Nothing ventured, nothing gained. . . . After all, we are in the entertainment business. Circulation went up and it stayed up. We didn’t lose money or anything like that.6
Despite the shortcomings of television, by the beginning of the twenty-first century, a rectangular, electronic viewing screen – television or computer (the technologies are merging), large or miniature – had become an
indelible symbol of globalization and the new media that had grown along- side it. Indeed, it was the symbol of the mediated world. And, given convergence strategies, the Internet, television’s natural sibling, was under- lining, even reinforcing the dominance of the television as the symbol of global media growth and influence.
And, the limitations of television are further compounded by wider industry trends. As the media and entertainment industry has grown, and major media organizations extended their global reach, the tendency toward commodificiation and commercialization, corporate conglomera- tion and the concentration of ownership, have intensified, fuelled by dereg- ulation and technological development.
As governments around the world embraced the free market, media conglomerates were able to extend their global reach. The move into China at the turn of the century by AOL, had its roots in a merger frenzy fired by US industry deregulation in the early 1980s, a process which continued through into the new century. The $US350-billion merger in 2000, between Time Warner and Internet giant America On Line (AOL) created, at the time, the world’s largest media company, yet was just one milestone in the growth and spread of the global entertainment giants.
The growth and changes in the ownership of the media have gone hand in hand with its globalization. Indeed, fuelled by deregulation and techno- logical development the media, in particular television, has been one of the most visible signs of this process. Just 15 years ago, many of the global tele- vision networks were in their infancy, some barely a twinkle in the eyes of their shareholders. News Ltd’s Sky Television, and what became its Asian subsidiary, Star TV, the BBC’s global television operation, BBC World, and business news operation CNBC had not been formed, and the adolescent CNN was still a few years from the Desert Storm conflict in the Middle East, the coverage of which marked its coming of age.
By the turn of the century, the creation of the global media giant was secured. Following a decision in the District of Columbia, US Federal Appeals Court in February 2002, industry consolidation looked set to con- tinue unabated, allowing the ‘concentration of media capital through com- petition’ (Keane 1991, p. 71). The Court decision removed the block on media companies owning both cable systems and local broadcasters in the same market, thereby accelerating global media mergers by allowing ‘new value to be extracted from local [US] TV station operations’ (Wolf 2002).
By the turn of the century, the three major owners of cable channels in the US – Time Warner Inc., Viacom and Disney – accounted for two-thirds of all cable advertising revenues, and a similar process was happening in Europe. In the first half of 2000, the volume of mergers in global media, Internet and telecommunications totalled US$300bn, triple the figure for
the first six months of 1999. It is these sort of numbers that leave the nation state wondering how long it can remain relevant, particularly with govern- ments around the world embracing the litany of the free market, allowing media conglomerates to extend their global reach (Golding and Murdoch 1996, p. 21).
The major media conglomerates like Walt Disney Co. (ABC, ESPN – 2005 annual revenues $US32 billion), Viacom (CBS, MTV – 2005 revenues
$US10 billion), News Corp (Fox, Harper Collins Weekly Standard London Times Direct TV – 2005 revenues $US26 billion), GE (NBC, Universal, Vivendi Universal Entertainment – 2005 annual revenue $US150 billion, but not a pure media play, NBC Universal 2005 revenues were about $US15 billion), Comcast (the biggest cable firm – 2005 revenues $US22.3 billion), Sony (2005 revenues $US64 billion, again not a pure media play – revenues for games, films and music amounted to about $US19 billion in 2005), and Bertlesmann (2005 revenues €18 billion), were among those scrambling to match up to Time Warner’s size and reach (2005 revenues $US44 billion).
The smaller media companies were less able to survive a slump in advertis- ing revenues, making easy pickings for the media giants. The future for independents looked particularly shaky.
Consolidation, therefore, has been a key characteristic of the media industry. The flurry of media mergers that took place in the 1980s and 1990s, as essentially a defensive response, borne out of fear of uncontrolled competition, became a process where ‘more and more assets are falling into fewer and fewer hands’ (The Economist13 April 2002, p. 11).
In the media business, size does matter. The hefty costs and risks involved, particularly in television, mean scale is vital. Consolidation allows vertical integration, something which is important to media groups as a whole: ‘by owning both a TV show and the means to distribute it, an operator can become a forceful promoter of its own programming – and gatekeeper for others’ (The Economist 13 April 2002, p. 11). As Peter Chernin, president and CEO of NewsCorp, explained: ‘There are great arguments about whether content is king or distribution is king. At the end of the day, scale is king’ (McChesney 2001b). The winners in the new entertainment reality will be the big companies that have ‘the economic power to make the huge, increasingly expensive movies that the crowds prefer, they are best posi- tioned to distribute and promote their content, and can easily stick out from the crowd’ (The Economist 23 May 2002, p. 63).
The Big Six (Time Warner, Disney, Viacom, News Corp, GE and Comcast), have not had the hunting grounds all to themselves. New com- petitors have emerged on the scene. Many were new players – from Google to YouTube – and, even the world’s most valuable company, Microsoft, was keen to move into the media world. ‘Microsoft executives want the
entertainment industry to view it as indispensable . . . Microsoft doesn’t plan to be a typical media company. It intends to become a media company by supplying the software that will deliver all forms of entertainment to any playback device’ (La Franco 2001, p. 42). Microsoft’s strategy was for its products to provide the software platform that executives use to view digital dailies of movies they were funding, that directors used to create demo reels, and that consumers used to watch video on demand, or used to listen to downloaded music.
And, Microsoft continued to nudge its way into the business proper.
Eager to stake its own claim on Europe’s Internet, the software giant took a $US333 million, 6 per cent stake in United Pan-Europe Communications (UPC). UPC, a small Dutch cable company controlled by US cable-mogul John Malone and his Liberty Media Corp, which had bought cable com- panies in France and Sweden, and with more than $US3 billion dollars in its pocket, was positioned to take its part in any industry consolidation (Baker 2001).
In the US, Microsoft made agreements with three US telecom groups to reach 90 per cent of households capable of receiving broadband digital sub- scriber line (DSL) connections. Microsoft CEO Steve Ballmer announced the agreements with Verizon, BellSouth and SBC Communications, to provide the services. Microsoft had already announced an extensive co- marketing agreement with Qwest Communications, another US telecom provider. Ballmer also said the group would continue to bolster its Internet news operation, MSN’s offering, by forging alliances aggressively with content providers. It already had such agreements with CNBC, the financial news television network, ESPN, the sports service, and Disney, as well as the music operations of Sony and Vivendi (Abrahams 2001).
Conglomeration was not a one way process. As companies looked for the most profitable solution, there was an ebb and flow in the strategy. Where Murdoch had been working to add the Internet to his global media empire, in 2005, Viacom announced plans to separate into two companies (the fast growing companies like MTV cable networks and the more mature busi- nesses like CBS). The mature businesses, such as television and radio, were finding revenue from advertising was growing slowly and these were sepa- rated from those that were growing faster: advertising on the Internet, video games, satellite radio and selling content to people on their mobile phones.
The latter was a much smaller part of the group’s operation, but Sumner Redstone, the controlling shareholder, hoped that it would extract value (The Economist18 June 2005).
John Malone made similar moves at Liberty Media, searching for value as well as a coherent story for investors – growth or value. Richard Parsons, the CEO of Time Warner, outlined a different strategy as the company
announced its partnership with Google in December 2005: ‘as digital tech- nologies continue to drive industries together, the great value and opportu- nity inherent in Time Warner’s structure and array of premier businesses becomes increasingly clear’.7
Television’s poorer cousin, radio, also witnessed a huge consolidation in the United States. Clear Channel Communications, a San Antonio-based broadcaster topped off an acquisition spree in August 2000, with a
$US23.8-billion purchase of radio station and billboard giant AMFM Inc., and a $US4 billion buyout of promotions and venue holding company, SFX Entertainment Inc. By 2001, Clear had become America’s number one radio chain, billboard owner, venue operator and concert promoter. The company had $US5.3 billion in annual revenues, operations in 64 countries from the US to Australia and New Zealand, including some 1200 radio sta- tions, 19 television stations, 770 000 outdoor ad displays and 135 live enter- tainment venues. Its nearest rival had only 183 stations.
Questions were raised about the company’s reach and leverage. A Denver concert promoter sued Clear in a US federal court in August 2001, accusing the media giant of monopolistic and predatory practices, includ- ing claiming that Clear Channel’s promotion arm blocked other concert promoters from publicizing their shows on Clear Channel’s radio stations.
Clear Channel’s CEO, L. Lowry Mays, in a Business Weekarticle defended Clear’s strategy: ‘Big is not bad. Our interest is not in squeezing the little guy out, but we want to expand our business the best we can’ (Forest 2001, pp. 77–8).
The consolidation process in the US did not unroll without some resis- tance. Despite the Appeals Court Rulings in early 2002, and the seeming deregulatory bent of Federal Communications Committee (FCC) Chairman Michael Powell, some powerful lawmakers in the US were pushing back. They had become alarmed at the possibility of ownership rules being dropped completely – rules which were in place to ensure diversity and prevent individual companies from amassing too much control over the US media – and they were demanding the FCC preserve the rules or give a good reason for weakening or abandoning them. As a result the FCC ordered a review of nearly all the media ownership rules, but this was seen as only likely to delay the inevitable (Dreazen 2002, p. A6).
The wrangling continued as arguments swirled around the FCC and its efforts to deregulate the industry, with political interest groups like the NRA trying to get content regulated, as the four big networks continued to push to be allowed to own local stations and allowing a single firm to own both a TV station and a newspaper in the same market. Republicans lowered the proposed limits for media ownership concentration from 45 per
cent to 39 per cent, up from the historical 35 per cent. The FCC also lifted a restriction preventing a company from owning both a newspaper and TV station in all but the smallest markets, and relaxed ownership rules to allow a single company to own up to three TV stations in the largest cities. But Democrats criticized the proposals noting that the practical effect of the changes demanded by the White House is to protect Rupert Murdoch’s Fox network and CBS-Viacom from having to comply with the lower 35 per cent cap.8
The argument continued when News Corp’s move to acquire a control- ling stake in DirectTV parent Hughes Electronics Corp for US$6.6 billion – more than doubling its worldwide satellite TV presence to 22 million subscribers – was approved by the Republican-dominated FCC in December 2003, despite claims it would result in beneficial changes in content, tech- nology and pricing (Pasztor and Squeo 2003, p. A8). Even the New York Times– Noam Chomsky’s lead ‘agenda-setting’ newspaper for corporate America (Chomsky 1997) – was critical of the spate of media mergers, par- ticularly the unquestioning way the media covered them. The paper’s columnist William Safire claimed these mergers were covered as ‘gee whiz, which personality will be top dog, how will shareholders profit, which giant will go bust’. While the NY Timeswas protecting its own position, Safire raised an important point: how do we better protect the competition that keeps us free and different? He said that those who claimed the Internet kept variety and competition were wrong. Much of the Internet was con- trolled by the giants too, leading to a ‘headlong concentration of media power in the US’ (Safire 2004, p. 9).
Ironically, however, media conglomerates were still, ultimately, answerable to their company shareholders, something Rupert Murdoch attested to at a News Corporation shareholders meeting in October 2006. When questioned by representatives of the conservative Parent’s TV Council and Accuracy in the Media about News Corp’s television output, Murdoch revealed that he had intervened at the personal request of a leading shareholder, the Saudi prince al-Waleed bin Talal, to query Fox News’s description of riots in Paris the previous year as led by Muslims. Murdoch said that he was concerned because he understood that many of the rioters were from an Algerian Catholic background. ‘All I said [to Fox] was “you ought to look at that and see if it’s right. If it isn’t you ought to change it” ’(Clarke 2006, p. 35).