Darth Murdoch has Feelings Too

Is the country threatened by media consolidation? Will the advent of media consolidation mean content is controlled by fewer and fewer people? Is that a bad thing?

Here is an excellent summary of the criticisms:

The consensus seems to be that there is a monopoly of the media in place, that media consolidation means less local representation, congressmen are arrogant prima-donna's, and the FCC has to assume that the 500 people that were energetic enough to pack public hearings on the issue represent an "overwhelming majority of 300 million citizens."

In contrast, Ben Compaine argues against the idea of media consolidation meaning a "media monoploy" in the first place. And he has the numbers to back it up (yay!):

In 1986, I employed a widely-used measure of economic concentration called the Herfindahl-Hirschmann Index (HHI), to assess the 50 largest American media industry players. In the HHI a score of 10,000 means a total monopoly. Anything above 1,800 indicates a highly concentrated market; 1,000 represents the bottom range of oligopolistic tendencies (meaning the major companies have some capability to limit price competition and perhaps indirectly constrain the range of content diversity), while any score under 1,000 reveals a competitive market. In 1997, the index for media companies stood at 268. This was up some from 206 in 1986, but hardly what you'd expect given fears of concentration. Skeptics would point out that 1997 was before AOL and Time Warner or CBS and Viacom merged, but it was also before magazine publisher Ziff-Davis broke itself up or Thomson, once the owner of more newspapers than any other company in North America, sold off most of its holdings to several established as well as newer players. Competitiveness in media compares favorably to other industries: The 1997 HHI for American motor vehicles was 2,506; for semiconductors, 1,080; and for pharmaceuticals, 446.

Much of the best-known merger activity has been more like rearranging the industry furniture: In the last 15 years, the American owners of MCA and its Universal Pictures subsidiary sold out to the Japanese firm Matsushita, who then sold Universal to Seagram's (Canada), who sold it to Vivendi (France), which is selling parts of it to General Electric's NBC. But at the same time Vivendi sold textbook publisher Houghton-Mifflin to a private investment group, and it did not include its Universal Music Group in the NBC sale. There is an ebb as well as flow, even among the largest media companies.

With all this fluidity, it is strange to read in the 1992 edition of Ben Bagdikian's influential book The Media Monopoly that our primary concern should be about "concentrated control" by "fifty corporations." Monopoly means exclusive control by one company. An oligopoly could involve two or three or four. In a 2001 online debate with me, academic critic and anti-consolidation activist Robert McChesney wrote that a top tier of seven "transnational giants -- AOL Time Warner, Disney, Bertelsmann, Vivendi Universal, Sony, Viacom and News Corporation -- ...together own all the major film studios and music companies, most of the cable and satellite TV systems and stations, the U.S. television networks, much of global book publishing and much, much, more." Of course, he wrote this in 2001, before Comcast became the largest cable company. So now it's the top eight? McChesney continues that the media cabal "is rounded out by a second tier of 60-80 firms," including many based in Asia and Latin America.

It is hard to contend that such a large and diverse group of companies has anything like "monopoly power," certainly in the economic sense. Indeed, any industry with 60 or more major players (who frequently change positions, appear out of nowhere, and disappear altogether) seems the very definition of a strong, competitive market.

Assuming that Compaine is wrong, and there is a monopoly that controls the media, does that mean that the media has replaced that media's quality and local representation has become worse?

First watch this...

...then read this, also from Compaine...

� Nor should anyone assume that smaller media entities are somehow "better" in the quality or quantity of news and public affairs programming. Or even that a commonly owned newspaper and television station in the same market create a single "voice." Studies by the FCC's Media Ownership Policy Working Group found that the local television stations owned by the large broadcast networks receive awards for news excellence at three times the rate of stations owned by smaller groups, and produce nearly 25 percent more news and public affairs programming than non-network-owned affiliates. Television stations owned by enterprises that also own newspapers have higher news ratings, win more news awards, and offer more news shows than non-newspaper affiliates. And in 10 cities where the newspaper and a TV station had common ownership, half of the combinations had a similar editorial slant in the 2000 presidential election, while the other half had divergent slants.

Hmm...

But perhaps, even though the content may be better and more expansive (not to mention diverse), putting the media in the hands of a selected group of people runs the risk of content being controlled by ideologies. To that, Compaine responds:

A.J. Liebling, the outspoken press critic of half a century ago, had a pragmatic insight into why the ownership structure of the media -- primarily newspapers then -- was a positive influence on content. In his 1947 book The Wayward Pressman he wrote, "The profit system, while it insures the predominant conservative coloration of our press, also guarantees that there will always be a certain amount of dissidence. The American press has never been monolithic, like that of an authoritarian state. One reason is that there is always money to be made in journalism by standing up for the underdog....[The underdog's] wife buys girdles and baking powder and Literary Guild selections, and the advertiser has to reach her."

At the time Liebling wrote this, the Hearst newspaper chain controlled more local circulation than any newspaper company does today. But his insights are actually more relevant today than in 1947. Profit, not ideology, means that whether one wants to focus on the 10 largest conglomerates or the 50 largest players or whatever other number, the content of the media is determined not by what the chief executive officer wants, but by what thousands of editors, producers, publishers, and local operating managers determine is right for the audience they are trying to reach.

This is one reason why big business and business executives are regularly made the villains (see The China Syndrome, Broadcast News, and Erin Brockovich, among many) in film and television features produced by major media companies. In many instances, the profit motive means localism prevails over centralization. It is not likely to matter much (and indeed experience shows it does not) whether a local TV station is owned by a company headquartered in another city. The decisions for much news and information need to be made locally if the owner wants to attract its share of the audience. In short, both locally and nationally owned media outlets are driven by the profit motive.

In fact, the notion that local owners of newspapers or TV and radio stations are inherently "better" -- usually taken to mean more "objective" -- than a large corporation has no standing in the real world. Some of the most biased newspapers in 20th-century history -- McCormick's Chicago Tribune, Annenberg's Philadelphia Inquirer, Loeb's Manchester Union-Leader -- were the creations of local ownership. Local owners are more likely than remote corporate owners to have ties to the local political and business establishment. Local owners may not have the economic resources to withstand a boycott by real estate or banking or similar interests should they risk some criticism of the local industry. Large chains, on the other hand, are far less affected economically by a short-term downturn in any one community. And it is less likely that the publisher is a prep school buddy of the mayor.

There is one more important point. Diversifying ownership by no means equals greater diversity in product. These smaller institutions need to make a profit as well. This means two things:

(1) As Compaine points out, they may simply purchase their programming from a larger production company, thus landing media control right back in the hands of the few regulation was supposed to remove from power:

� There is nothing inherently better or more "diverse" about a media company buying its content from outside sources rather than from its vertically integrated production operation. The trend in recent mergers has been for distributors, i.e., broadcast networks, to align with production companies, i.e., film studios. Their decision to do so is a classic "make vs. buy" case. No one has criticized newspapers for running their own content-creation businesses, even though they could rely on freelancers and independent contractors. Some do more than others. Magazines do some of both. TV networks and local stations have long had their own in-house news operations. But a combination of business model and (for two decades) regulation kept most entertainment production out-of-house at the three older networks. Over time the combined studios/TV networks are likely to find that they were better off being able to pick and choose programming from what outsiders offered them rather than being stuck with whatever their limited in-house operations offer. The economics offer powerful incentives: To cite one of many examples, Warner Brothers Television, part of AOL Time Warner, owner of the WB and HBO television networks, produces the top-rated television show, ER. It could run that show on either of those in-house networks, but instead sells it to NBC, based on a cold calculation that this is the better financial decision.

(2) This argument does not affect local television broadcasts, which are cheaper and more manageable then national or international operations. However, the dynamics of profit still call the shots no matter how many independent stations exist. This means that stations will gravitate towards the same programing (read: the pack mentality) no matter how trivial it is (read: soft news).

Compaine brings an interesting proof that when profit (i.e what the public does not want to see) it not responsible for programming, nobody watches. In three letters: P, B, and S:

Animus against the profit motive runs deep among FCC critics and activist groups. Consider this complaint in the mission statement of the Free Press, a lobbying group founded by McChesney: "The main problem is that the structure of the media system makes socially dubious behavior...the rational outcome." One proposed scenario? "If the government gave all the publicly owned radio and TV frequencies to nonprofit groups, rather than a relative handful of huge corporations, the content of our broadcasting system would probably be radically different from what exists today."

They are almost certainly half-right. Content might well be different. But it wouldn't necessarily be better. Would nonprofits be able to pay their employees well? Would they have the capital to reinvest in equipment and technologies? Who would determine the content of their programming, and on what basis? This might work only in a Harrison Bergeron world of enforced equality, where no democracy of content was allowed, where the voice of the audience was not heard. The experience with the Public Broadcasting Service is instructive in this regard. At its best, PBS could rarely get the attention of more than 2 percent of the total TV audience. And that was when it had only three rivals. Who exactly would benefit from a model of only PBS-like programming?

There are definite merits to both sides of the deregulation debate. As Compaine himself points out, there are serious negatives to media consolidation. However, he argues the risk is tremendously exaggerated. Compared to other industries, media is competitive. Corporate control does not mean less local coverage. Consolidation is also not correlated with uniform content. And Deregulation may not be that much better anyway. Time will tell who is correct.