Everywhere you look and read there are stories of media companies trying to cuddle up with the digital world. While this is an important issue that they must face, how they go about tackling the challenge is as important as knowing that the problem is there.
As in the case of the merger of AOL and Time Warner, there is a lot to be learned from how not to do it. With the market starting to get into that "frenzy" atmosphere, you can see some of the mistakes that are about to be made by some of the big media and digital companies.
There is a lot of venture capital and angel money out there now to provide a foundation for deals to be made. But just because the money's there, doesn't mean that anything should be done just because they are able to do it.
Concerning the errors of the AOL/Time Warner (TWX) merger, Hollywood reporter says:
"The single biggest reason why media's biggest and boldest marriage has failed to produce dramatic synergies is because AOL's Internet operations were dropped into an old-time corporate media structure, whose means of quantification, production and overall psychology were wholly different.
"The two companies were never truly integrated or reconciled. The most telling case in point was how Time Warner's Road Runner service and AOL were never combined to aggressively drive high-speed Internet access at Time Warner Cable. And to this day, Google owns AOL's search business, in addition to a 5% equity stake in the company."
This is why, when the frenzy really begins, companies need to step back and look more at joint ventures rather than mergers and acquisitions. The way of doing business in media companies versus digital firms are completely different; they don't belong under the same banner. They will do more harm to each other than help.
The other benefit is that the strength of digital companies can be utilized best by performing trial offerings that can be done quickly and cheaply using some of the content created by media companies. When they are under one roof, the corporate machinery runs so slow that it can't compete in the fast-changing Internet world.
Most of them will probably learn the hard way like AOL and Time Warner have.
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