Just as there are numerous kinds of media – from electronic to print, local to worldwide – so too are there many different forms of media corporations. There are corporations that are vast multinational conglomerates operating in unrelated industries and spanning the globe, and those that focus on a single medium in a solitary market. There are those that are closed or private corporations, owned and controlled within a limited group without shares for sale, and those that are public corporations, with stock traded on the open market. And there are public corporations with dispersed ownership spread across millions of shareholders, and those with a single individual or group with sufficient ownership to exercise control over the business. While there are countless differences between corporations, there are also important characteristics they have in common.
Investors and entrepreneurs often form joint stock companies and incorporate them to function as a business, but corporations can also be formed for political, religious, or charitable purposes and can be for-profit or not-for-profit organizations. The modern business corporation emerged in the United States in the 1800s, when most states passed general incorporation acts that granted perpetual life and extended to shareholders limited liability, two defining characteristics of corporations. The late 1800s featured the rise of the large, multi-unit business enterprise, and the acceptance of this structure was evident in 1914 when US president Woodrow Wilson declared that “the antagonism between business and government is over.” Wilson embraced the foundations of what became known as corporate liberalism, which accepted the large business corporation as permanent and desirable. The significance of this period is clear, since it was on Wilson’s watch that the US government orchestrated the pooling of broadcast radio patents and the creation of the Radio Corporation of America (RCA).
Economic Dominance Of Corporations
Large corporations are now the fundamental organizing unit of the capitalist economy, although not the most common business enterprise. In 2002, a total of 26.4 million businesses reported to the US Internal Revenue Service, and 21 million or 80.1 percent of those were nonfarm sole proprietorships or partnerships, compared to just 5 million corporations (US Census Bureau 2006). In spite of this imbalance, corporations still generated the bulk of business receipts, accounting for 83.6 percent of $22.6 trillion in total revenue in the United States in 2002. Graham Murdock (1982) documented how the merger movement that accelerated after the mid-1950s resulted in media firms becoming a part of larger corporations, and this is evident in the US sample. Corporations were even more prominent in the “Information” group within the industrial classification system used by the US Census Bureau, which includes the most prominent media sectors. In that group, corporations accounted for 32.3 percent of total firms and 86.9 percent of total revenue.
The forms of corporate ownership in the US provide a framework for discussion, with basic elements evident in other settings. In the US, a corporation is a legal distinction that establishes rights and obligations of individual persons that are separate from those of its shareholders. This is an important difference from other business structures. In a sole proprietorship or partnership, an individual or group of individuals contributes the working capital for business, and risks not just their investment but also their personal assets. In such a legal structure, investors are liable to third parties that are injured by the proprietorship or partnership, so their liabilities are unlimited. That is not the case with corporations. Unless there is fraud or malfeasance, investors in a corporation are exposed to limited legal responsibilities and are shielded from the indebtedness and other liabilities of the corporation. A corporation assumes other aspects of personhood, including the ability to own property, sign contracts, and pay taxes. In 1978, the US Supreme Court even extended First Amendment rights to freedom of speech to corporations.
An ownership structure that sits between limited partnerships and corporations is a limited liability company (LLC). This business configuration is evident in some of the independent production and distributions companies in the US motion picture business, including the Weinstein Company after Harvey and Bob Weinstein split from Miramax, and DreamWorks SKG and Newmarket Films before they became part of Viacom and Time Warner Inc., respectively. One of the advantages of this ownership structure is that an LLC exists as a separate legal entity, which gives its owners the same liability protection from business debts and claims as with a corporation. There are, however, clear differences between an LLC and a corporation. Flexible profit distribution and flow-through taxation for LLCs mean that profits, losses, and expenses flow through the company to the individual members.
Public Versus Private Ownership
A second distinction can be made between public and private corporations. A public corporation is one that issues securities, such as common stock, that represent equity in the company. These securities are then traded on the open market. This process enables public corporations to generate capital for investment in new endeavors or continuing operations. The sale of shares can occur in multiple markets. Firms incorporated outside the US can create American Depository Shares that represent securities in their domestic market. Sony Corporation, for example, is incorporated in Japan and shares are sold on the Nikkei stock exchange, but it is also traded on the New York Stock Exchange (NYSE). The same is true of Spanish-language television giant Grupo Televisa, which is traded on the Mexican stock exchange and the NYSE. A privately held corporation can also issue shares that represent a percentage of ownership, but these are not traded on the open market.
Most large media companies are public corporations, but there are exceptions, such as the empires of the Cox family in the US and the Marinho family in Brazil. Cox Enterprises is prominent in three different media sectors in the US, with ownership of 17 daily newspapers, and 15 local television stations and cable systems that reached over 6 million basic subscribers in 2005. James M. Cox acquired his first newspaper in Dayton, Ohio, in 1898, but expanded in the 1930s with horizontal integration in the newspaper business through the purchase of the Atlanta Journal and diversification into broadcast radio with the launch of WHIO in Ohio. A century later, the Cox assets remained within the family, with Barbara Cox Anthony and Anne Cox Chambers in control of the corporation.
The roots of the Marinho empire are in newspapers, as well. O Globo was first published in Rio de Janeiro in 1926, and that fueled diversification into radio in the 1940s and television in the 1960s. The latter was the venture that defined the Marinhos, as TV Globo became a dominant force in Brazil. When Roberto Marinho died in 2003 at the age of 98, control of the corporation passed on to his three sons. Organizacoes Globo controlled Brazil’s largest broadcast television network, the third-largest newspaper, and a collection of businesses that included cable and pay-TV services, radio networks, record labels, and the Editora Globo publishing house.
The largest privately held media corporation in the world is Bertelsmann AG. Carl Bertelsmann founded the corporation in 1835 with a focus on publishing hymnals and religious materials, but Reinhard Mohn, a fifthgeneration descendent, transformed it into a diversified media conglomerate. In the mid-2000s, Bertelsmann owned Random House, the most prominent trade group publisher, 50 percent of Sony BMG Music Entertainment, and controlling interests in magazine publisher Gruner + Jahr and European television broadcaster RTL Group, as well as other companies. After a stock buy-back in 2006, the Bertelsmann foundation controlled 76.9 percent of the corporation, with the Mohn family owning the rest.
Public Corporations In The Media Business
There are various incentives for private corporations to make public stock offerings. The founders of a corporation will often go public to generate cash that can then be used for other purposes. Another reason for a public offering is the desire to generate working capital that can be used for new investments or continuing operations. Such an offering comes with a price, however. For instance, public corporations trading in the US must comply with Securities and Exchange Commission (SEC) laws and policies. These rules include the disclosure of persons or groups that have beneficial ownership of more than five percent of the voting shares of any class of stock. The SEC also mandates that corporations disclose extensive financial information and liabilities. The Sarbanes-Oxley Act of 2002 added teeth to such requirements, since it mandated that corporate executives personally certify that filings are accurate and complete.
The evolution of Cox Enterprises reveals the different sides of the public/private equation. In the 1960s, James M. Cox, Jr established a publicly traded corporation, Cox Broadcasting, which included the firm’s broadcast and cable assets, while organizing its newspaper interests in a private corporation, Cox Enterprises. The development of cable television systems is resource intensive, and the public offering was one route to raise needed capital. In 1985, the Cox family took the broadcast and cable business private and merged it with Cox Enterprises. That structure lasted for a little more than a decade, when Cox Cable merged with the cable systems of Times Mirror in 1995 to create Cox Communications, Inc., a publicly traded company. In 2004, the Cox family completed a cash tender offer and once again took its cable business private.
The public corporation is much more common in the media industries, but there is no single model. Some are diversified conglomerates with vast holdings in unrelated industries. In the case of General Electric, NBC Universal was one of six operating segments in 2005, with the Infrastructure and Industrial units combining for close to 50 percent of total revenue compared to just under 10 percent for its media division. Some are diversified conglomerates with holdings in media-related industries. The Time Warner portfolio, at that time, included Internet services and cable systems, filmed entertainment, broadcast and cable networks, and publishing. Other media corporations focus on a pair of related news and information industries, with the newspaper and television holdings of Gannett Co. Inc. and Tribune Co. prime examples. There are still others that focus more or less on a single industry – newspapers and broadcast radio, respectively, in the cases of the McClatchy Co. and Cumulus Media.
Goals And Control In Different Forms Of Ownership
The organization of media companies as public corporations can be seen as quite problematic, since placating Wall Street and investors mandates a focus on the bottom line. For instance, when General Electric acquired NBC in 1986, chairman Jack Welch bristled at claims that broadcast television networks were a public trust, believing that the same public trust applied to making an air conditioner as running a broadcast network (Auletta 1992, 19). For Welch, the main obligation was not to the public who owned the airwaves, but to the shareholders who owned General Electric stock. General Electric’s conglomerate form also intensifies concerns since it is involved in what Murdock (1982) has called “socially and politically contentious areas” such as nuclear power and military aviation engines. The impact of corporate ownership on media content has been the focal point of extensive research in the communications field (Murdock 1982; Herman & Chomsky 1988; Wasko 1994; Barnouw 1997; McChesney 1997; Hesmondhalgh 2002; Bagdikian 2004; Croteau & Hoynes 2005).
Concentrated Versus Dispersed Ownership
Public corporations, large and small, must adhere to the same rules and regulations, but there are significant differences in the nature of corporate ownership. The most obvious distinction is between firms with concentrated ownership and those with dispersed ownership. This is an important difference according to the arguments made in regard to the separation of ownership and control in modern corporations. According to one perspective, this separation has severed the ties between the elite families and the means of production and distribution, and has transferred control to a managerial class that represents the capitalist class, but has different interests.
The significance attached to this supposed separation is profound. In 1933, Adolph Berle and Gardiner Means argued in The modern corporation and private property that the dissolution of the “old atom of ownership” into two parts, control and beneficial ownership, destroyed the “very foundation” upon which the economic order had rested for three centuries (Berle & Means 1933, 8). The central tenet of an economic order based on private enterprise was that the self-interest of the property owners was tantamount. The ownership interests of those who control modern corporations in the twentieth century was so minimal, it was argued, that the “return from running the corporation profitably accrue to them in only a very minor degree” (Berle & Means 1933, 8 – 9).
Such a shift in motivation would be a profound change for communication corporations, given the role assigned to the media in democratic theories of the press and the potential for media outlets to educate. Berle and Means argued that the rise of groups in control of corporations that were independent of owners placed the “community in a position to demand that the modern corporation serve not alone the owners,” but the society as a whole (Berle & Means 1933, 355 –356). They argued that,
Neither the claims of ownership nor those of control can stand against the paramount interests of the community . . . It is conceivable – indeed it seems almost essential if the corporate system is to survive – that the control of the great corporations should develop into a purely neutral technocracy, balancing a variety of claims by various groups in the community and assigning to each a portion of the income stream on the basis of public policy rather than private cupidity.
There are prominent media corporations where stock ownership is dispersed and the separation that Berle and Means envisioned is evident. In the first quarter of 2006, the members of the board of directors and executives of Gannett Co., Inc., the largest newspaper publisher in the US, owned just 2.2 percent of the common stock. The stock ownership of the directors and executives in the Walt Disney Co. was even less, as the same groups controlled less that 1 percent of the common stock. Other large media corporations represented very different ownership structures. The separation of Viacom in 2006 split its various media assets into two corporations, Viacom Inc. and CBS Corporation, but Sumner Redstone retained power over both with beneficial ownership of over 70 percent of the common stock of each through National Amusements, the private corporation that his family controls.
Allocative Versus Operational Control
There is another level of control that defines corporations, and that is the difference between allocative and operational control. The separation that Berle and Mean advanced and which Daniel Bell (1960) supported, arguing that there was no longer a power holding elite with both an “established community of interest and a continuity of interest,” requires such a partition. Allocative control resides in the board of directors of a corporation and consists of the power to define the overall goals of the firm and decide how resources are distributed. Operational control is wielded within the parameters set at the allocative level. Once such decisions are made, managers determine the most effective use of the resources that the board has allocated and the implementation of policies it has established.
There are media corporations where there is a clear line between allocation and operational control, and some where such a detachment does not exist. General Electric, the parent corporation of NBC Universal, shows the clearest separation. In the first quarter of 2006, there were 15 members of the board of directors, and just 3 of those were executives within the corporation. The outside directors were strategic choices, including the chief executive officers of two prominent advertising agencies, current or former chairpersons of six Fortune 500 companies, and the former chair of the Armed Services Committee in the US Senate. In another case, the makeup of the board of News Corporation, the parent of Twentieth Century Fox and Fox Television Network, was quite different. The 14 members of the board included 2 members of the Murdoch family, Rupert and his son Lachlan, and 3 senior executives from within News Corporation or one of its subsidiaries. There were three additional board members who were long-time lieutenants to the elder Murdoch, so he had close ties to 8 of 14 board members. The Murdoch family, moreover, controlled around 30 percent of the News Corporation stock.
Process Of Consolidation
While there are various forms of media corporations, more and more prominent media properties are contained within ever fewer conglomerations. In the first edition of The media monopoly, published in 1983, Ben Bagdikian concluded that ownership of most of the major media in the United States was consolidated in 50 national and multinational corporations. Two decades later, when The new media monopoly was published, that number had dwindled to just five (Bagdikian 2004).
The extent of corporate ownership is evident at each turn. In the mid-1980s, federal regulations in the United States limited a single individual or corporation to the ownership of just seven local television stations and seven AM and seven FM radio stations nationwide. In 2006, Clear Channel Communication owned 1,182 local radio stations, including 8 in 12 different markets, while CBS Corporation owned 39 local television stations, with multiple stations in 10 markets. More generally, although there are cases in which media content is produced by sole proprietorships and partnerships or corporations of modest size, the large corporation is the dominant form of business organization in the mass media.
- Auletta, K. (1992). Three blind mice. New York: Vintage.
- Bagdikian, B. (1983). The media monopoly. Boston, MA: Beacon Press.
- Bagdikian, B. (2004). The new media monopoly. Boston, MA: Beacon Press.
- Barnouw, E. (ed.) (1997). Conglomerates and the media. New York: New Press.
- Bell, D. (1960). The end of ideology. Glencoe, IL: Free Press.
- Berle, A. A., Jr, & Means, G. C. (1933). The modern corporation and private property. New York: Macmillan.
- Croteau, D. R., & Hoynes, W. (2005). The business of media: Corporate media and the public interest. Thousand Oaks, CA: Pine Forge.
- Herman, E., & Chomsky, N. (1988). Manufacturing consent: The political economy of the mass media. New York: Pantheon.
- Hesmondhalgh, D. (2002). The cultural industries. London: Sage.
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- McChesney, R. W. (2004). The problem of the media: US communication politics in the twenty-first century. New York: Monthly Review Press.
- Murdock, G. (1982). Large corporations and the control of the communications industries. In M. Gurevitch, T. Bennett, J. Curran, & J. Woollacott (eds.), Culture, society and the media. London: Methuen.
- US Census Bureau (2006). Statistical Abstract of the United States. At http://www.census.gov/compendia/statab/2006/2006edition.html, accessed September 20, 2007.
- Wasko, J. (1994). Hollywood in the information age. Austin, TX: University of Texas Press.