"There is always a philosophy for lack of courage."—Albert Camus

Wednesday, September 13, 2006

Media Consolidation Reversing?

Numerous writers and analysts have pointed out that large media conglomerates' purchases of movie studios, magazines, and book publishing companies have had a deleterious effect on the quality of production in these media by forcing them to bring in higher profits than were historically attainable.

I suspect that the decline of American education has had a much more important effect on the quality of popular culture in the past half-century, but there were always two additional interesting questions regarding media conglomeration that needed to be asked and seldom were.

Question one was whether these two industries would remain as appealing to corporations as they had become during the 1970s and the two decades thereafter.

Question two was whether the decline in quality and increasing sameness of product from corporatized major publishers and film studios would cause a rise in competition from independent producers and publishers. And if the latter happened, might not the answer to question one be that the big corporations might wish to unload some of these firms?

That does appear to be the case, with the well-documented rise of independent media productions, proliferation of new magazines (which has slowed only in the past few years), and increasing success of university presses, small book-publishing houses, and other such ventures.

We are seeing some signs of a reversal of the media consolidation of the past couple of decades.

In today's news, for example, The Wall Street Journal reports that Time-Warner is jettisoning numerous magazines "as it looks to prune its portfolio of smaller, less-profitable titles."

This move is significant because it includes very popular titles such as Popular Science, Field & Stream, Outdoor Life, Skiing, Parenting, and Babytalk. Of course these will all be sold to other big investors, because they are still worth a lot of money, but this looks to me like part of what may be a continuing devolution to a more reasonable scale of organization for these publications.

Equally significant in today's news is the announcement by the New York Times Co. that it is selling off its television stations:

"The decision to explore the sale of our broadcast stations is a result of our ongoing analysis of our business portfolio," said Janet L. Robinson, president and CEO. "These are well-managed and profitable stations that generate substantial cash flows and are located in attractive markets. We believe a divestiture would allow us to sharpen our focus on developing our newspaper and rapidly growing digital businesses, and the synergies between them, thereby increasing the value of our Company for our shareholders."

The stations that comprise the Broadcast Media Group are:

  • WHO-TV in Des Moines, Iowa (NBC);
  • KFSM-TV in Ft. Smith, Ark. (CBS);
  • WHNT-TV in Huntsville, Ala. (CBS);
  • WREG-TV in Memphis, Tenn. (CBS);
  • WQAD-TV in Moline, Ill. (ABC);
  • WTKR-TV in Norfolk, Va. (CBS);
  • KFOR-TV in Oklahoma City, Okla. (NBC);
  • KAUT-TV in Oklahoma City, Okla. (MyNetworkTV); and
  • WNEP-TV in Scranton, Penn. (ABC).

Leftist critics complained about the corporatization and consolidation of the media as an unwelcome phenomenon in the '70s and thereafter, and they were correct to point out that there would be deleterious effects.

Market-oriented analysts simply replied by saying that the consolidation would be good because people wouldn't do it if it didn't make sense.

That was not the correct response, however. People do stupid things, and corporations do stupid things too.

The sensible response should have been that the media consolidation that began in the 1960s was most likely part of a societal and technological transition that would ultimately work toward everybody's benefit, as free markets typically do over the long term.

And that appears to be what has happened and is happening today.

Contrary to the leftists' claims, competition among media providers actually increased during the period of consolidation, as a simple glance at the current media landscape should make abundantly clear. In response to that competition, big media companies are beginning to divest themselves of some of their media holdings in order to make themselves leaner and more effective at responding to competition, as the New York Times statement makes clear.

That process will increase media competition further, and will create increased capacity for variety, efficiency, and customer satisfaction in our communications media.

That is what markets do, and it is always to the good in the long term.

From Karnick on Culture.

2 comments:

Francis W. Porretto said...

This appears to be a special case of a general economic truth: given some set of market conditions, in the absence of coercive interference, every enterprise, no matter how narrowly focused or how widely diversified, has an optimal size, at which its return on investment is maximized. An enterprise that grows beyond that size will become less profitable, and usually less viable as well. If external conditions change in a fashion that reduces the optimal size for a particular kind of enterprise, firms that have grown beyond that point will be well advised to slim down voluntarily, before the market puts them on its own notion of a reducing diet.

(The dynamics and consequences of State-induced giantism form a special study.)

Tom Van Dyke said...

The writing was on the wall back in 1989, when Sony acquired the "creative talents" of the Guber-Peters (Mr. Barbra Streisand) Entertainment Company by buying the whole shebang.

By the time the ashes fell to earth after those twits got to work, Sony had written off more than $5 billion.

As much as mega-media try to synthesize and assimilate talent, it can't be done. Human beings and their genius are not fungible. That fact gives hope to us all, in that Adam Smith kind of way. We geniuses are like cockroaches; no matter how big the boot, it can't stomp us all.

Up the establishment, man.