Lecture 7: Concentration of Media Ownership

Thus far, I have dichotomized news organizations (and journalist) from the rest of the media industry. The picture which I have painted is, as if, news organizations are purely interested in reporting issues that is of public concern (theoretically) to ensure that citizens in a democracy would take note and act to ensure the health of democracy.

Such a dichotomy between news organizations and the rest of the media industry is false. News organizations are essentially part of the media industry. It could not escape the general trends that affect the media industry as a whole. As a matter of fact, such trends have an impact in the way news are reported and published.

Of particular importance to us in today’s and the coming few lectures is the issue of media ownership. Given the pervasiveness of the media in our daily life, these lectures will attempt to answer the question of ‘Who controls what we watch, read and listen to?’ This question focus on the issue of media ownership. Who owns the media has an important bearing on what gets to be published or broadcast in news.

However, in today’s lecture, I will be directing our attention to the worrying trend of concentration of media ownership in the hands of a few. Today’s lecture will give us a broad context in the next few lectures.

What do We Mean by Concentration of Media Ownership

Media concentration is a commonly used term among media critics, policy makers, and others to characterize the ownership structure of the media industry. When we talk of media concentration we are referring to the presence of media conglomerates in the media industry. We understand media conglomerate as a company that owns many different types of media businesses.

Two Examples of Media Conglomerates

AOL-Time Warner Time-Warner was founded in a merger between Time Inc. and Warner Communications in 1990 before being subsequently purchased by AOL in This media conglomerate is involved in a variety of media enterprises such as:

Books Time Life Books; Book of the Month Club; Warner Books; Little, Brown and Company; Little, Brown and Company (U.K.); and 19 other book brands such as History Book Club Cable/DBS HBO USA; HBO Home Video; HBO Pictures/Showcase; HBO Independent Productions HBO Downtown Productions; HBO NYC Productions; HBO Animation; HBO Sports; Cinemax; Time Warner Sports; HBO International; HBO Asia; HBO en Espanol; HBO Olé (with Sony); HBO Poland (with Sony); HBO Brasil (with Sony); HBO Hungary; Cinemax Selecciones.

Other Operations HBO Direct (DBS); Comedy Central (50 percent owned with Viacom); CNN Time Warner Cable (13 million customers in USA); Road Runner (high-speed cable modem to the Internet); and 16 others, including New York City Cable Group with over one million subscribers. Magazines Time; Fortune; Life; Sports Illustrated; People; Entertainment Weekly; and 26 other magazines, including DC Comics and Mad Magazine. Movies and TV (Production and Distribution) Warner Bros.; Warner Bros Studios; Warner Bros. (production); The WB Television Network; Hanna- Barbera Cartoons; Warner Home Video; and nine other national and international operations, including Warner Bros. International Theaters (owns/operates multiplex cinemas in 12 countries).

Online Services America Online (over 22.2 million subscribers); AOL International (4.4 million subscribers in 14 countries, services in seven languages); AOL.com portal; CompuServe Interactive Services; AOL Instant Messenger; AOL Europe; AOL MovieFone; Netscape Communications; Road Runner; Music Warner Music Group: Recording labels include Atlantic Group; Atlantic Jazz; Elektra; Warner Bros. Records; Reprise; Warner/Chappell Music (publishing company); and 47 other labels, including Warner Music International. Film Production New Line Cinema; Fine Line Features; Turner Original Productions.

Retail/Theme Parks/Merchandise Warner Bros. Studio Stores (stores in over 30 countries); Warner Bros. Recreational Enterprises (owns and operates theme parks); Warner Bros. Consumer Products. Sports Atlanta Braves; Atlanta Hawks; Atlanta Thrashers; Turner Sports. Turner Entertainment (cable, sports franchises) Entertainment Stations: TBS Superstation; Cartoon Network; Turner Classic Movies; Cartoon Network in Europe; Cartoon Network in Latin America; TNT; and Cartoon network in Asia/Pacific. Other operations Turner Learning; CNN Newsroom (daily news program for classrooms).

Employing an estimated 84,900 employees, AOL Timer-Warner earned USD 43.7 billion in As can be observed, this media conglomerate owned different media businesses which operates worldwide.

Sony Corporation Japan-based Sony Corporation started in 1946 as Tokyo Telecommunications Engineering, with three employees. Now, it boasts more than 180,000 employees worldwide and over $58 billion in sales for 2001.

Sony started as a conglomerate that deals with consumer audio-video products before moving into the media business in the late 1980s. Today its Sony Pictures Entertainment is one of the seven major movie houses in Hollywood, while Sony Music is one of the top five distributors of albums worldwide. Heading into 2003, Sony's strategy is a gamble: connecting each of its consumer products to the Internet and then using them as a platform to deliver content from its entertainment divisions.

Film Sony Pictures Entertainment Columbia TriStar Sony Pictures Classics Screen Gems Television Sony Pictures Television AXN Animax Japan SoapCity GAME SHOW NETWORK (50% with Liberty Media) Movielink (jointly owned with Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. Studios) Music Sony BMG Music Entertainment (50% with Bertelsmann) Labels include: Arista Records, BMG Classics, BMG Heritage, BMG International Companies, Columbia Records, Epic Records, J Records, Jive Records, LaFace Records, Legacy Recordings, RCA Records,

RCA Victor Group, RLG - Nashville, Sony Classical, Sony Music International, Sony Music Nashville, Sony Wonder, So So Def Records, Verity Records Sony/ATV Music Publishing (joint venture with Michael Jackson) Music Choice (venture with Time Warner, EMI, Motorola, Microsoft, and several cable companies: Cox, Comcast, Adelphia, Time Warner Cable) Other Sony Electronics Sony Computer Entertainment America PlayStation 989 Sports Sony Connect Inc. Metreon (last updated 9/28/2004)

The Rise of the Media Conglomerates

The rise of media conglomerates can be traced back to the 1980s & 1990s which saw a lot of mergers and buyouts of media and entertainment companies. Bagdikian, a media scholar who studied this phenomenon noted that the last twenty years witnessed a trend where the ownership of the media industry was increasingly concentrated in the hands of a few companies. For example, in 1983

fifty corporations dominated most of every mass medium and the biggest media merger in history was a $340 million deal.... [I]n 1987, the fifty companies had shrunk to twenty-nine.... [I]n 1990, the twenty-nine had shrunk to twenty three.... [I]n 1997, the biggest firms numbered ten and involved the $19 billion Disney-ABC deal, at the time the biggest media merger ever.... [In 2000] AOL Time Warner's $350 billion merged corporation [was] more than 1,000 times larger [than the biggest deal of 1983].

And when the dust settle, there emerge a global media system that is dominated by a group of media conglomerates. They are AOL Time Warner, Disney, General Electric, News Corporation, Viacom, Vivendi, Sony, Bertelsmann, AT&T and Liberty Media (as of 2002) which forms what media scholar McChesney calls, as the first-tier media

conglomerates which is followed by a second-tier made up of 50 or so companies doing media-related business at either national or regional level. All of these conglomerates each do more than one billion dollars worth of business. This trend is not restricted to the US but is a worldwide phenomenon.

Vertical Integration as Basic Characteristics of Media Conglomerates

The Profit Motive Essentially, all activities of the media industry centered around the creation and packaging of intellectual property with the aim of maximizing revenues by selling it as many times as is feasible to the widest audience. Given its aim of revenue maximization, the media industry have focused on the vertical integration business strategy.

What is Vertical Integration This term describes a style of ownership and control where a group of companies are united through a hierarchy and share a common owner where each member of the hierarchy produces a different product or service, and the products combine to satisfy a common need.

The idea behind vertical integration is that all activities of an industry are ordered in a sequence which starts ‘upstream’ at the early stages in the production process, works its way through succeeding or ‘downstream’ stages where the product is processed and refined, and finishes up as it is supplied or sold to the customer. Also known as vertical supply chain.

The Media Supply Chain

Production: creating media content Packaging: content is collected together & assembled as media product Distribution: delivering Product to customers

By controlling the media vertical supply chain, a conglomerate can generate enormous profit out of its media products. Therefore, if a media conglomerate has a successful movie, it could promote the file through its broadcast properties, and then use the film to spin off TV programs, musical CDs, books, merchandise, etc.

As Viacom’s CEO Redstone put it: “When you make a movie for an average cost of $10 million and then cross promote and sell it off of magazines, books, products, television shows out of your own company, the profit potential is enormous.” For example, Disney’s 1994 animated film The Lion King generated over USD 1 billion in profit. It also led to a lucrative Broadway show, a TV series and all sorts

of media spin-offs. It also led to 186 items of merchandising. The common parlance for such practice is ‘synergy’ which attempts to boost sales by promoting products across media where for every ‘hit’ movie (or any other media product) there is a TV series, soundtracks, books, plastic mugs, etc. In another example of ‘synergy,’ Disney takes its lucrative ESPN cable channel and use the name to generate other

products, including ESPN radio network. In 1996, Disney launched ESPN Magazine to compete directly with AOL-Timer Warner’s Sports Illustrated. Using incessant promotion on ESPN, the magazine exceeded initial estimates with a circulation approaching 500,000 after a few months. This resulted in the launch of ESPN Grill restaurants to appeal to those who wish to combine sports with dining out.

What we are witnessing today is that media conglomerates are no longer producing media products as creating brands that are durable and profitable which is promoted through its media channels. Branding has become the primary means of attracting and keeping audiences while offering new commercial possibilities.

As have been suggested earlier, branding enables media conglomerates to enter the world of selling retail products based on their ‘branded’ media products which have been pursued aggressively. Fore example, in 197 Disney sold USD 25 billion worth of Disney’s merchandise, (more than twice the global sales of Toys ‘R’ Us) with 660 retail stores selling its products while its licensing revenue was USD 10 billion in the same year.

The moral of the story is size matters! If a media company controls a vertical supply chain, it can use the full resource of its organizations to squeeze the last ounce of profitability out of its media products.

Conclusion: Why Should I be Concerned?

Historically speaking, the origins of what we term as the media has its roots in newspapers that proliferated in the 19 th century. The function of newspapers was to inform and educate its readers on the issues of the day as well as disseminating ideas. However, the 20 th century have witnessed the gradual evolution of the media that moves away from news to entertainment.

And the trend in media ownership in the past twenty is simply accelerating the media’s move towards entertainment. With the emphasis towards profitability, rather than social responsibility, media content have increasingly been watered (some would say dumbed) down in an effort to entertain us rather than inform and educate us (or what Neil Postman calls as “Amusing Ourselves to Death.”

And given the pervasiveness of the media in our lives, its influence is undeniable. We are what we read, see and hear through the media. And the message of the media is simply this ‘Resistance is futile. Become part of the mindless audience hive that consumes what we offer.’

Tutorial Question For the next 3 days, you will keep a log of the media that you spend time with together with a brief note of the content of such media.