March 2005

[[cross-posted from PFF Blog]]

Last week, I blogged about how the media industry is in the midst of a major shakeup and de-consolidation craze, but few seem to notice or care. I noted how even a whisper about a potential media merger or joint alliance garners front-page headlines, replete with numerous quotes from the Chicken Little media critic crowd about how the whole world is going to hell. But when the opposite is occurring, and firms are getting smaller or selling off assets, you don’t see or hear a word about it.

Today, however, the Washington Post’s Frank Ahrens, one of the best media beat reporters out there, proved to me that at least one person in the press is taking notice. In a fine piece entitled, “Media Firms Piece Together New Strategies,” Ahrens notes that: “After a decade of growth by acquisition, media conglomerates such as Viacom, Sony Corp. and Time Warner Inc. are beginning to reconfigure, pushed by new technologies and changing consumer habits. At the same time, the 1990s cookie-cutter model of a media giant–take one television network, add a movie studio, theme parks, music company and maybe a pro sports team–is falling from favor, as companies settle on their core identity, analysts say.”

In addition to the examples I cited in my post last week, Ahrens provides many other examples of media providers scrambling to come up with new strategies to meet the growing competition from new technologies and media outlets. In many cases, these old giants are shedding properties and taking a “back-to-basics” approach to meeting this challenge.

Again, as I asked last week: Where are all the media critics now?

P.S> Chapter 3 of my forthcoming book “Media Myths” contains an extensive discussion of how the media industry often goes in waves or cycles like this, with: (1) consolidation being in vogue for a few years as firms seek out “synergies,” but then many of those investments don’t pan out or the synergies never materialize, and then (3) a wave of divestitures ensues as firms scramble to get back-to-basics and focus on their core competencies. This is called the marketplace, folks. Media critics think it’s all some sort of grand conspiracy to destroy democracy or competition, but in the end, we end up with a ever-expanding universe of media options at our disposal. In sum, despite what the Chicken Littles predict, the sky never falls.

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The radio industry is commonly cited by many media critics as a poster child for the supposed evils of media consolidation. While it is true that a large number of acquisitions took place in the radio market following relaxation of the radio ownership rules back in 1996, the reality is that the radio marketplace–properly defined–is very competitive and nowhere near being the “monopoly” that some critics claim.

Take, for example, all the hand-wringing over every media critic’s favorite villain: Clear Channel Communications. If you believed the rhetoric spouted by the critics, you’d guess that Clear Channel, which now owns over 1,200 stations nationwide, has a stranglehold on this marketplace. OK, now here’s a quick reality check: Clear Channel’s 1,200 stations represent less than 10 percent of all radio stations in the America. That’s right, less than 10 percent. Does that sound like a monopoly to you?

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Have you ever noticed how media critics claim the world is going to end whenever two media companies propose any sort of merger or partnership, but when the opposite is taking place these people are nowhere to be found? Indeed, we are in the midst of another wave of media DE-consolidation with numerous media companies exploring divestitures or break-ups, but few seem to notice or care.

Consider today’s announcement that media giant Viacom is preparing to split itself in two firms: the old broadcast radio and TV properties would go into one company; the cable and movie studio holdings into another. Viacom has spent the last decade amassing as many media properties as they could get their hands on, but like many companies these days, they have come to believe that it probably makes more sense to avoid spreading themselves too thin and instead are refocusing their efforts on doing just a few things very well.

Liberty Media is doing the same thing. John Malone’s continuing push to break apart the firm into smaller, independent media operations has generated little media attention, but there’s no doubt he’s on the way to breaking up his company into smaller units.

Same goes for Cablevision. In late 2003, the firm announced that it was spinning-off its satellite and national programming arm into an entirely new, distinct company, Rainbow Media Enterprises. And recently there’s be a move by the board to get rid of its “VOOM” high-def satellite service.

Isn’t is funny how you don’t hear much about this in the press, (unless you’re a nerd like me that relishes the business stories buried deep in the back pages of the Wall Street Journal and business magazines)? I guess this really isn’t all that surprising. As Ben Compaine, co-author of the brilliant Who Owns the Media?, correctly observes, “Break-ups and divestitures do not generally get front-page treatment.” Too true. By contrast, however, if Cablevision, Liberty, or Viacom were proposing acquisitions right now instead, we’d see front-page coverage in every paper complete with numerous quotes from the Chicken Little crowd about how the end times were near.

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