Time Warner To Be Split Into Four Parts? 107
Shakrai writes "CNN Money is running a story titled Icahn eyes Time Warner break-up. Carl Icahn is a fairly well known investor who is pushing to break the Time Warner empire into at least four different business units. While his motivation seems to stem from business interests -- he thinks it will work out better for Time Warner in the long run -- I thought it raised an interesting point of discussion. Will the vertically integrated media empires that control content creation, content distribution, internet access and the news media become the Ma Bells of the 21st century? What can be done to protect consumers without stifling the technological innovation that we all know is so important?"
Stifling innovation (Score:1, Insightful)
Re:What will happen to the Netscape Divison ? (Score:0, Insightful)
Catching up with the past (Score:2, Insightful)
I've always thought they were putting too many different colored eggs in one basket
Splitting the company up will only help innovation (Score:5, Insightful)
My personal opinion is that Icahn is pushing this for simply financial reasons. Quite simply, Time Warner has money making divisions, and others are dead weight that should jettisoned. By splitting them up, an investor ends up with some kind of stock split amongst the resulting companies. They then sell off the loser stocks and put that money back into the good portions. This would be a great way to kill off AOL once and for all. AOL is the only division I know of that's dead weight, but there could be others. I'm really just guessing here. MY point is that Icahn is doing this for money reasons. It's the only reason why he would, and neither the article nor the submitter make any mention of this, which is extremely short sighted.
However, regardless of the financial motivations, I completely support a break up of any company as large as this, purely because it benefits consumers with competition. Also, while a merger usually ends up in "eliminating redunancies" in jobs, a break up will usually put those "redundancies" back and open up at least a few new jobs to fill.
No brainer really... get the sledgehammers out and start breaking!
Re:Weird (Score:4, Insightful)
Very bad analogy: TW is not a utility (Score:5, Insightful)
These two aren't equal; they aren't congruent, they aren't even parallel.
Time Warner's broadband properties are not a utility, like water, sewer, electricity, or natural gas-- things you can't live without. They don't have the same history, the same economics, the same monopoly control, the same easement and right-of-way capital assets, and so on.
Therefore, garbage-in, garbage-out. The comparison is null, and it is, unfortunately moot.
Start by making fewer assumptions? (Score:4, Insightful)
Start by making fewer assumptions...
Assumption #1: Technological innovation as you perceive it actually happens.
Assumption #2: Consumers are protectable and/or need to be protected.
Assumption #3: Consumers want current content.
Assumption #4: Consumers are the ones being protected.
TV was called the 'boob' tube, for good reason, long before the phrase 'innovative technology' was coined. You seem to think content mega-control by corporations is new on the scene...it's not.
Consumers aren't quite the idiots you think they are - by your logic, a small group of people enjoying an ad-hoc musical performance in Central Park are neither consumers, nor are they being exposed to 'content'...wrong. Just one example - there are hundreds more. Point is, consumers can protect themselves, thank you very much.
As for protecting anyone...the corporations are the ones interested in protection.
Despite your fantasies, most technological innovation comes from good old fashioned war. Faster information gathering; better medical procedures; increased creature comforts...the biggest upswings in tech advances have always been associated with some type of major military activity.
Real innovations occur as distanced events in terms of any form of consumerism or content protectionism, and they will never be subject to any threat (first amendement or business model related) that is simply based in the marketplace. Just ain't gonna happen...
Re:Splitting the company up will only help innovat (Score:3, Insightful)
The merger was probably never a good idea but it was made worse when the two architects of the new company lost their focus shortly after the merger. With those two out of the picture the suits took over and the results are history.
Who can say what would have happened if the merger hadn't taken place but I think Time Warner would have been in a lot of trouble. The magazine business was losing ad money to the internet and don't get me started about their movies... Little Nicky, that stoopid Eddie Murphy space movie, please... The only thing that was making money was music and even that went to hell a few years later. That company was and is run by a bunch of greedy old school suits who have no clue what the real public wants or needs. They finally did get lucky with the HP and LOTR movies but I doubt if they could have done those without the money AOL was kicking in.
The best thing that could happen would be for the company to be split up. Then each new company could stand or fall on it's own and not be held back or propped up by the losing divisions. Maybe AOL will get picked up by someone who actually knows what the internet is...
Re:Splitting the company up will only help innovat (Score:1, Insightful)
Make some conservative assumptions:
10,000,000 members paying $20/month
Revenue of $200,000,000/month, over $2billion a year. The cost to AOL of one of these accounts is less than $10/month.
Yeah, $100million free cash flow/month. That's dead weight...sure.
Time Warner *wants* to ditch AOL because of old wounds, but Time Warner can't afford to....it's too much free money currently, which is used to fund their less-spectacular divisions.
Re:Very bad analogy: TW is not a utility (Score:3, Insightful)
Icahn is trying to up his asset. Ma Bell was a utility, and a monopoly. Time Warner is neither.
Time Warner has diverse media and manufacturing assets, and while they have content generation and distribution, they're not a monoply in any of the areas of their business, like Ma Bell was.
A breakup in this case, has no useful metaphor to Judge Greene's breakup of the AT&T components into different companies. The only common denominator between the two, is that the fact that they were broken up to increase shareholder value. Other comparisons aren't valid. This is an economic issue, not one with parallels.
Comparisons that try to link the two in that way just don't work-- TW's asset structure, business model, governmental regulatory control, and every other facet between TW and AT&T are different. Really different. The supposition of the post tries to presume that tie, where no tie exists.
Polypoly (Score:4, Insightful)
Instead, the most popular remedy suggested by the most influential spectators, the Wall Street Journal crowd, was "horizontal" split into smaller microcosms: MS1, MS2, MS3 - just cut them down to size, retaining all the same operations, and fight each other. FWIW, does anyone even know what the MS remedy actually was (is), other than oversight by a nanny judge? And how the new regime compares to the old in specific metrics accepted by the judge who determined MS was a monopoly? In any event, MS is still an anticompetitive juggernaut, as subsequent state monopoly lawsuits demonstrate, as well as the news in any given month, and especially to anyone trying to actually compete with MS even in their areas of vapor competence.
This is, of course, exactly the same pattern as the paradigmmatic monopoly breakup: AT&T. The "Baby Bells" were little "Ma Bells", regional monopolies which were smaller, but just as anticompetitive. Until cable companies like Time Warner recently started offering phone service, they continued their local service monopolies. Though long distance immediately became competitive - the AT&T monopoly action was brought by MCI, which found it couldn't compete with a monopoly, regardless of its merit. The MS monopoly decision also was the result of a competitor bringing action: Netscape, which claimed (correctly) that MS violation of a prior court consent decree not to bundle IE with Windows illegally interfered with its ability to compete. Netscape, of course, was bought up by AOL by the time of the monopoly decision, as the anticompetition took its toll, while AOL also bought Time Warner, as people believed (among other fantasies) that the AOL combination could compete with MS better than Time Warner could, especially if it was also Time Warner, and once MS was divested of its monopoly advantage. That turned out to be wrong, in several essential ways.
But recall that the vertical split was believed to offer greater collective return to shareholders. And that it would offer the benefits of competition to consumers, from price to quality, as well as market opportunities for vendors. Icahn apparently believes that is the case. Bill Gates, an even larger holder of MS shares than Icahn is of TW shares, has the benefit of a single manageable empire to compensate for the tradeoff of potentially more $billions in returns on his shares. Is there a good example of a monopoly, especially a tech one, that was split into its vertical components? Bundling is the most powerful competitive tool, short of IP monopoly, in the tech business. It seems clear to many people that vertical splits are the proper remedy to protect the market, and even benefit shareholders at the ego expense of executives. Which ones can we study for actual market results, and compare with these others, which have gone the other way - and usually remain monopolies in different guise?