Consolidation refers to the expansion of media firms through mergers and acquisitions. Formally, it is distinct from the concentration of media markets, although the terms are often used interchangeably. To some observers, consolidation responds to the growth of new television networks and cable and satellite channels – e.g., MTV, HBO, ESPN, CNN, Fox News, Canal 1, A&E, Al Jazeera – and the splintering of audiences into niche markets. Even the grip of the Hollywood majors – Columbia, Disney, Paramount, Twentieth Century Fox, Universal, and Warner Bros – over US and international film audiences appears to be slipping, with their share of the US market tumbling from 85 percent in 1994 to 66 percent in 2004. Throw into this mix the Internet’s endless websites, downloading services, and innumerable blogs, and the idea of media concentration seems anachronistic. As Benjamin Compaine (2001) states, “the democracy of the marketplace may be flawed but it is . . . getting better, not worse.”
Others disagree. Over the course of six editions of The (new) media monopoly, Ben Bagdikian has argued that while thousands of firms exist in the US media business, the number controlling half or more of the broadcasting, newspaper, and film industries has fallen from 23 in 1990 to just five in 2004. Robert McChesney (2000) concurs, arguing that by 1999 six conglomerates controlled most of the media market within the US, and even globally. In contrast to those who see more channels as an index of greater competition (numerical diversity), these observers focus on source diversity – the number of media owners in a market.
Applying the method of concentration ratios (CR4) to the US, Alan Albarran (2003) found strong evidence of concentration in markets for music (CR4 98 percent), television networks (CR4 84 percent), film (CR4 78 percent), and cable systems (CR4 61 percent). In terms of national newspaper ownership, however, the top four owners controlled just under the 50 percent threshold (48 percent), although 98 percent of American cities have only one daily newspaper.
A study of media ownership by the Canadian Senate (2004) found similar trends. The top five newspaper groups’ share of circulation grew from 73 percent in 1994 to 79 percent by 2003. In terms of television, the top five groups accounted for just 31 percent of all stations in 1980, but by 2000 that grew to 68 percent. These groups’ share of audiences for all channels in English-speaking Canada also rose from 42 to 50 percent between 1997 and 2002.
In a global market consisting of hundreds of firms and worth $258 billion (2005), ten firms account for 81 percent of revenue: Time Warner ($43.7 billion), Disney ($31.9 billion), Bertelsmann ($28.9 billion), News Corp ($25.3 billion), Viacom ($24.1 billion), Comcast ($22.7 billion), NBC/Universal ($14 billion), Pearson ($7.5 billion), Fuji Television Network ($5 billion), and ITV ($3.9 billion). All of these firms are conglomerates, seven are listed on Fortune’s list of the global 500 (2005) and all are based in the US (6), Britain (2), Germany (1) or Japan (1). Each derives the lion’s share of its revenue from domestic markets and from Europe, North America, and Japan; only a fraction of their revenues comes from the rest of the world.
Consolidation and concentration can be explained in several ways. Some argue that consolidation has historically occurred in cycles, first between the 1880s and the first decade of the twentieth century, then in the 1920s, 1960s, 1980s, and again from the late 1990s until, roughly, 2004. The current cycle is notable by the sheer size of some of the transactions, as illustrated by the unprecedented, but ill-fated, AOL and Time Warner deal, initially valued at $166 billion in 2000 but which fell to $106 billion a year later. A few deals have been transnational in scope, such as Universal Studios’ purchase by the French diversified conglomerate, Vivendi, in 2000 ($35 billion), although the failure of that deal spawned further consolidation when GE/NBC acquired Universal Studios in 2004.
One outcome of current trends is the unprecedented common ownership that now exists between the major television networks and Hollywood in the US: Twentieth Century Fox and the Fox Network (1985), Disney with ABC (1995), Time Warner and the WB network (1995), CBS and Viacom (1999), and NBC/Universal (2004). Hollywood majors have also countered the mounting impact of independents by taking them over, as exemplified by Disney and Viacom’s acquisition of Miramax and Dreamworks, respectively, in 2005. Policy shifts in Canada have fueled acquisitions across the media by Bell Globe Media, Canwest, and Quebecor between 1998 and 2000. In Britain, the amalgamation of Granada and Carlton in 2003, after disastrous investments in digital terrestrial television brought both to the brink of bankruptcy, furthered concentration in the national television market.
These trends also reflect the influence of financial markets on media firms. Media firms have turned to financial markets since the late-1990s more than ever in the past, with over half of all venture capital pouring into the communications media sector in 1999 (Picard 2002, 175). This is significant because financial markets abhor risk and prefer specific types of media firms, notably conglomerates, Internet companies, and those with a deep reservoir of content. While financial forces fueled a wave of consolidation, they also spawned a speculative bubble that triggered the collapse of some firms – WorldCom, Adelphia, Hollinger, Vivendi – and led to others becoming ongoing targets of investigation into corporate malfeasance, such as Time Warner. Nonetheless, an enduring monument to the dot-com bubble remains: the increased proportion of the media business accounted for by conglomerates. Even those who do not usually take a critical stance claim that empire-building and personal hubris are now driving forces behind the consolidation of media markets, alongside traditional concerns with profits (Demers & Merskin 2000).
A web of alliances among media firms has also substituted cooperation for the sharp edge of competition. Such alliances typically function as part of broader strategies that aim to counteract the risk of creating content for fickle audiences. The failure rate of media goods is far higher than in other industries, with unsuccessful television series, films, books, and music CDs vastly outnumbering successful ones. Hollywood releases hundreds of films a year, but only a few are box-office winners. However, since the cost of reproducing content is low, firms can achieve economies of scale by delivering content to as many audiences across as many media as possible. Time Warner and Viacom’s decision to close down their rival networks – the WB and UPN, respectively – in 2006, while launching their jointly owned CW network, is an example of this strategy. Time Warner and Comcast also divided several cable systems they had acquired from AT&T in 2003 after it abandoned its push into the cable business, and from Adelphia in 2004 after that firm’s owners pled guilty to pillaging the corporation for personal ends. The two companies also joined Cox Communication and Advance Newhouse to develop a new video-ondemand service, while Comcast combined with the PBS in 2005 to launch a new children’s channel, KidsSprout.
Media firms also use deep pockets, alliances, and litigation to shape the evolution of new media. News Corp is particularly noteworthy in this regard, with its purchase of MySpace ($580 billion), gaming and entertainment site IGN.com ($620 million), and the top sports site in the US, Scout Media ($60 million) in 2005. Similarly, ITV acquired Friends Reunited ($200 million) in 2005, while Viacom bought Neopets ($160 million), a children’s website in the US, in 2004, and IFilm.com in 2005. Alliances with cellular telephone companies and computer firms such as Apple and Microsoft have also allowed these firms to stake out a key role in new mobile television, music, and film download services. While the largest deal in the post-bubble era occurred in 2006 when Google took over the videosharing site, YouTube ($1.65 billion), that transaction was preceded by agreements with NBC Universal, SonyBMG, Time Warner, Viacom, and News Corp that served three goals: (1) to implement content identification technology to help these companies maximize control over their content; (2) to share traffic and advertising revenue; and (3) to share access to Google’s technology.
Dangers Of Consolidation
These agreements will not give these firms “perfect control” over their content, but will help to preserve their dominant role in the media economy. They will also allow them to shape the evolution of new technology, undermining claims that new technology is inherently antagonistic to concentrations of power. That the Internet is not immune from such tendencies can be seen in Google’s dominance of the search engine market (50 percent), with the Yahoo!, MSN and Time Warner/AOL share accounting for 47 percent, yielding a CR4 of 97 percent – far exceeding the standard of concentration outlined above. This is why Google is such a powerful force in defining the relationship between the “old” and “new” media.
The staying power of the global media giants can be seen in the fact that Time Warner, Disney, and NBC possess four of the top ten Internet news sites in the US, while the New York Times, Tribune Newspapers, Knight Ridder, and USA Today account for another four. The fact that other top news sites rely on these sources and a handful of global news agencies for their content further magnifies this influence. With almost no original news of their own, Yahoo! and Google do little to diversify the range of available news sources. Similar patterns hold globally, where the same firms dominate, with the exception of the BBC and three Chinese sites. The latter rely solely on reports from the state-controlled Chinese media.
Many critics argue that the biggest consequence of consolidation lies in the ability of media owners to influence media content and, thus, people’s view of the world. While some claim that this potential has been sharply diminished by the rise of the modern corporation, where ownership is dispersed and control rests in the hands of managers, with media workers relatively free to do as they please within the limits of professional norms and good business practice (Demers & Merskin 2000), four of the top ten global media companies remain owner-controlled: News Corp (Rupert Murdoch), Bertelsmann (heirs to founder Carl Bertelsmann), Viacom (Sumner Redstone), and Comcast (Roberts Family). Moreover, in Australia, Canada, and Latin America, among other places, owner controlled media firms remain the norm, suggesting that it is premature to sound the death knell of media moguls who can use their outlets to pursuit political and ideological goals. However, identifying causal links between owners, content, and people’s beliefs is fraught with difficulties, including the anecdotal nature of the evidence and the well-known limits of media effects research.
A larger view of the issues considers the consequences of consolidation on the allocation of resources within media firms. While some believe that the deeper pockets of media conglomerates allow them to commit more resources to production, news gathering and so forth, a counterargument is that resources are being diverted from these goals to meet the high cost of financing mergers and acquisitions. The merger between Granada and Carlton television in Britain, for example, led swiftly to the closing of the 24-hour ITV News channel and centralization of news production for all of its other channels in London. In 2006, NBC announced that it would cut 700 people, eliminate news bureaus in favor of a centralized operation in New York to feed NBC, MSNBC, CNBC, and its Spanish-language network, Telemundo, and replace high-cost, early prime-time drama with cheaper reality TV and game shows. Overall, the number of network journalists has fallen by over one-third since 1985 in the US, while international news bureaus have been slashed. This trend is especially acute in Canada, where the number of international bureaus operated by Canwest has fallen from nine in the late-1990s to two. The scope of such changes differs between firms, but the trend is clear: integrated news operations that serve multiple channels, budget cuts, fewer journalists, less foreign bureaus, and high-cost drama series replaced by low-budget programs.
These trends are bound by audience tastes and the complexity of the media business, but several points remain to be made in any final assessment of the consolidation of media markets. First, audiences now have more channels than ever, but source diversity is shrinking. Second, consolidation has created deep rifts within the media. Media workers report that bottom-line pressures now have a greater impact on their work than in the past, that the influence of owners, managers, and advertisers is increasing and that their trust in executives is falling (Project for Excellence in Journalism 2006). Lastly, the push by conglomerates to expand the scope and duration of copyright laws, aggressive litigation, and use of digital rights management technologies is subtly biasing the architecture of the media in favor of control and closure versus the values of openness and real diversity that are the sine qua non of democratic societies.
- Albarran, A. (2003). US media concentration. In A. Arrese (ed.), Empresa informativa y mercados de la communicacion. Pamplona, Spain: EUNSA, pp. 63 –74.
- Bagdikian, B. (2004). The (new) media monopoly, 6th edn. Boston, MA: Beacon Press.
- Canada (2004). Interim report on the Canadian news media. At www.parl.gc.ca/37/3/parlbus/commbus/senate/com-e/tran-e/rep-e/01apr04-e.pdf, accessed August 22, 2007.
- Compaine, B. (2001). The myths of encroaching global media ownership. At www.opendemocracy.net/media-globalmediaownership/article_87.jsp, accessed August 22, 2007.
- Demers, D., & Merskin, D. (2000). Corporate news structure and the managerial revolution. Journal of Media Economics, 13(2), 103 –121.
- McChesney, R. (2000). Rich media, poor democracy. Urbana: University of Illinois Press.
- Picard, R. G. (2002). The economics and financing of media companies. New York: Fordham University.
- Project for Excellence in Journalism (2006). The state of the news media. At www.stateofthenewsmedia.org/2006/, accessed August 22, 2007.