In the absence of practical organic growth prospects, media industry executives have the urge to merge. This wave started a dozen years ago and has been marked by such deals as “Time merging with Warner, buying Turner Broadcasting, and then selling itself to America Online; Disney buying ABC; Viacom buying CBS; and Vivendi buying Universal. Later months have seen such combinations as Comcast and AT&T Broadband, EchoStar and DirecTV, Vivendi Universal and USA Networks.” A tide of activity in this sector over the past decade has provoked wide-ranging comment from the press, investment analysts, and other commentators. Critiques are concerned that it might not take too long for very concentrated conglomerates to control every image, radio and TV channel, and even the emerging internet service.
There is a state of oligopoly or monopoly in a given media industry. For example, movie production is known to be dominated by major studios since the early 20th Century. The music and television industries recently witnessed cases of media consolidation, with Sony Music Enterntainment's parent company merging their music division with Bertelsmann AG's BMG to form Sony BMG and TimeWarner's The WB and CBS Corp.'s UPN merging to form The CW. There is also a state of large-scale owners. This market structure exists for television broadcasting, cable systems and newspaper industries, all of which are characterized by the existence of large-scale owners. Concentration of ownership is often found in these industries. As a result, a small number of large companies lead to a very concentrated media and entertainment industry. To see a graph of Family Tree of the current media conglomerates:
With this concentrated market structure, the industry Learner Index is relatively high, thus the market outcome lies farther from the competitive case and the market power is being exploited more. Concentration of media ownership is very frequently seen as a problem of contemporary media and society. When media ownership is concentrated in the ways mentioned above, a number of undesirable consequences follow, including the following:
- For the general public, there are less diverse opinions and voices available in the media.
- For minorities and others, fewer opportunities are available for voicing their concerns and reaching the public.
- Healthy, market-based competition is absent, leading to slower innovation and increased prices.
2 comments:
Very interesting article considering the fact that many believe that the music industry is being compromised by the domination of Clear Channel Communications and their affiliates in the radio industry. Why are people worried about Clear Channel? For the reasons that HoosAdvantage pointed out, a lack of diversity in output. The more concentrated the radio industry becomes, the more concentrated the sets of music played on the radio become and thus the more concentrated and CONTROLLED the music industry will become. It is a big problem to some. In addition, the blog post raises the question of whether the average consumer will be better off with a more concentrated media market? Perhaps more importantly, in a increasingly global marketplace and global culture that is emerging with the internet, how will a concentration of media markets effect the exposition given to people of all ages to diversity and different types of culture?
What about the internet? Although the original impetus behind media mergers may have been a lack of growth opportunities, the major industry hurdle today is how to best adapt to the ways in which the internet has transformed music, television, newspaper, and other traditional media outlets.
While noncompetitive outcomes, diversity of options, and content control may have been salient issues before, the internet has kept a healthy check on the ability of media conglomerates to exercise market power. In fact, most conglomerates today are struggling to remain competitive in the face of streaming video, downloadable music, and the media power of everyday citizens (think YouTube). The market structure in this case may result in mergers that, rather than signally concentrations of market power (and control over the media), are simply a reaction to heightened competition in what many have termed a “dying” industry.
Posted by: Holly Bui, Daniel Mendelson, Kevin Turner
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