AOL Brings Big Brand to Broadband1/16/2000 7:00 PM Eastern
Wall Street may be sorting through the America Online
Inc.-Time Warner Inc. deal for months, but marketers last week overwhelmingly endorsed the
merger and predicted that more deals between old and new media were inevitable.
"The ultimate benefit goes to the consumer,"
Cable & Telecommunications Association for Marketing president Char Beales said.
"This is going to make more and better products available."
The merger combines the power of the AOL brand with the
robustness of Time Warner Cable's broadband pipe.
It also brings a wealth of Time Warner content ranging from
television networks like Cable News Network and The WB Television Network -- ideal for
facilitating online chats -- as well as music and movie properties that could be sold
online and downloaded on-demand.
"The AOL brand is one of the top brands around,"
Dove Associates Inc. managing director Bob Davis said, "which is remarkable for them.
It wasn't too far back that AOL was about to have its brand irrevocably tarnished for
not being able to deliver."
By addressing service problems a few years ago, Davis said,
AOL was able to save its brand -- and probably the company, too.
According to The Myers Group LLC senior vice president of
market analysis Craig Leddy, the AOL brand tied for seventh place among consumers in a
recent ranking of 70 media brands. In the 1999 "Myers Media Brand Tracker,"
released in November, AOL also finished above the top three broadcast networks.
"AOL has a very powerful brand," Leddy said,
echoing other marketing sources contacted for this story.
Leddy added that the AOL-Time Warner merger would raise the
profile for interactive services and "ensure that interactivity will be the
battlefield of the 21st century. Their competitors are not going to want to sit
idly by while AOL and Time Warner take all of the business."
When it comes to new technology services, being first to
market can make the difference between winning and losing, according to David Robertson,
president of ad agency SCDRG Inc., which created a "Big Picture" campaign last
year tying Time Warner Cable to other Time Warner properties.
In anticipation of further deals among various media
players, companies should pay close attention to their brands in order to maximize the
value in such transactions, Beales said, adding, "The power that brands have to drive
deals like this is pretty astounding."
Marketers predicted that AOL would play a big role in
driving consumers to broadband, including cable-modem services.
"AOL has 20 million customers who have always moved up
to the fastest speeds they can get," Intertainer Inc. president Jonathan Taplin said.
"If AOL wants to move their customers up to broadband, they have been very effective
in doing that."
In November, Kinetic Strategies Inc. projected that cable
modems would have an installed base of 15.9 million by the end of 2003, according to
president Michael Harris. He added that the firm was likely to revise those numbers upward
once AOL's plans for its new broadband service, such as pricing and packaging, become
AOL may want to price the service as low as its dial-up
service in order to promote electronic commerce, for example. "This will help"
the numbers, Harris predicted, but he couldn't say how much it would help, especially
given the fact that the deal isn't expected to close until the end of this year.
In the meantime, Time Warner's Road Runner high-speed
cable-modem service could see some upside if AOL and Time Warner move forward with plans
to cross-promote the services even before the deal closes.
Daniel O'Brien, chief operating officer at
small-system cable Internet-service provider High Speed Access Corp. said there was little
doubt that AOL could make the broadband category explode as soon as it is able to market
higher speeds to its existing base.
"They have 21 million narrowband customers now, and
really, the only difference is speed," he said. To hook customers in, AOL could
easily offer its broadband service to existing customers at the same price they currently
pay for a month or two, then ease the subscription price up to $30 per month or so.
One barrier to moving AOL customers to cable-modem services
in the past was the perception that they would have to give up their AOL service.
"People don't want to change e-mail addresses or preferences," Beales said.
Over the past year or so, several MSOs have been active in
letting their customers know that they could keep their AOL accounts on broadband for a
monthly fee of $9.95 to AOL.
AT&T Broadband & Internet Services ran a promotion
last summer offering to pay new AT&T@Home subscribers' AOL bring-along fees for
six months. "It was a very successful promotion," AT&T Broadband senior vice
president of marketing Doug Seserman said.
He added that although a fraction of the new AT&T@Home
customers keep their old ISPs at first, many tend to wean off their old ISPs over time.
"In many ways, AOL and @Home are complementary
services," Seserman said, adding that AOL offers unique content such as chats, while
@Home targets the heavy Web surfer. "You could have a household where AOL and @Home
could very mutually coexist," he added.
Comcast Corp. ran a promotion last year giving away three
free months of AOL service to Comcast@Home subscribers, according to Comcast Online
Communications Inc. senior vice president of marketing David Juliano. "We think
consumers should understand that they can keep AOL as they come over to our service,"
"If AOL is going to become an even more ubiquitous
name and more powerful brand than it already is, operators would find it advantageous to
associate themselves with AOL," Leddy said. "It could become the 'HBO [Home
Box Office] brand' for high-speed access."
MSO executives were reluctant to speculate last week on
future marketing alliances with AOL.
Even Time Warner Cable said it was too soon to detail its
branding plans for the new service. Spokesman Mike Luftman said the company could not say
whether the broadband service would incorporate the Road Runner name following the merger.
"It's a very complex issue," he added.
Marketing sources disagreed on whether the companies should
try to tie the Road Runner name into the new AOL Time Warner broadband service.
"AOL has the brand name in the category," The
Yankee Group analyst Bruce Leichtman said. "Road Runner is cute, but AOL Plus might
make more sense than AOL Road Runner."
Glen Friedman, president of Ideas & Solutions Inc.,
disagreed. "They will do something to denote that it's not the same old AOL, but
AOL on steroids. If I were them, I would very strongly consider keeping the Road Runner
name because it clearly denotes the speed and ties it into the Time Warner company,"
But Davis went so far as to recommend that all Time Warner
Cable systems be rebranded AOL. "The main issue in today's marketing world is to
create a consumer franchise," he said. "You want to create an incredible
relationship with consumers so they'll be willing to trial other products."