Lecture 7: Concentration of Media Ownership

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Lecture 7 Concentration of MediaOwnership
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• 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.

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• 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.

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• Of particular importance to us in todays 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.

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

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What do We Mean by Concentration of Media
Ownership
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• 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.

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Two Examples of Media Conglomerates
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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 2001.
• This media conglomerate is involved in a variety
  of media enterprises such as

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• 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.

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• 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).

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• 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 and _at_Home.

• 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.

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• 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).

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• Employing an estimated 84,900 employees, AOL
  Timer-Warner earned USD 43.7 billion in 2005.
• As can be observed, this media conglomerate owned
  different media businesses which operates
  worldwide.

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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.

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• 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.

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• 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,

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• Other
• Sony Electronics
• Sony Computer Entertainment America
• PlayStation
• 989 Sports
• Sony Connect Inc.
• Metreon
• (last updated 9/28/2004)

• 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)

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The Rise of the Media Conglomerates
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• 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

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• fifty corporations dominated most of every
  mass medium and the biggest media merger in
  history was a 340 million deal. ... In 1987,
  the fifty companies had shrunk to twenty-nine.
  ... In 1990, the twenty-nine had shrunk to
  twenty three. ... In 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.

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• 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, ATT and Liberty Media (as of
  2002) which forms what media scholar McChesney
  calls, as the first-tier media

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• 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.

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Vertical Integration as Basic Characteristics of
Media Conglomerates
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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.

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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.

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• 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.

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The Media Supply Chain
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Production creating media content
Packaging content is collected together
assembled as media product
Distribution delivering Product to customers
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• 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.

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• As Viacoms 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, Disneys 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

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• 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

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• products, including ESPN radio network. In
  1996, Disney launched ESPN Magazine to compete
  directly with AOL-Timer Warners 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.

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• 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.

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• 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 Disneys 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.

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• 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.

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Conclusion Why Should I be Concerned?
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• Historically speaking, the origins of what we
  term as the media has its roots in newspapers
  that proliferated in the 19th 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 20th century have witnessed the
  gradual evolution of the media that moves away
  from news to entertainment.

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• And the trend in media ownership in the past
  twenty is simply accelerating the medias 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.

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• 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.

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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.