Media Regulation

More on Media (De)Consolidation

by on March 22, 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 “Monopoly” Myth

by on March 18, 2005

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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Red Lion R.I.P.: FCC Declares the Scarcity Doctrine Dead

by on March 17, 2005

“[T]he Scarcity Rationale for regulating traditional broadcasting is no longer valid.” So begins a stunning new white paper from the Federal Communications Commission. In the paper, “The Scarcity Rationale for Regulating Traditional Broadcasting: An Idea Whose Time Has Passed,” author John Beresford, an attorney with the FCC’s Media Bureau, lays out a devistating case against the Scarcity Rationale, which has governed spectrum & broadcast regulation in the United States for over seven decades.

Calling the Scarcity Rationale “outmoded” and “based on fundamental misunderstandings of physics and economics,” Beresford goes on to show why just about everything the FCC every justified on this basis was misguided and unjust. He points out what countless economists have concluded through the years, namely that:

(1) the scarcity the government complained of was “largely the result of decisions by government, not an unvoidable fact of nature.” In other words, the government’s licensing process created artificial scarcity.

(2) a system of exclusive rights would have ensured more efficient allocation of wireless resources.

(3) even if there ever was anything to the Scarcity Doctrine, there certainly isn’t today in our world of information abundance.

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Stop This Insane Media De-Consolidation!

by on March 17, 2005

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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Blocking Blockbuster

by on March 17, 2005

Today’s Wall Street Journal reports that the Federal Trade Commission is expected to file a lawsuit to block Blockbuster’s move to takeover Hollywood Entertainment, a competing video rental company.

Here again is a classic example of how backward looking antitrust officials can often be. I suppose an argument could have be made that this was anti-competitive five years ago, when everyone still drove down to the local video store to get their movies. But come on, the world has changed a lot since then! Certainly most antitrust officials must have heard of Netflix by now. Netflix alone is decimating the traditional movie rental business and has already forced it to change its business model by eliminating late fees and moving to adopt their own online services.

Meanwhile, on-demand, pay-per-view video offerings are flourishing. Turn on any cable or satellite service and start flipping through the pay-per-view channels. It’ll take you a short eternity to scan all the options at your disposal.

And then’s there’s Internet video. True, it’s still in its infancy, but for a couple of bucks you can already download and watch most your favorite movies on your PC via Movielink.com.

Meanwhile, the costs of DVDs continue to fall to the point where if you plan on watching a movie more than once, you might as well just buy it for your personal collection. Heck, WalMart has giant bins of movies on sale every day for a couple of bucks.

So the net result of the FTC blocking a Blockbuster-Hollywood Video merger will just be to stop two dying dinosaurs from having a chance to survive this coming storm. Once again, antitrust officials got the relevant market wrong and failed to appreciate the rapid pace of technological change.

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Hillary Clinton Wants a V-Chip in Your I-Pod

by on March 10, 2005

Monitoring children is difficult business. I should know; I have two little critters who aren’t even 4 years old yet whose eyes and ears I”m already trying to protect from certain material. Millions of other parents share this difficult task with me.

But, thankfully, Hillary Clinton is coming to our rescue.

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Introducing the Center for Digital Media Freedom

by on March 9, 2005

Hey gang, Adam Thierer here… I wanted to let everyone know that I have left the Cato Institute and moved over to the Progress and Freedom Foundation to create PFF’s new Center for Digital Media Freedom.

Allow me to tell you a little more about this project and what we hope to accomplish at the Center.

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Heritage event on Dan Rather and the Blogosphere

by on January 24, 2005

Heritage is hosting an event this Friday featuring bloggers from RatherBiased, PowerlineBlog and WizbangBlog, and hosted by Heritage’s Mark Tapscott. The subject: “Dan Rather is Retiring: Is the Blogosphere the New Media Establishment? Should be fun. If you are in DC, come on by. If you aren’t in DC, we applaud your common sense. And you can virtually attend here.

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“Google-Zon,” Rise of the Machines, and the Future of Media

by on January 13, 2005

Google + Amazon = World Media Domination and then Rise of the Machines Techno-Totalitarianism … or so claims this video. But you have to admit that this is very well done. Look at the little details too… like when they flash the Google identify card up on the screen and the guy’s name on the card is Winston Smith… a la Orwell’s “1984.”

http://www.broom.org/epic/

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Desperate Regulators (con’td)

by on November 24, 2004

Last week, I posted a comment on the Monday Night Football/Desperate Housewives tempest, arguing that rather than have the FCC censor broadcasts, Americans should tune out offensive material the old fashioned way, with our thumbs on the remote control.

The post garnered a sprited dissent from a reader who argued that because broadcasting is so pervasive, viewers don’t really have a choice. I suggested that he should get out of the house more. Uh oh. The reader really launched on me after that one, writing:

“Yeah, you’ve got a point James. Let’s let all the shit in the world over the public airwaves. Hardcore porn in primetime. Anybody who doesn’t like it doesn’t have to own a tv. Or go to stores with tv’s. Or own cars with radios. Or let your kids have friends with either. How about a little full frontal nudity on the nightly news? It’s my fault for watching tv at all. “Get out more?” You’re basically telling me that it’s a parent’s responsibility to shield their kids from anything they don’t want them to see, but the only way to do that is to become Amish. Tell me, do you support having ANY decency standards on tv or radio at all? If so, what is that line?”

Wow. I really got him mad, which is probably my fault for being so flip. (And it’s not like we have so many readers here we can afford to offend any of them!) And he does raise points which deserve an answer.

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