March 2002
Consolidation - Pros and Cons

Questions of consolidation.

As we write, developments in Australia, the UK and the US, suggest that the governments round the world may well ease restrictions on media ownership by large conglomerates and, as may be obvious from the type sizes above, we have come to the conclusion that the process of consolidation in media in general has now moved so far that the pros are significantly outweighed by the cons; indeed we would go so far as to say that the pros have now become almost negligible except for those who evaluate solely in financial terms and whose definitions of efficiency are measured within the narrow confines of share value.

Those values would make a Colombian drug baron, history and finances duly laundered, a more valuable member of society than an honest New York firefighter, something with which we would beg to disagree.

The Pros.

We have a severe problem here, for apart from the financial benefits for the shareholders of major media groups and, through takeover hopes or actual takeovers, a price boost for shares in smaller media groups , we can't think of any significant benefits of having fewer large corporations than now exist dominating media.

It could be argued that only a large corporation could invest enough to produce some movies or TV series or indeed major radio drama but the corporations that existed a decade or so ago did quite nicely, thank you, on this front. Some would argue that they did more and were more innovative then than now, when consolidation has thinned the ranks of companies but probably not of accountants.

Then there is the argument in some countries about competing with the global giants but that argument so often boils down to either national pride of the same kind as maintaining a large state airline for prestige (but they didn't deliver good value in general) or, when taken to a logical conclusion, simply hand more power to the already powerful rather than stimulating development in general.

Or the argument of being big enough to withstand pressures from other large organizations and governments:So go on, send us some good examples!

Which leaves the argument in terms of the marketplace as being the best arbiter. That argument has its weaknesses in terms of an energy company like Enron but is, we feel, unsustainable when issues of news and information that are vital to a democracy are put into the balance sheet.

But then arguments about democracy seem to have somewhat wilted in the big media organizations (such as News Corporation and Disney) when the issue of profit comes into conflict with their former arguments in terms of defending market freedoms (think of China: think of Murdoch: think of hypocrisy because the only other conclusion would have to be in terms of intelligence and we don't think the individuals involved in making many of these decisions are unintelligent but neither are they particularly principled if one applies the definition in terms of sticking to a decision they argued was morally right when it's going to hit the bottom line hard.)

The cons.

Here we seem to have an embarrassment of riches, even if profits are lower. Maybe in defence of our view, we could quote someone who is normally regarded as a conservative US commentator.

In a recent column in the New York Times, William Safire, wrote, "In the real world, intimidating "mere size" has become, when not sin itself, the occasion of sin. Today's any-merger-goes regulators permit cross-ownership of content and distribution while encouraging corporate titans with swollen egos to gobble up competitors or suppliers. Where does this power grab leave the innovative entrepreneur, the small business, the individual talent and the consumer?"

Where indeed, we would ask?

Place yourself in the position of an individual or small operator up against the might of a giant like Clear Channel and you pale in significance. That might not matter if there were sufficiently severe curbs against abuse of power by such a giant but in no countries do we see such curbs at the moment and in many there are effectively no curbs.

That, to us, is a situation rightly condemned when the media concerned was the state-run media of the former Soviet Union and still existing to far to great a degree in many of the successor states or in other countries with state-controlled or dominated media such as Iran, Iraq or Zimbabwe.

It receives insufficient condemnation when similarly small groups effectively dominate the media of countries with "free markets."

Again to quote Safire in US terms, "The longtime anti-business coloration of liberals reduces their ability to take on the convergence con. It is for conservatives to ask ourselves: Since when is bigness goodness? "

"The Constitution's brilliant system of checks and balances restrains each government branch's power. We oppose the concentration of authority in the federal government, urging its devolution to states and localities. We seek to empower productive individuals by cutting taxes. Our mothers' milk is market competition. "

"Why, then, should we supinely go along with the seizure of economic power by today's triopolies and duopolies on their march to becoming tomorrow's monopolies? "

Our response.

To Safire, here, we say Indeed so and the answer to us is to limit the march towards monopoly and, where monopoly powers are abused, to so punish that abuse as to reduce the abuser to a status where it loses its monopoly.

Not without warning and clear rules, we would agree. But those rules could and should be much tougher now, not when too much power has been grabbed by a monopoly and the response is a repair job. As always, we regard business as intelligent in general when it comes to facing up to bottom-line risks in the case of violations. The principle of the polluter pays is a good one and in the media business, abuse in certain areas (think of Disney and the future of Nightline in terms of the vitality of democracy) should risk not just condemnation but massive financial losses up to, were a corporation foolish enough to push its luck too far, either a mandatory splitting up or, where the business is dependent upon licences to use public airwaves, the loss of such licences.

We don't think it would ever be likely that, say Viacom or Clear Channel, would ever face such a penalty but facing enforced divesting of interests in some areas and knowing that it was a possibility that all could be lost would, we think, seriously temper their actions. Done in a context that insists on public good quid-pro-quos in terms of information and diversity of offerings, we think that would be a public good: Having a few giants in effective control of media information or indeed of too much of the advertising in a market, we think is the opposite.

Any views? Please comment on the above. For that matter, if you can put the time aside, we'd like your "Guest comment" pages this year to stimulate more feedback and dialogue.

Front Page About this site Freelance bulletin
Site audio files Radio Stations Other links Archives Index Comment Pages Your feedback Browsers
players, 38 Creswick Road, Acton, London W3 9HF, UK: