On one hand, the deal could give Time Inc. titles, including People, Sports Illustrated and Time, an edge over rivals in the digital age. It will also make millionaires of scores of Time Inc. staffers who saw the value of their stock options soar.
On the other, the magazine division will be a much smaller component of the merged company, and its ink-on-paper products look stodgy alongside AOL's interactive technology. Time Inc. currently pulls in 18% of Time Warner revenues but will generate only about 11% of the revenues of AOL Time Warner.
"The fear people at Time Warner and other traditional media companies have is that they will be overshadowed," said Reed Phillips, a partner in media mergers and acquisitions company DeSilva & Phillips. "Time Warner folks fear they are really the second team to support the AOL team."
Still, Time Inc. executives said they're thrilled the company finally has a viable Internet strategy. And Time Inc. President-CEO Don Logan is confident his division won't be overshadowed.
"The majority of the increases to our profits in the next five to 10 years will come from print and print-related products," Mr. Logan said. At the same time, "having access to AOL and its expertise in Internet products will make all our properties 1,000% better."
Mr. Logan said he sees AOL as a centralizing force rather than as one more division alongside the publishing, film and entertainment units.
"I'm a decentralized guy, but this is a time when there certainly needs to be a major effort made to get AOL involved in everything that's happening in Time Warner's electronic strategy," he said.
John Huey, managing editor of Time Inc.'s Fortune, also views the merger as an opportunity to strengthen the company's magazines: "We, along with every other old-media company, are still searching for the best ways to bridge the business to the other side. This certainly seems like it's full of promise."
Still, he admitted, excitement over the deal has been "mixed with caution and probably just a little anxiety. There's not ever been a big merger without a little anxiety, but it's probably as much on the AOL side as the Time Warner side."