01 Feb 2000

When the Queen of England does it, you know that it's more than a fad.

PC's - Palace Corgis to you and I - may still roam the royal residences, but there's another PC in Buckingham Palace nowadays. The Palace Computer is logged on. Time Warner and America Online (AOL) may have grabbed the stock market's attention recently, but how about the news that the Queen has invested in a dot com? The Millennium Mapping Company, which takes aerial photos of the UK, has the Royal personage as one of its primary backers. Cartography has got to be among one of the oldest professions and, finally, tradition is mapping out a new way to meet the future - and it's on-line.

And this royal prerogative for 'dot com' is catching. Have you noticed how media companies that don't have the Net tag after their names are being re-defined? Nowadays, if you publish magazines, run radio or cable stations, make movies or TV shows and distribute these various products to theatres, radio frequencies and news-stands, you are no longer considered diversified and synergistic. Now you are just plain old-fashioned. There's even a term for it: Legacy Media - i.e. some way behind the times. Nice, but out of touch.

Never mind if you have brand names, revenues and, heaven forbid, profits, to your credit. In this new, on-line age, your assets appear somehow stodgy and old-fashioned. Especially so in the bright light of AOL's purchase of Time Warner. And make no mistake, it is AOL - whose market capitalisation, pre-merger, was twice the size of Time Warner's - who is doing the buying. Time Warner's Gerald Levin may be older and more experienced, but it is Web nerd Steve Case of AOL who is getting the top job at the new, combined company. And AOL number two, Bob Pittman, is the heir-in-waiting of the new entity. Levin didn't even make the cover of Business Week, now did he?

That a 15-year-old company with a mere 20 million customers each paying around $20 (£12) a month (and that share will be eroded by free-Internet services) can be worth more than a company that runs one the world's biggest cable TV systems, a movie studio, a record company, a stable of TV channels including CNN, HBO and Warner Bros. Network and a publishing empire with titles like Fortune, Time, Sports Illustrated and People magazines, among others, is, well, unsettling.

The most revealing statement of the AOL Time Warner press conference was when Mr. Levin admitted that he had to take some time over Christmas away from the hubbub to become convinced that "the future cash flow prospects" made a deal like combining AOL and Time Warner sensible. I bet he did!

And I'll wager he had some mind-numbing moments doing those calculations because he's betting a lot of his hard-earned assets on the Web.

Only the next several months will reveal if AOL was very smart to cash into Legacy Media while its Web currency was still hot, or if it's move is just the first in a series of 'dot coms' "selling up" to get their hands on content and some good, old-fashioned profits to drive their businesses to the next level. Will Yahoo! be the next to breech the walls of Legacy Media and buy Walt Disney or Viacom or News Corp? Or will the ever-bigger Internet valuation bubble finally start to deflate, pulling down the Internet high-flyers and causing Levin to rue his decision to sell out.

Whatever happens, the deal marks a sea change for Net businesses. And for Europe it throws the spotlight on the Legacy Media providers. For unlike the US, where the Net has a bigger presence because more people are logged on, European Net companies are either sub-units of their US parents or pre-pubescent in terms of how their stock valuations stack up to the "old-fashioned" media companies. The big UK deal before the turn of the Millennium was content provider Flextech linking up with cable TV operator TeleWest. The 'dot com' part of that deal is more in the future than in the present. And Scottish Media Group recently spent a lot of money to buy radio and TV production company Ginger Media. Not much of an Internet strategy developed there. At least not yet.

But the one wild card in Europe is the mobile phone companies. The mobile players are battling for dominance - just look at the knock-down, drag-out fight between Mannesmann and Vodafone - and the card they all want to play is M-commerce, or mobile commerce. Of course, the key to getting people to buy on-line, using their cell phones, is having the right system and, crucially, the most attractive content.

So, instead of 'dot com' companies buying up Legacy Media in Europe, the first wave may be the mobile companies buying up or, at least, into the content holders. The fact that Vivendi holds not only a cellular license in France but also a large stake in the biggest pay-TV company in Europe, makes this kind of buy-in attractive to a company with aspirations like Mannesmann.

So, while Steve and Gerry rule on one side of the Atlantic at the start of the new millennium, the kings and queens of the new European media super powers are still waiting to be crowned. Maybe we should e-mail that nice lady at Buckingham Palace for the inside track - she's on the web now, after all!