by Shannon Henry
Tuesday, February 2, 1999
America Online Inc. said yesterday that it will acquire MovieFone Inc., the country's largest movie listing and ticketing service, in a move to build a new franchise in mass culture.
The Dulles-based firm will pay $388 million in stock for MovieFone, which is best known for its movie telephone lines (333-FILM in Washington). MovieFone has listings for about 17,000 screens in 42 U.S. cities. It also does business at a World Wide Web site, www.moviefone.com.
Using the service, movie goers can find times and locations for local showings of films, get brief reviews and buy tickets. The service will be renamed AOL MovieFone, and AOL subscribers will be eligible for special discounts or promotions.
Buying MovieFone, a service sufficiently well known that it was spoofed in an episode of the TV show "Seinfeld," gives AOL a new entry into American homes where people are looking for entertainment. If they're not online, they might be interested in a movie.
"We're looking for applications in the offline world that we can bring to the online world," said Barry Schuler, president of AOL Interactive Services.
Schuler said AOL, which is now the largest online service with 15 million subscribers, will use MovieFone as a new source of electronic commerce revenue and to promote AOL. For example, handing out disks for AOL trial memberships at movie theaters is a possibility, he said.
"It's just one more way to draw people to the AOL experience," said Paul Merenbloom, an analyst with Prudential Securities Inc. in New York. "The reality is {AOL President} Bob Pittman is driving AOL into the average individual's daily life."
The acquisition will help bolster AOL's Digital City service, which provides guides to entertainment and events in particular cities. Under AOL's ownership, MovieFone also will let users review movies themselves, adding to the sense of community that Digital City promotes.
One of Digital City's main competitors, CitySearch Inc. of Pasadena, Calif., merged in September with TicketMaster Online of Los Angeles, forming a similar offering of local information and ticket sales.
Taking over MovieFone's 100 million annual customers is a key move in AOL's attempt to decrease its reliance on subscription fees for revenue.
The deal is well-timed for such marketing, Merenbloom said. What will certainly be one of the most-promoted movies ever, "The Phantom Menace," prequel to the "Star Wars" trilogy, is due out this year.
"That movie will bring together two generations of viewers," Merenbloom said. "Imagine bringing the power of that to AOL."
Andrew R. Jarecki, chief executive of MovieFone, and his three co-founders will continue to run the company, according to AOL.
Under the terms of the deal, AOL will acquire all the outstanding shares of MovieFone for AOL stock valued at $388 million based on AOL's closing price Friday. MovieFone's board of directors has already voted in favor of the acquisition, and the Jarecki family, which controls more than 90 percent of the voting interest of the company, has agreed to endorse the purchase.
The acquisition also will give AOL another recognizable greeting to add to "You've got mail," which is heard when a user of the online service has new e-mail.
The service plans to greet people using it with: "Hello, and welcome to AOL MovieFone."
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