We're finally at the point where Time Warner (TWX) is going to spin off AOL, which was originally the acquired in one of the most ill-conceived merger deals of all time. And now what happens? Comcast (CMSA) decides that it isn't satisfied with creating a trend of increasing share prices. No, it sees a vacuum in the really bad idea space, and so will buy a controlling stake in NBC Universal, just because someone apparently had to. And they want to be in pictures. Doesn't everyone?
Oh, there will be rationalizations aplenty. Content. Synergy. Vertical entertainment integration. You know -- all those things you heard when AOL was acquiring Time Warner, back when at least some people assumed that such corporate combinatorics were all the rage. But there were some clear reasons why the arguments held as much water as a ripped sieve:
- Running a distribution business through data pipes, which is what AOL did and Comcast does, is far different from running a media company that creates content. People experienced in the former are likely to know nothing about how to make the latter tick.
- The please for economies of scale is almost always misguided, because when the two companies are in different industries, it turns out that there's a whole lot of overhead and infrastructure that you can't easily remove. Unless, of course, you want to pretend that people can do infinitely more than they've ever been able to do in the past simply because you're in charge.
- There is too much ego in both organizations and it's going to clash to the detriment of actually getting work done. The executives in charge of AOL thought they knew better. They didn't. In fact, they knew so little that they managed to take the value of the combined entity for a long while.
- Wall Street doesn't trust such combinations because, if you'll pardon the metaphor, they've seen the movie before. Who wants to make the next Ishtar or Waterworld?
Image via stock.xchng user saine, site standard license.