/TW DVR is terrible – has limited selection and is good for only one thing -watching bad movies again and again. The Sopranos however are another story
Good point Om.
I’m not sure what “Tivo like thing” means.
If it means a recommendation system, so AOL helps people find things that they’d like, much as Amazon does with it’s book recommendations, I think that would be marvelous.
And, it just so happens that I’ve written the code….