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New thinking, new technology for the creative sectors
A MediaTainment Finance supplement

The telecom juggernauts are taking over. This was confirmed in May with US telecom goliath Verizon’s proposed US$4.4bn merger with AOL.

Pre-social media, the 32-year-old AOL Inc (as well as content-aggregating rivals Yahoo and Microsoft’s MSN) spent millions on ad-funded online entertainment, news and free communication services like email to lure end consumers into accessing their then clunky Internet networks.

Internet access became cheaper and ubiquitous (3.2 billion connections worldwide today) and mobile phones (7 billion subscribers globally) got smarter (1.75 billion smartphone users). Growth in broadband Internet bandwidth, to handle fans’ demand for the larger movie, music, and video games files, on mobile devices soared. And the Internet became key to businesses’ standard strategies.

Then over-the-top content distributors and creators like Netflix, Hulu and Amazon Prime were able to use the Internet to deliver high-end TV and entertainment directly to viewers, who are becoming disillusioned with expensive pay TV packages from telecom-owned Internet service providers and cable operators.

That development seemed to kill telecom operators’ ambitions to operate their own media and content distribution services.

What telecoms companies want
However, the tables turned again. Telecom companies realized digital content owners and distributors, including AOL, Hollywood and the music industry, needed their networks more than they needed content.

After all, traditional voice communications and data gathering have always placed telecoms in every home and office the world over. But as they still want to entertain their customers, they have been forming some formidable partnerships with content owners.

In the UK, BT Group is successfully challenging satellite-delivered Sky, Europe’s largest pay TV operator, to compete for rights to the major live sports events and Hollywood blockbusters. BT is able to promise free TV entertainment to existing and potential subscribers of its broadband Internet service. Meanwhile, to ensure it does not lose viewers to BT, Sky makes similar offers to its TV subscribers via Sky Broadband, which was created through a series of acquisitions.

Verizon rival AT&T has made a US$49bn bid for DirecTV, the country’s largest satellite TV group. Orange, France’s largest telecoms operator, sees its entertainment service as key to its longevity. Over the years, it has invested in, created and run a series of TV channels (Orange TV). It is a major mobile-music distributor. It is also an investor in streaming music platform Deezer and owns Dailymotion, the video-streaming platform.

Why AOL?
What has made Verizon’s bid noteworthy is that AOL’s content is secondary to the tech resources and intelligence the latter has been accumulating in recent years. AOL has a peripatetic history. 

To continue reading this article and other coverage of technology disrupting the creative industries, download TechMutiny Issue No.10.

 

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