Media deconcentration.

Media deconcentration.

Media deconcentration.

Media criticism.
March 18 2005 10:34 PM

Media Deconcentration

Roll over Viacom and tell Bagdikian the news.

Illustration by Mark Alan Stamaty

For better than 30 years, activists and press critics on the left have disparaged the corporate consolidation of media. Tracking the story with the stamina of an ultramarathoner, Ben Bagdikian has written a new version of The Media Monopoly every three or four years since the first edition came out in 1983. In recent years, activist-academic Robert McChesney has beavered away at a similar rate.

The activists and critics take the alarmist view of media concentration, decrying the fact that five big media "corporations decide what most citizens will—or will not—learn," as Bagdikian puts it. What's bad is only getting worse with the passage of the decades, they believe. When Bagdikian first wrote TheMedia Monopoly, just 50 media companies dominated the industry and he thought the problem was out of control then!

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But as I wrote in my review of The New Media Monopolylast summer, the trend toward media gigantism isn't as inevitable as Bagdikian thinks, because bigger doesn't always make business sense. CBS Inc., which was the largest media conglomerate in 1986, unloaded its various record label, book, and magazine divisions before finally selling its television network to the new conglomerator on the block, Viacom.

Time Warner did incalculable business damage to itself by merging with AOL, and in recent months has shed its record label and its Time-Life books-and-records division. It would love to sell its Little, Brown book subsidiary if it could find a taker, and it routinely contemplates ditching AOL. And we all know about the financial tragedy of the French water company that conglomerated itself into a media megalith (Vivendi) and deconglomerated itself in almost record time.

Comes now Viacom's idea of halving its behemoth self into a broadcasting-outdoor-sign company and a studio-cable-book operation—and no unreasonable offer for its book division would be refused, I suspect. Investors have seconded Viacom CEO Sumner Redstone's proposal, bidding Viacom stock up 9 percent at one point this week.

What's troubling the media giants' balance sheet is (hold onto your hat, Professor Bagdikian!) competition. In a piece about the Viacom plan, the March 17 Wall Street Journal reports that "new technologies, which include the Internet, satellite radio and digital-video recorders such as TiVo" and new media businesses are cutting media conglomerate profits. The article continues:

[T]he consolidation mania of the 1990s failed to produce the idealized benefits that drove the original mergers. Not only did infighting impede cooperative ventures, but slow decision-making led to missed opportunities. No media giant was savvy enough to buy Yahoo Inc. early on, for example, before it became an important player.

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The infighting the Journal refers to is what the media companies got instead of synergy when they conglomerated. Ask anybody who works for a big media company how much cooperation they get from their corporate cousins, and you'll be greeted by a horse laugh. The broadcast division won't give the record division a sweet advertising deal if it can sell the same air time for more to an outside client. At the bottom of the ledger, every subsidiary must stand for itself.

Today's New York Timesillustrates the failure of synergy with a telling anecdote from an anonymice.

One indication of just how little synergy there was for Viacom is the fortunes of its movie studio. In the era of consolidation, media executives pointed to the advantages of combined studios with TV networks and cable networks.

At Paramount, the combination did not pay off. Viacom owns Paramount Pictures as well as MTV and CBS, but if Paramount made a movie that was poorly received, the film was likely do badly on television and cable. The same was true for television programs.

"Poor films and TV shows go right through the pipeline and destroy value," said a media executive who insisted on not being identified. And when a film studio makes a hit, the entire market should be able to compete for it to maximize its value.

Page One of today's (March 18) Journal brings more bad business news for media conglomeraters. Revenue for the entire radio industry has been down or flat since 2000, as listeners and advertisers have abandoned it for Internet radio, satellite radio, MP3 players, and other entertainments. The article portrays the industry as complacent and slow to upgrade to new technologies such as digital radio.

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Regardless of whether the split-up happens, Viacom intends to refocus its Infinity radio division by selling some of its stations, especially small-market ones. Viacom and Time-Warner aren't the only media companies resizing. Over on the cable TV dial, Microsoft has soured on media and reportedly wants out of its MSNBC partnership with NBC. Microsoft also rid itself of Slate earlier this year, selling to a "diversified media and education company." John Malone of Liberty Media wants to spin off Discovery Communications to maximize shareholder value.

Media giant foes such as Bagdikian and McChesney willfully ignore the market realities that undermine the monopolistic impulses of the conglomerators. Take radio as an example. Even though Viacom-Infinity and Clear Channel purchased thousands of radio stations and now own multiple outlets in big cities, their "power" over advertisers to bill the volume and charge the rates they desire has been zero. Advertisers looking for value have taken their dollars to the Web, cable TV, newspapers, and elsewhere.

These two radio giants have also proved themselves powerless over listeners, many of whom have turned off their sets rather than endure the 15 minutes of commercials per hour that was the industry average last year. (Some programs run as many as 22 minutes per hour, according to the Journal.) The limited playlists at Infinity and Clear Channel stations have driven audiences away, too. Today, Clear Channel is trying to reclaim listeners by reducing ads and many broadcasters are starting to program more variety into their stations, the Journal finds.

"In large conglomerates, size and complexity is the enemy," Columbia University business school professor Bruce Greenwald tells the Times. "Often, executives can't focus carefully on each of the businesses, so they don't run as well." Yet the break-up contemplated by Viacom isn't a sure cure. Some financial analysts speculate that making a winner out of the CBS half of the cleaved Viacom could come at the expense of its cable TV half.

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Contrary to the Bagdikians of the world, the best way to foster media competition isn't by appointing the government to determine correct levels of ownership. Instead, the government should limit its role to making sure that revolutionary new technologies and business models (peer-to-peer file sharing, CD burning, Internet broadcasting, low-power FM, satellite broadcasting, market-driven spectrum reallocation, etc.) aren't politically suppressed by the established (i.e., threatened) media companies.

The Fair Play for Purdum Committee. Yesterday, I gave a loving noogie to Todd S. Purdum for granting anonymity to a source in a story about Paul D. Wolfowitz because the source didn't want "to steal the spotlight" from the World Bank president nominee.

To be absolutely fair to Purdum, he wasn't the only major journalist to put a bag over the head of a source who chose to talk about Wolfowitz. After I filed my story, I read a piece by the Washington Post's Bradley Graham ("Tsunami Tour Said to Spur Wolfowitz Move") that teems with anonymice. Graham writes:

[Wolfowitz's] move was described by a number of colleagues and defense specialists as leaving a significant gap at the Pentagon in sheer intellectual power. …

"As an intellectual force he was unparalleled, and there were few in the building who kept their eyes on as many things," said a former defense official who had frequent dealings with Wolfowitz. "But paradoxically, when he ordered action on this or that, things had a way of getting delayed or never done." …

"This is the one job you can't leave vacant for long, because there are so many issues that cannot be resolved at any level short of the secretary's, and the deputy makes the bulk of those decisions for the secretary," said one defense specialist with extensive Pentagon experience. "If that position remains vacant, it is really going to slow things up dramatically." …

Several lawmakers mused privately that Wolfowitz's departure will add to pressures on Rumsfeld to step down as well. In this view, whoever takes Wolfowitz's place would be a likely successor to Rumsfeld. …

Many inside the Pentagon have assumed that Rumsfeld plans to leave after U.S. troop levels in Iraq start declining and this year's quadrennial review of defense programs is completed. The Pentagon leader has given no hint of his plans.

"One advantage of picking a successor for Wolfowitz now is that the person can expect to serve for at least three years" until the end of Bush's current term, said a retired high-ranking officer who remains well connected at the Pentagon. "That is enough time to enable someone to do the job well."

The only named source in the 858-word story (outside of a statement issued by Donald H. Rumsfeld)? Paul D. Wolfowitz.

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Last Call for Warm Bodies: Help fill the Brookings Institution's Falk Auditorium on March 22 from 10 a.m. to noon as the think tank that Richard Nixon plotted to bomb convenes a panel to explore "The Impact of the New Media: A Live, Inter@ctive Discussion & Webcast." (I'm not kidding about that "@".) Panelists include Jodie T. Allen, Ana Marie Cox, Ellen Ratner, Jack Shafer, and Andrew Sullivan. Moderator, E.J. Dionne Jr. Bloggers Daniel Drezner (danieldrezner.com), Ed Morrissey (captainsquartersblog.com), and Josh Trevino (redstate.org) will blog in real-time. (Update, 3-20: Two additional live bloggers have been added, Ruy Teixeira of DonkeyRising  and Laura Rosen of War and Piece.)  Registration is free. Can't make it to the show? E-mail your questions for the panel to Brookings. One of these days I'm going to write my piece about spectrum socialism. Send e-mail tips and inspiration to pressbox@hotmail.com. (E-mail may be quoted by name unless the writer stipulates otherwise.)