Media Mergers

1
Media Mergers

• The Race to Become
• Americas Information Utility

2
Ownership Regulations

• Most regulations based on scarcity concept
• theres only so much spectrum to go around
• FCC created to serve as licensing authority
• entry barriers are both economic regulatory
• How scarcity has been applied
• Broadcast TV dominant markets, network oligopoly
• Cable TV expanded, but still limited, channels
• Internet do entry barriers scarcity? Are there
  entry barriers?

3
Media Industry Integration

• Levels of media industries
• content production creating media messages
• distribution marketing booking the messages on
  media outlets
• delivery exhibiting content to audiences
• allied industries e.g., advertising, research
• Vertical integration company has holdings in
  multiple levels of media industries
• Horizontal integration companys holdings are
  spread across one level of an industry

4
Integration Regulations

• Sherman Antitrust Act of 1890
• prevented monopolistic power that did not serve
  the public interest
• unregulated in public utilities
• many argued competing wires were a bad idea
• same rationale applied to cable TV until 1980s
• Communication Act of 1934
• first comprehensive law governing communications
  industries
• one concern centered around undue influence of
  one media company on national audiences

5
History of Ownership Regs

• National Restrictions
• was 5-5-5 (FM-AM-TV) until 1992
• in 1992 deregulation, switched to 12-12-12
  (FM-AM-TV) and 25 national reach
• Telecommunication Act of 1996 eliminated numeric
  restriction for 35 of US audience
• In any one market
• 1 newspaper, 1AM/FM combo, 1 TV until 1992
• numeric restrictions loosened in 1992 and cable
  ownership dereg. in 1996 TCA
• radio ownership within a market now regulated by
  the size of the market

6
History of Cable Ownership Regs

• cross-ownership strictly controlled between
  broadcast, telephone, and cable
• cross-ownership basically forbidden until 1980s
• intended to prevent monopoly, unrestrained cable
  rates, and large MSOs from squeezing high
  affiliate fees onto their small competitors

7
Cable Act of 1992

• maintained FCCs authority to regulate rates
• required cities to open up to other competitors
• forced cable companies to compensate broadcasters
  for using signals (i.e., must carry)
• phone companies allowed to offer video signals
  (i.e., video dial tone)
• subsequent court decisions allowed them to
  provide content, too

8
Telecommunication Act of 1996

• Favored competition over regulation
• Lines of business restrictions dropped
• telcos can start or buy into cable vice versa
• only broadcast/cable MSO not allowed now
• Competition in local service
• Competitive Access Providers
• cable TV, independent local telcos, cellular/PCS
• Will the act work?
• Integrated communication companies may emerge,
  creating new monopolies
• On the flip side, integrated companies may mean
  only one system of fiber optic is needed, etc.

9
Other Ownership Regulations

• Movie Studios
• banned from owning movie theaters in 1940s
• in effect, a freeze on vertical integration, but
  not horizontal
• Telephone companies
• ATT held monopoly until 1960s
• other companies got equipment licenses in 60s
• ATT divestiture in 1984 (led to RBOCs)
• phone companies forbidden from owning any other
  medium until Telecomm Act of 1996

10
Americas Communication Mega-Corporations
11
Television WB Network Warner Bros. TV WB
International Programming CNN networks HBO
networks Cinemax Family Channel HBO
Animation Turner networks (TNT, TBS, TCM) Cartoon
Network cable systems serving 12.3 million people
Films Warner Bros. Studios Warner Home Video WB
International Theaters
Publications Time, Inc. People Sports
Illustrated Entertainment Weekly Fortune Time
Life Books Warner Books Little, Brown
Publishing specialized and international
magazines Book-of-the-Month Club
Music Warner Music Group Atlantic Records Elektra
Records 50 of Columbia House
12
Television Walt Disney Television Touchstone
Television Disney TV Animation Buena Vista
Television ABC, Inc. 10 local TV
stations Disney/ABC International TV ESPN Disney
Channel AE Network History Channel Lifetime
Television for Women
Radio ABC Radio Network 26 radio stations pending
start of Radio Disney
Selected Others. . . Daily newspapers 50 trade
publications W magazine Discover
magazine Hollywood Records Disney Records theme
parks professional hockey baseball teams Disney
Interactive ABC Online Disney Online
Films Disney Motion Pictures Group Touchstone
Pictures Hollywood Pictures Caravan
Pictures Miramax Films Buena Vista Pictures
Distribution, International, Home Video, Home
Entertainment
13
Television Fox Broadcasting Co. 23 US TV
stations Fox News Productions 20th Century Fox
TV 20th Television 20th Century Fox TV
Distribution Evergreen TV Productions Fox
Childrens network Fox pay-per-view fX Networks
Films Fox Motion Pictures 20th Century
Fox Columbia Tri-Star Films 21st Century Fox
Film Cinemascope Products Fox Animation
Studios Mirror Pictures Van Ness Films Fieldmouse
Production Fox West Pictures San Antonio Film
Features Fox Home Video
Selected Others. . . Daily newspapers world
wide Harper Collins Publishing Murdoch
Publications News T Magazines News America
Publications Fox Music companies (6) Fox
Movietone News
14
Regional Bell Operating Companies (RBOCs)
15
Americas Big Cable MSOs
16
U.S. Cable Companies, 1998
17
Whos who in the utility race. . .

• What advantages and disadvantages do each of
  these industries bring to the utility race?
• Cable Television
• Local Long-Distance Telephone
• Broadcast Television
• Internet Service Providers