Commentary by Scott Donaton

WHY AOL TIME WARNER SHOULD ACQUIRE NBC

It Just Makes Sense

By Published on .

AOL Time Warner will own NBC.

The inevitability of this coupling is obvious. And, although marketers, media buyers and consumer advocates will, and should, have concerns about such a pairing, it makes all the sense

Scott Donaton, editor of 'Advertising Age.'
in the world.

It's fairly amazing to consider that AOL, the world's largest, most powerful and most diversified media company, is not a player in the largest and most powerful ad medium (please don't insult me or yourself by mentioning the WB). And it no longer makes sense for NBC to continue as essentially a stand-alone media property -- its cable TV holdings aren't much of a factor in this regard -- in an age of ownership concentration and integrated cross-platform marketing.

Broadcast remains key
AOL is far and away the media industry's most influential company, even without a sizable broadcast TV presence. But, as one veteran media executive told me last week, broadcast remains the key even in a supposedly media-neutral marketplace. "It's the platform through which you can leverage sales to other parts of the company," he said.

It's that simple.

The perfect pair?
NBC needs to be part of a broader media conglomerate and AOL needs a top-tier broadcast presence to remain competitive with Viacom (CBS and some of the best brands in cable), Disney (home to ABC, ESPN and some other neat cable TV nets) and News Corp. (Fox). Last week's federal appeals court decision to overturn the ban that blocks cross-ownership of a cable system and a broadcast TV station in the same market paves the way for such a marriage. (This, of course, assumes the Supreme Court won't overturn the decision.)

"We're very pleased" by the ruling, AOL's general counsel told The New York Times. "The rule had long ago become an anachronism and did not serve the public interest."

Consumer groups, who worry that

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concentration of ownership limits consumer options, would beg to differ. So would some media buyers, although a strong argument could be made that media owners are consolidating in a necessary response to the consolidation of clients.

Bidding war
If General Electric Co. decides to part with NBC, there would be a vigorous bidding war. Vivendi Universal would surely love a shot at the peacock network. As Chuck Ross, editor of our sibling publication Electronic Media, responded when I said I was convinced AOL will buy NBC: "Not if Barry Diller can help it."

Diller, soon to be chairman-CEO of Vivendi Universal Entertainment, was asked recently if the broadcast network economic model was fixable given ever-escalating programming costs. He replied, essentially, "Let me get my hands on one and we'll find out."

Diller also noted the combination of Vivendi Universal's entertainment properties with his USA Networks' properties made sense because "when you put all these together you have scale to get to being a tier-one media company. We have enough assets to get us the next assets."

Bolstering the WB
Wayne Friedman, Advertising Age's Los Angeles bureau chief, had his own answer to my AOL-NBC theory. He believes the more likely immediate impact of the court ruling will be that AOL will "get its feet wet" by buying a mid-tier station group to bolster the WB.

The Diller and station group theories make sense. But they don't sway me. NBC, I predict, is destined to be a sibling division to Time Inc., AOL and Warner Bros.

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