Dines02.qxd 7/26/02 2:33 PM Page 21 2 THE NEW MEDIA GIANTS Changing Industry Structure ◆ David Croteau and William Hoynes n September of 1999, Viacom announced its merger with CBS.1 IThe huge deal combined CBS’s television network, its 15 TV stations, more than 160 radio stations, and several Internet sites with Viacom’s well- known cable channels (e.g., MTV, Nickelodeon, Showtime, TNN), 19 television stations, movie and television production (Paramount Pictures, UPN), publishing (Simon & Schuster), theme parks, and more. The $38 billion merger was bigger than any previous deal between two media com- panies. In fact, it was almost double the size of the previous record. The 1995 record-setting deal in which Disney acquired Capital Cities/ABC had been worth $19 billion [$21.2 billion]. While the size of the Viacom/CBS deal was unprecedented, the basic dynamic underlying the merger was not. Since the mid-1980s, major media companies had been engaged in a feeding frenzy, swallowing up other media firms to form ever-larger conglomerates. Including the Viacom/CBS merger, the 1990s alone saw well over $300 billion in major media deals. So rather than being unique, the Viacom/CBS announcement was just NOTE: From The Business of Media: Corporate Media and the Public Interest (pp. 71-107), by David Croteau and William Hoynes, 2001, Thousand Oaks, CA: Pine Forge. Copyright 2001. Reprinted by permission of Sage Publications, Inc. ◆ 21 Dines02.qxd 7/26/02 2:33 PM Page 22 22 ◆ A Cultural Studies Approach another example—and certainly not the facilitated by an increasingly lax regulatory last—of the mergers that transformed the environment, major media companies have industry toward the end of the 20th century. been buying and merging with other com- These deals not only changed the media panies to create ever-larger media conglom- industry playing field but also sometimes erates, all of which are now global in their made it difficult to figure out who, exactly, activities. A decade and a half of such merg- were the players. While media mergers and ers have rapidly transformed the organiza- acquisitions had been mostly between tional structure and ownership pattern of media companies, there were also non- the media industry. In the process, the media companies who ventured into the dilemmas associated with the market and lucrative media market. In 1985, manu- public sphere models of media have been facturing giant General Electric bought dramatically highlighted. RCA—owners of the NBC broadcast net- From a market perspective, industry work. Westinghouse—producer of every- changes such as the Viacom/CBS deal can thing from household appliances to be understood as the rational actions of components for nuclear reactors—bought media corporations attempting to maxi- CBS in 1995. Three years later, the com- mize sales, create efficiencies in production, bined company dropped the Westinghouse and position themselves strategically to face name in favor of CBS Corporation and then potential competitors. Despite the growth proceeded to sell off the manufacturing in media conglomerates, many observers parts of the conglomerate—in essence split- believe the profusion of media outlets made ting back into two companies. Seagram’s, possible by recent technological develop- best known for its alcoholic drinks and ments—especially cable and the Internet— Tropicana orange juice, became a major makes the threat of monopolistic media company, buying MCA in 1995 misbehavior by these media giants highly (now Universal Studios), Polygram records unlikely. How can we talk about monopo- in 1998, and others. Microsoft, the soft- lies, they ask, when we have moved from a ware behemoth, also began investing in tra- system of three television networks to one ditional media companies such as the cable that will soon boast 500+ channels? How company Comcast, as well as Internet sites, can a handful of companies monopolize the and entering into a vast number of other decentralized Internet? The media industry media deals. Most important, traditional as a whole has grown, they also note, and telecommunications firms also became cen- the larger media companies simply reflect tral media players. In fact, at the time of the the expansion of this field. Viacom/CBS merger, the only media deals But the public sphere perspective directs that had been larger were the ones in which us to a different set of concerns. Growth in phone company giant AT&T acquired two the number of media outlets, for example, cable companies, TCI (for $48 billion in does not necessarily ensure content that 1998) and MediaOne (for $54 billion in serves the public interest. Centralized cor- 1999); a sign of the coming integration of porate ownership of vast media holdings telephony, cable television, and Internet raises the possibility of stifling diverse access. expression and raises important questions about the powerful role of media in a democratic society. Even with new media ◆ Making Sense of Mergers outlets, it is still a handful of media giants who dominate what we see, hear, and read. The expansion of new media technologies At various points in history antimonopoly has only strengthened, not undermined, concerns have resulted in the dismantling of the power and influence of new media media conglomerates. In more recent years, conglomerates. Dines02.qxd 7/26/02 2:33 PM Page 23 The New Media Giants ◆ 23 ◆ Structural Trends in the adjusted for inflation, 1999’s $38 billion Viacom-CBS deal was more than 65 times Media Industry as big. This enormous growth in conglomera- tion was largely fueled by a belief in the var- The basic structural trends in the media ious benefits to be had from being big. industry have been characterized in recent Larger size meant more available capital to years by four broad developments. finance increasingly expensive media pro- jects and size was also associated with effi- 1. Growth. Mergers and buyouts have ciencies of scale. But most important, made media corporations bigger than integrated media conglomerates can exploit ever. the “synergy” created by having many out- 2. Integration. The new media giants lets in multiple media. Synergy refers to the have integrated either horizontally by dynamic where components of a company moving into multiple forms of media work together to produce benefits that such as film, publishing, radio, and so would be impossible for a single, separately on, or vertically by owning different operated unit of the company. In the cor- stages of production and distribution, porate dreams of media giants, synergy or both. occurs when, for example, a magazine writes about an author, whose book is con- 3. Globalization. To varying degrees, the verted into a movie (whose CD soundtrack major media conglomerates have is played on radio stations), which becomes become global entities, marketing their the basis of a television series, which has its wares worldwide. own Web site and computer games. 4. Concentration of ownership. As major Packaging a single idea across all these var- players acquire more media holdings, ious media allows corporations to generate the ownership of mainstream media multiple revenue streams from a single con- has become increasingly concentrated. cept. To do this, however, media companies had to expand to unprecedented size. Some of these phenomena are overlap- Ironically, as the scale of corporate ping or interrelated developments. growth increased, concern with regulating However, to describe the specifics of these potential media monopolies virtually dis- developments, we examine each separately. appeared from mainstream political dis- course. As a result, the big media players have—with sometimes stunning GROWTH frequency—been merging with or buying out other big media players. (See Exhibit The last decades of the 20th century will 2.1.) To better understand these mergers be remembered as ones of expansive media and acquisitions, it is informative to take a growth. Not only was the number of media closer look at one example, the Viacom/ outlets available to the public via cable, CBS deal mentioned earlier. satellite, and the Internet greater than ever, The Viacom/CBS Merger but the media companies themselves were growing at an unprecedented pace. In 1983, CBS was created in 1928 and has long the largest media merger to date had been been a major broadcaster with a strong when the Gannett newspaper chain bought radio and television presence. Through Combined Communications corporation— much of its history, it was popularly associ- owner of billboards, newspapers, and ated with its news programming, especially broadcast stations—for $340 million [$581 with Edward R. Murrow and Walter million]. Even when the value of that deal is Cronkite, who were among the preeminent (Text continues on page 28) Dines02.qxd 7/26/02 2:33 PM Page 24 24 ◆ A Cultural Studies Approach Exhibit 2.1 Select Media Mergers and Acquisitions of $1 Billion (current) or More (1984-2000) Value (in billions $) Constant 2000 Year The Deal Current Dollars Dollars 1985 Rupert Murdoch’s News Corp. $1.6 $2.5 (newspapers, television in Australia, Britain, U.S.) buys Metromedia (six television stations) as the launching pad for his new Fox network Turner Broadcasting buys 1.5 2.4 MGM/United Artists (keeping MGM’s library of 3,000 films but selling off the rest for $.8 billion) General Electric buys RCA (owners 6.4 10.1 of NBC network) Capital Cities (backed by investor 3.5 5.5 Warren Buffett) buys the much larger ABC television network 1986 National Amusements