The jitters are understandable given that AOL's role as a content distributor will change dramatically once it owns and taps into Time Warner's vast storehouse of media content--from news periodicals to massive catalogs of popular music.
"What we are seeing on the content side is that pure content firms will have a tougher time competing with a one-stop shop that AOL and Time Warner will become," said Youssef Squali, an analyst at investment banking firm ING Barrings. "That is what the market is assessing right now."
Some of the companies, or individual sites, to watch as a result of the AOL-Time Warner merger include:
Reel.com and Viacom's Blockbuster unit, which sell videos and DVDs, may see stiffer competition from Time Warner's Columbia House Videos.
CBS MarketWatch could take a back seat to Time Warner-owned CNNfn.com.
CDNow.com, which is backed by Time Warner, could have an edge over Towerrecords.com and other similar sites.
While the list of sites that could be harmed is broad, investors appear to have focused on sports and music sites. Shares of SportsLine.com, for example, have slid steadily since the merger was announced on Jan. 10.
|SportsLine.com at a glance|
HQ: Fort Lauderdale, Fla.
CEO: Michael Levy
Annual sales: $60 million
Annual income: ($17 million)
Date of IPO: November 1997
"With AOL now acquiring Time Warner, and Time Warner owning a property (CNNSi.com) that is generally directly in competition with SportsLine, you have to look at the impact here," said Phil Leigh, an equities analyst at Raymond James who follows the sports content and e-commerce site. "I think this is a big part of why SportsLine is down right now."
The day before the merger was announced, SportsLine closed at about $50 per share. The shares are now trading at about $38, a decline of about 25 percent. "Sure, there's been some concern there for investors," said Andrew Sturner, SportsLine's president of corporate and business development. "But for us, it will be business as usual. We will continue to build our business by growing our online distribution relationships and continue to leverage our distribution with AOL."
Sturner added that he is not concerned by whether the contract with AOL is renewed. SportsLine also has the added security of television network CBS owning about 16 percent of the company.
AOL executives, during the company's earnings conference last month with analysts, acknowledged that the CNN Sports Illustrated site may be given more consideration than earlier, but that the main thrust will still be to give subscribers the best content available.
Other Net companies also are feeling bruised from the pending merger.
In the music sector, investors are evaluating the risks to EMusic and MP3.com. In addition to the AOL-Time Warner deal, there is another concern: the planned merger between EMI and Time Warner's Warner Music Group.
"The stock prices in the music sector are certainly affected," said Leigh, who also covers EMusic. "The thinking is that AOL is going to make a major move in this direction."
Shares of MP3.com are trading at about $26, well off their 52-week high of $105 and not far from their low of about $23. EMusic is trading at about $8, down from a 52-week high of $35.
Some analysts note that Net content stocks were sliding well before the AOL-Time Warner merger was announced. But they add that the merger certainly hasn't help lift the stocks. Indeed, even AOL is trading at about $53, down about 25 percent from its pre-merger price of $70.
In recent months business-to-business companies have grabbed the attention of investors.
"The perception is that (content and e-commerce) companies don't have potential to scale higher in revenues as B2B companies," said David Simons, managing director at institutional research firm Digital Video Investments.