Whose Voices?: The elite versus the public in the game of merger mania
(I wrote this back in 1999, as part of my consternation about the rise of media mergers after the 1996 Telecommunications Act. Unfortunately, such consternation has not abated: in fact, they might have gotten worse with the rise of predominance of the Internet.)
Forget Pokémon. Merger mania is the real game sweeping the nation. In fact, if it wasn’t for merger mania, Pokémon wouldn’t be the selling force it is. Time/Warner Inc. was able to take a simple Japanese game and market it to exhaustion. How did they do this? Because they are a synergistic media conglomerate and one of the first players in merger mania. These days, mergers in various industries are an almost everyday occurrence in an atmosphere of convergence and deregulation. However, the mergers in the telecommunications and media industries receive the most attention, which is typically focused on how the mergers will impact two issues: competition and diversity. Will there be enough competition to benefit the customers? How will centralized ownership affect democratic access? Competition is on track to remain because the number of corporations across medium and technology do not appear in danger; the voices of the elite will remain numerous. However, diversity will suffer as access to the mediums is closed to a variety of people who do not mirror the ideology of the controlling corporations. The voices of the public will be shouted down by those of the elite unless some outside force steps in.
To understand how the public is being silenced, the place to begin is with the factors which are shaping this playing field for merger mania. The factors, evoked by industry executives, analysts and critics, can be divided into five categories. Technological factors are prominent for companies as they look forward to the convergence possibilities offered by the onset of a pure digital platform and broadband capabilities. Economically, the corporations look for vertical integration to give their companies synergistic edges in order to compete. A political factor is the necessity for developing strong enough companies to counteract any foreign threat. The legal factor is the most conspicuous: deregulation of various limitations. The cultural factor, more subterranean and subtle than the other four but no less overarching, is the blurring of work and pleasure. Each factor in some way benefits the conglomerate, but they may not be the most beneficial for the consumer.
It would seem intuitive that on a cultural level the mergers are occurring because the public wants it as such. But the public is often told what it wants by the media and the controlling corporations. “‘Market dominant’ corporations in the mass media have dominant influence over the public’s news, information, public ideas, popular culture, and political attitudes.” (p 5, Bagdikian, 1992). Subtly, these dominant corporations create the cultural factors that they, in turn, can use as an explanation for the need to merge. One such induced factor is the blurring between mainstream and counter-culture work norms. Traditionally, mainstream would dictate the worker to follow the 9-to-5 rule of separating work and pleasure. A counter-culture norm requires work to be seen as fun and thus work spills over into traditional leisure hours while pleasure invades work time. In today’s business world, especially in the more high-technology industries, counter-culture is replacing mainstream. New technology needs to exist to ensure that these new working habits are effective, such as cellular phones, the Internet, video-conferencing, and so forth. So the telecommunication and media companies claim they have to merge in order to provide these technological and communication needs at the most cost-effective rate. And the public never stops to question this manipulation on the corporations’ part because of their belief in technological determinism, that technology is “the initiator of events…the driving force and agency of change.” (p 23, Sussman, 1997). Working with this ideology, the corporations are able to continue expanding for their own benefit.
The cultural factor can be applied to either industry, as can be the economical one. Still, it is in the media industries where synergy and its effects are the most destructive to the public voice. The basic idea behind synergy (Bagdikian, 1992) is that two separate entities come together to produce something greater than the sum of their two parts. People in the industry say synergy can increase their competitiveness by increasing their efficiency through economics of scale which will in turn lead to better media products for the consumer (Baker, 1993). This abstract concept is clarified by examining the recently proposed CBS/Viacom merger. CBS Corp., among its holdings, owns television and cable networks and television and radio stations; Viacom Inc. has the same, along with a Hollywood studio. In today’s media industry, having a studio in the conglomerate mix is the best way to maximize in-house profit through cross-promotions (Greenfeld, 1999). No longer is Hollywood about making films but “franchises” or blockbuster-scale hits which can be systematically reproduced in a range of media forms. The “Rugrats” Nickelodeon show can be turned into a movie released by Paramount, which in turn could soon be released for broadcast on CBS. This new type of movie is “a two hour promotion for a multimedia product line.” (p 74, Schatz, 1997). With such powerhouses as Disney, Fox and Warner Bros. creating fortunes with the model, Paramount couldn’t fall behind. Unfortunately, by doing everything in-house, they are shutting out potential voices and ideas that may not fit with the franchise frame of mind. With so many outlets all about Rugrats or Batman or Tarzan, diversity has definitely been reduced.
Owning a multitude of outlets, especially a movie studio with international prestige, allows conglomerates to compete globally, which is one of their worries and thus a factor. The conglomerates believe they need to become bigger to be able to compete in an increasingly global marketplace. Apparently, the government agrees. The industries asked the FCC and Congress for less restriction so that they could consolidate their forces under large masses (Schatz, 1997), like having scattered militias pull together to form an army. The government sees such deregulation as necessary in order to safeguard American companies from foreign infiltration and to become a prominent global force (Bagdikian, 1992; Price, 1996). Applied to the proposed MCI/Sprint merger, the idea is to create a company that by seizing more customers leaves less room for foreign companies to move in. At the same time, by consolidating their forces under “one roof,” it allows them to move into the world to find more customers. Some see this as a thinly disguised attempt to assert American political and cultural values over other cultures (Bagdikian, 1992). Nevertheless, the government supports this idea.
Through a laissez-faire attitude, the government has given the merger “go-ahead” to benefit both telecommunications and mass media. One act in particular is cited for the new game: the Telecommunications Act of 1996. In the telecommunication world, such mergers as the MCI/Sprint, were spurred on as federal legislators removed the limitations for long distance companies to serve local needs and vice versa. The idea was to allow the Baby Bells and the long distance companies to fight in each other’s domain (Sloan, 1999). Actually, the act opened up the floodgate for non-telephone companies to move in as well, capitalizing on new technology (Thurman & Grier, 1999). Thus, in order to ward off these new competitors and still complete against phone companies, Sprint and MCI/WorldCom decided they need to merge.
Similar effects occurred in the media industry in the name of synergy. The Act allowed for two changes. First, it allowed for the broadcast networks or their parent companies to own production companies again (Marks, 1999). Second, it allowed for companies to own two television stations in one market as long as the total number of stations owned does not reach more than thirty-five percent of American households (Greenfeld, 1999). These two changes allowed CBS and Viacom to merge to compete. “By buying CBS, Viacom gives itself a much stronger distribution network. CBS gets the strong production studio it still lacked.” (p 1, Marks, 1999). As with the telecommunication industry, the idea was to create competition among media providers. Curiously, both of these aspects of the act put together are probably going to cause the most competition among media providers, as can be seen in AT&T’s acquisition of TCI to provide cable, Internet and phone on the same line. Here is a crossing of traditional borders: television and telephone. If the game is now open for them to play in each others fields, then competition will increase, just as in any sporting situation.
AT&T is gambling on the hope that the new digital platform will come soon, which will leave them in first place for people to turn to for broadband capability services. This strategy exemplifies the convergence factor. Convergence here applies to the idea of taking two technologies and combining them to create a new one. The main technology driving this convergence is the Internet and the possibilities of networking. “What had been media is becoming applications, content, and appliances on a communications-transportation infrastructure–an infrastructure that may someday be as pervasive and essential to myriad of small acts of our daily lives as it will be invisible.” (p157, Aufderheide, 1997). As AT&T leads this drive down the “digital superhighway” (Sloan, 1999), the MCI/Sprint merger is an attempt to compete with them in offering broadband capabilities. Acquiring Sprint will give MCI/WorldCom access to the formers Integrated On-Demand Network and multichannel multipoint distribution service (Schober, 1999). Acquiring these services, the new company will have access to millions of customers, placing them on par with AT&T without having to construct a new network of wires (Sloan, 1999). However, these broadband services will offer more cost-efficiency to businesses than the normal family subscriber. “Heavy users will get breaks on rates, low users will get clobbered by increasingly high fixed rates.” (p49, Sloan, 1999). The elite are catered to while the public pay for their advantages, like the Morlocks.
All these factors discussed are evoked in the name of increasing competition, yet the mania created is raising fears that the end result will be like the trusts, robber barons and monopolies that existed at the turn of the twentieth century. However, by comparing the current situation with examples of communication monopolies that existed then, it does not appear that competition is in danger; rather, diversity is. Unlike during the times of “Ma Bell” and RCA, the public now has more choice as the number of communication and media outlets expand (Blanchard, 1998). But as these outlets fall under centralized control, quality and democratic access may not keep up.
Back at the turn of the century, there was AT&T for telephone services and RCA for radio services. AT&T’s monopolistic pricing made it hard for most Americans to even use the phone (Sussman, 1997). AT&T created its monopoly by buying out any competing patents, essentially keeping their enemies close at hand. With their monopoly, they were able to invest themselves where the profit was, in equipment manufacturing and not in wiring rural communities. RCA’s monopoly was created to protect against total government control over radio which was sought to control the chaos caused by the unregulated “radio boys.” Each corporation in RCA controlled a different aspect of the medium. Under “one roof,” RCA became a private “national” monopoly over the entire industry (p 87, Sussman, 1997). Even AT&T had a controlling aspect and eventually paved the way with their “toll booths” for the type of advertising and broadcasting common today; those with the money get their messages across.
Of course, both monopolies have since broken up: AT&T because of the government; RCA because of AT&T. And it does not seem possible for similar types of monopolies, which control all aspects of an industry, to exist now. At the time of AT&T’s dominance in telecommunications, there was no wireless PCS or Internet. At the time of RCA, there was no television, cable or DBS. These were monopolies set up in a time and atmosphere where they basically only had to worry about competition within their own medium. Today’s companies have to worry about competition from not only within their medium but from other mediums created by advancing technology. There are more communication outlets and many companies that deal in them. “The variety and number of outlets in many markets today, representing almost as many separate owners in each market, contrasts sharply with the fewer total number of outlets–virtually all newspapers–in any comparable group of cities in 1920.” (p272, Compaine, 1993). It would be nearly impossible for there to be only one company controlling all aspects of communication and entertainment needs.
Of course, in answer to this new situation, companies are merging not only within their medium but across others (Bagdikian, 1992). Such cross-ownership is now legal due to deregulation, creating a fear that all of America as soon working under one company (Miller, 1999). However, while the government may be advocating opening up free-market competition, they’re not just going to let go of the reins. The limit of reaching only thirty-five percent of the market ensures that, in television at least, one company won’t be the sole provider of entertainment. It also seems unlikely companies will be able to handle becoming as big as is required to control everything. The bigger they are, the harder the fall, after all. Even if they do become extraordinarily big, others have before and the government has broken them apart. Such was the fate of AT&T in 1984. Taking all of this into account, while competition may wobble, it won’t fall.
Diversity is another story. According to Bagdikian (1992), “…the experience has been that common control of different media makes those media more alike than ever.” (p7). Synergy has the ability to homogenize across media. If the idea behind a true synergy is to take one idea and use it as raw material for ideas in all kinds of divisions just to multiply in-house profit, then where is creativity or diversity (Baker, 1993)? Maybe if everyone likes Pokémon, having it as the only choice would not be so bad. But there are other things out there besides Pickachu and Ash. Due to synergy, this is hard to tell at times. “Consequently, the result of ‘synergism’ is a series of circuits more devoid of new ideas and talent than necessary. Independent and smaller voices will always exist and continue to be important, but the growing power of the major voices makes small voices even smaller.” (p 244, Bagdikian, 1992). Outside independents are heard less because it is hard for them to find an outlet to go through that is not controlled by some conglomerate, which would rather put its own products on (Greenfeld, 1999). Even if an independent becomes successful, they are usually “consumed” by a conglomerate, such as Miramax. Also shut out are minorities. Because of their proposed merger, UPN may have to leave Viacom and could disappear entirely. UPN is one of few networks on broadcast or cable to have shows for African-Americans, as the NAACP has pointed out (Anonymous, 1999). The Viacom/CBS merger could snuff out the access to television for voices other than mainstream middle-class whites.
While the government is concerned about keeping competition alive, they apparently could care less if diversity ends up in the ICU. When Newton Minow in the early 1960s tried to improve the quality of television, congressmen and industry spokesmen alike accused him of censorship; they finally agreed to requiring the sale of sets with both UHF and VHF channels as the “least of two evils.” (Folkerts & Teeter, Jr, 1994). The government agreed to the formation and sustainment of a public broadcast network but have in recent times decided its “liberal” content and have pulled back funding. Now PBS, set up to increase diversity in television, is required to go the more commercial route. And just as regular commercial networks, PBS is staring to move away from diversity because “expanding dependence on advertising (requires)…to avoid messages that might distress segments of the mass audience and the advertisers themselves…” (p104, Sussman, 1997). If the government is willing to step in and keep competition, then it should do the same for diversity.
In order to ensure that diversity survives the merger mania game, then the government needs to keep open channels for minorities and others to speak through. There need to be public spaces subsidized by the government that have no intent to maximize or even generate profit. When the postal service was created in the late 1700s, it was done with the intent of connecting the entire country, and not to make money (Aufderheide, 1997). There are indications that the government is willing to do this. In 1996, Congress upheld the 1992 Cable Act’s requirement for DBS companies to set-aside four to seven percent of their transmission space for nonprofit users. This goes along with similar requirements for networks to set-aside three to four hours a day for children’s educational programming. The government could be doing more, such as requiring telecommunication companies, before allowing them into the television competition, to provide access for independent, nonaffiliated programmers and program services (Price, 1996). The government can also more rigorously enforce the PICON standards as many media executives now define the public interest as what the public wants and not what is good for them. Just because the public wants something doesn’t make it good for them. “Children would probably watch public torture if it occurred on their way home from school, but that fact does not make public torture in the public interest.” (p207, Bagdikian, 1992). The government is doing something but more can be done. And in the case of democratic diversity, some government is definitely better than none at all.
Taking a look at merger mania as it sweeps the nation, one can find similarities to another game sweeping the nation: Pokémon. Both deal with the effects of synergy and how one idea can homogenize all the other ideas available for consumers to take away from their media outlets. Not only is Pokémon stressed on various Warner Brothers’ holdings, even the venerable CNN, but Pokemon rip-offs like Digimons on Fox Kids are popping up in various other media companies’ outputs. While synergy may have the effect of increasing efficiency for the company employing it, it also has the effect of narrowing the variety of different messages from which consumers can choose. If an idea is effective in one division, a vertically integrated company will milk it for its other divisions. And if an idea is highly effective for one company, other companies will come along and try a version of the same idea.
This strategy is likely to increase in the future as conglomerates gain more and more companies that have an interest in a variety of media outlets. The telecommunication companies, under the guidance of AT&T, will probably soon compete with the more traditionally entertainment-oriented companies like the cable and broadcast networks. But as a multitude of outlets and new technologies come along every year or so to open up another outlet, it does not seem that the competition for the attention of consumers will dry up. Instead, what is more likely to happen, especially if there is no government intervention, is that the merging companies will turn into Pokémon trainers. The trainers with the most of those little creatures, after all, take the prize. In this case, the companies with the most outlets will be able to have their message heard the most by people, whether or not the people want it.
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Posted on October 2, 2012, in Industry Analysis Studies and tagged horizontal integration, media business, media industry, media mergers, Telecommunications Act of 1996, vertical integration. Bookmark the permalink. Leave a comment.