Why study media ownership?
The issue of who owns the media, and how much of it they own, matters. It is important for broadly two reasons. The first is pluralism. A great many writers have focused attention on the potential harms that may result from concentrated media ownership, including the abuse of political power by media owners or the under-representation diverse and pluralistic media provision. Concentrations of media ownership narrow the range of voices that predominate in the media and consequently pose a threat to the interests of society.
Recognition of the need to safeguard pluralism has historically been the main reason for regulating ownership of the media. However, concentrated media ownership matters to society, not only because of pluralism and democracy, but also because ownership patterns may affect the way in which the media industry is able to manage the resources available for media provision. Restrictions on ownership could, for example, result in a duplication of resources which prevents the industry from capitalising on all potential economies of scale. The ways in which ownership patterns affect the economic strength and efficiency of the sector are not solely a mater for broad societal interest but are obviously of immense and particular concern to media forms.
Industrial or ‘economic’ arguments favouring a more liberal approach toward concentrations of ownership seem to have become more influential in determining media ownership policies in the UK and Europe since the early 1990s. The elevation of industrial interests may, at least in part, be attributed to ‘technological mystique’ surrounding developments such as convergence and globalisation and to the perception that policy-making ought to help industry capitalise on such developments (Hitchens, 1995: 640). But relatively little work has been done to quantify precisely what efficiency gains or other economic benefits or, indeed, what disadvantages greater concentrations of media ownership might bring about. This book sets out to uncover, based on the experiences of leading UK media corporations, exactly what sort of economic or commercial advantages are created as media firms enlarge and diversify.
Above all, ownership and control over the media raise special concerns that do not apply in the case of other sectors of industry. Media concentrations matter because, as exemplified in the notorious case of the Berlusconi media empire in Italy (and, on a lesser scale, as frequently evidenced elsewhere), media have the power to make or break political careers. As was said of a former UK media baron: ‘Without his newspaper, he is just an ordinary millionaire. With it, he can knock on the door of 10 Downing Street any day he pleases’ (Financial Times, 2000: 24). Control over a substantial share of the more popular avenues for dissemination of media content can, as politicians are well aware, confer very considerable influence on public opinion.
So policies that affect media concentrations have very significant political and cultural as well as economic implications. As these policies undergo sweeping ‘reforms’ to cater for the perceived needs of an increasingly dynamic media and communications environment in the 21st century, it is important to question whether the structures we are left with adequately safeguard the need of European citizens for media plurality. This text traces the development of media ownership policies in the UK and at the European level since the early 1900s. Taking account of the conflicting objectives that policy-makers have been faced with, it analyses key shifts in position and assesses who stands to gain or lose out from the wholesale redesign of media and cross-media ownership policies.The term ‘convergence’ is used in different ways but, generally speaking, it refers to the coming together of the technologies of media, telecommunications and computing. It is also used sometimes to denote greater technological overlap between broadcasting and other conventional media forms. Digital technology – i.e. the reduction of pieces of information to the form of digits in a binary code consisting of zeros and ones – is the driving force behind convergence. Sectors of industry that were previously seen as separate are now converging or beginning to overlap because of the shift towards using common digital technologies.
The implications of convergence are far-reaching. With the arrival of common digital storage, manipulation, packaging and delivery techniques for information (including all types of media content), media output can more readily be repackaged for dissemination in alternative formats. For example, images and text gathered for a magazine, once reduced to digits, can very easily be retrieved, reassembled and delivered as another product (say, an electronic newsletter). So, digitisation and convergence are weakening some of the market boundaries that used to separate different media products.
Convergence is also drawing together the broadcasting, computing and IT sectors. According to some, ‘(u)ltimately, there will be no differences between broadcasting and telecommunications’ (Styles et al., 1996: 8). More and more homes are now linked into advanced high capacity communication networks and, through these, are able to receive a range of multimedia, interactive and other ‘new’ media and communication services that can be delivered to consumers via the same communications infrastructure, the better the economics of each service.
The ongoing globalisation of media markets and convergence in technology between media and other industries (especially telecommunications and broadcasting) have caused many media firms to adapt their business and corporate strategies accordingly. As traditional market boundaries and barriers have begun to blur and fade away, the increase in competition amongst the media has been characterised by a steady increase in the number of perceived distributive outlets or ‘windows’ that are available to media firms.
The logic of exploiting economies of scale creates an incentive to expand product sales into secondary external or overseas markets. As market structures have been freed up and have become more competitive and international in outlook, the opportunities to exploit economies of scale and economies of scope have increased. Globalisation and convergence have created additional possibilities and incentives to re-package or to ‘repurpose’ media content into as many different formats as is technically and commercially feasible (e.g. book, magazine serialisations, television programmes and formats, video, etc) and to sell that product through as many distribution channels or ‘windows’ in as many geographic markets and to as many paying consumers as possible.
The media industry’s response to these developments has been marked. Media firms have been joining forces at a faster pace than ever before. They have been involved in takeovers, mergers and other strategic deals and alliances, not only with rivals in the same business sector, but also with firms involved in other areas that are now seen as complimentary.
Convergence and globalisation have increased trends towards concentrated media and cross-media (e.g. Time Warner/AOL, Pearson, Bertelsmann etc.) whose activities span several areas of the industry. This makes sense. Highly concentrated firms who can spread production costs across wider product and geographic markets will, of course, benefit from natural economies of scale and scope in the media (DTI/DCMS, 2000: 50). Enlarged diversified and vertically integrated groups seem well suited to exploit the technological and other market changes sweeping across the media and communications industries.
Three types of expansion
At least three major strategies of corporate growth can be identified and distinguished: horizontal, vertical and diagonal expansion. A ‘horizontal’ merger occurs when two firms at the same stage in the supply chain or who are engaged in the same activity combine forces. Horizontal expansion is a common strategy in many sectors and it allows firms to expand their market share and usually, to rationalise resources and gain economies of scale. Companies that do business in the same area can benefit from joining forces in a number of ways including, for example, by applying common managerial techniques or through greater opportunities for specialisation of labour as the firm gets larger. In the media industry, the prevalence of economies of scale makes horizontal expansion a very attractive strategy.
Vertical growth involves expanding either ‘forward’ into succeeding stages or ‘backward’ into preceding stages in the supply chain. Vertically integrated media firms may have activities that span from creation of media output (which brings ownership of copyright) through to distribution or retail of that output in various guises. Vertical expansion generally results in reduced transaction costs for the enlarged firm. Another benefit, which may be of great significance for media players, is that vertical integration gives firms some control over their operating environment and it can help them to avoid losing market access in important ‘upstream’ or ‘downstream’ phases.
Diagonal or ‘lateral’ expansion occurs when firms diversify into new business areas. For example, a merger between a telecommunications operator and a television company might generate efficiency gains as both sorts of service – audiovisual and telephony – are distributed jointly across the same communications infrastructure. Newspaper publishers may expand diagonally into television broadcasting or radio companies may diversity into magazine publishing. A myriad of possibilities exists for diagonal expansion across media and related industries. One useful benefit of this strategy is that it helps to spread risk. Large diversified media firms are, to some extent at least, cushioned against any damaging movements that may affect any single one of the sectors they are involved in. More importantly perhaps, the widespread availability of economies of scale and scope means that many media firms stand to benefit from strategies of diagonal expansion.
In addition, many media firms have become transnationals – i.e. corporations with a presence in many countries and (in some cases) an increasingly centralised management structure. Globalisation has encouraged media operators to look beyond the local or home market as a way of expanding their consumer base horizontally and of extending their economies of scale. For example, UK media conglomerate EMAP acquired several magazine publishing operations in France in the mid 1990s and has since expanded heavily into the US market. French media company Vivendi, a majority shareholder of Canal Plus, has pay-television operations in several national markets across Europe and recently acquired Swedish group Bonnier which specialises in business news and information recently expanded into the UK with the launch of a new daily newspaper called Business AM in Scotland.
The basic rationale behind all strategies of enlargement is usually to try and use common resources more fully. Diversified and large scale media organisations are clearly in the best position to exploit common resources across different product and geographic markets. So, enlarged enterprises are better able to reap the economies of scale and scope which are naturally present in the industry and which, thanks to globalisation and convergence, have become even more pronounced.
This points towards what Demers calls the ‘paradox of capitalism’ – that intensified global competition results in less competition over the long run (Demers, 1999: 48). Even with a loosening up of national markets and fewer technological barriers to protect media incumbents from new competitors, the trend that exists in the media of increased concentration of ownership and power into the hands of a few very large transnational corporations – clearly reflects the overwhelming advantages that accrue to large scale firms.