Archive for the ‘Mergeres’ 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.

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Mergers and TV companies: is media like cheese?

December 22, 2009

Last week two Spanish broadcasters, Telecinco and Cuatro, announced that they will merge. It seems that other two, Antena 3 and La Sexta will do the same quite soon. Each new audiovisual group will have between 21 percent and 23 percent of the audience market share (the legal threshold is 27 percent).

Telecinco’s main shareholder is Silvio Berlusconi, while Cuatro is owned by PRISA, a media company closely linked to the Spanish Socialist Party. On the other hand, Antena 3 has a right wing orientation and La Sexta has the opposite position.

During the last days, managers of the four TV companies concerned said that each channel will preserve its identity. But… is media like cheese? A cheese company can produce Gruyere, Emmetal, Gorgonzola or Roquefort: different options for different tastes. But can we apply this model to media? Will the journalists be happy if they know that the new owner is only interested in profits because he has not a pourpose of making a positive impact on society? Will the company keep the standards of quality and innovation if their most creative people are not motivated? The future will give us the right answers.