Archive for the ‘Media Concentration’ Category

The End of Big Media Conglomerates

March 23, 2010

A few years ago, it seemed that -in the future- most part of relevant media outlets would be in the hands of big media conglomerates. In 2000, when Time-Warner merged with AOL, CEO┬┤s of media companies all over the world identified two main competitive advantages: big size and a diversified portfolio of media assets. Ten years later Time-Warner has split in two units: content (magazines, TV networks and film production) and distribution (AOL and cable systems). Viacom followed a similar strategy some years before.

What happened with the economies of scale, the synergies and the diversification of risks that those companies where looking for? In fact, most part of operations of concentration in media industries in the last two decades destroyed value for shareholders. Economies of scale have a rationale: costs per unit decrease when production increases; but the disadvantages have more wheight: in such cases, firms have lack of focus, problems of coordination among business units, more burocracy, less innovative spirit… and synergies do not appear. In some ways, companies are like human beings: they should be strong enough but without exceeding a given size.

If a company has a clear “market fontier” its risks are highly concentrated. But the solution is obvious: the shareholders can select different bets. In this way, they diversify their risks while invest in focused media companies.

Media Concentration in the World

January 19, 2010

From 1960 to 2000 there were a controversy about concentration of media companies all over the world. Sometimes, media moguls were described as people who did not care about their media outlets’ impact on society because they were only focused on how to increase profits and shareholder value. During that period, big media companies became more international, more diversified, more horizontally and vertically integrated, and more powerful.

What is going on nowdays? Are media markets more concentrated? The answer depends on how we define markets. If we analize the newspaper market or the magazine market, we will identify a trend towards more concentration in most countries. But if we take the “information market” (including online services, radio news networks, 24 hours news TV channels, blogs and other user generated contents) it is obvious that there are less players whith dominant positions and less bottlenecks in the value chains. That applies both to news markets and entertainment markets.

If media markets are less concentrated, it is time to change some legal frameworks which made sense in the old times but which are inefficient and oldfashioned when choice for consumers is almost limitless. (That, of course, applies only to free market societies but not to state-controlled economies like China, Cuba or North Korea).