Overview of where we've been, where we are going:
Importance of Media
2. Media effects
1. Media are big businesses
I. Media as Big Businesses
James Bond movies
1. 1997: Tomorrow Never Dies
Media Tycoon Eliot Carver
2. Media = power
3. Media throughout world except China
4. Plan: coup in China by causing war between U.K. and China.
5. Stages "Chinese" attack on British boat
6. Massive media coverage to incite war
7. Only Bond can stop him…
The fictional Eliot Carver
1. Huge business empire
2. Multinational operation
Answers to no one
4. Vast capital
5. Multi media operation --
books, movies, TV, newspapers, etc.
6. Arrogant, power hungry
Announced Jan. 10, 2000
$165 billion deal
Largest new media co.
Largest trad. media co.
54% US Internet access
#2 cable system (20% US)
33 magazines/120m readers
Time, People, SI, Money
18% US movie box office
WB TV network (5%)
CNN, TBS, TNT: 70m US
HBO, Cinemax: 35m US
Music: 16% of US market
Atlantic, Elektra, WB, Warner Music Intl., Sire. LeAnn Rimes, Tori Amos, 3 Tenors, Brandy, Tracy Chapman, Cher, Clapton, Madonna,
Books: $1.1b in 1998.
D. Carey, Friends, D.Creek, Rush Hour, Sylvester
Why? Mutual needs
1. AOL needs high speed/cable
"Broadband" allows ecommerce, interactive entertainment
2. TW: fast track to Internet
1. 4th most valuable US company
2. Stock market value = gross domestic product of Mexico
What does the merger mean?
1. Faster Internet service
2. Interactive TV
3. Digital jukebox
first major record co. to be affiliated with internet co. with ability to deliver music online.
4. Web as mainstream media
5. News on internet (CNN)
6. More mergers ahead
II. Why such big media companies?
I. Government ownership
1. Govt. operates or funds
2. Media people = govt. employees
3. Revenues: taxes, user fees
4. Profit not required
5. Somewhat limited # outlets
II. Private ownership
1. Individuals or groups
2. Multiple owners competing
3. Revenues: sales of product (time, space), subscriptions
4. Profit required
III. U.S. media: Key characteristics
1. Private ownership
What does this mean? Primarily, that individual persons or corporations are the key owners of media outlets in the United States. They get established/continue in business through the infusion of money/capital from INVESTORS --- who naturally expect a return on their investment. Investors thus put particular emphasis on COSTS, REVENUES. They want an EFFICIENT and PROFITABLE organization (record company, news organization, movie project, etc.)
2. Minimal govt. control
Not outright ownership. No outright control over content.
Controls that exist: libel, invasion of privacy, some level of anti-trust/monopoly. But not a great deal more than that. Blend of free market/free press model.
3. Media are businesses
Media industries experience the same business climate (boom, recession, fluctuations of the dollar) as other industries (whether auto, lumber, food & drink, etc.) and goes through industry changes due to changing technology, etc.
4. Profit orientation
U.S. Media also face the same imperatives that other businesses face, particularly profit orientation. Allows business to reinvest into products and processes to remain competitive. Provides returns for individuals who advanced capital to start operations. PERFORMANCE is measured more in terms of dollars and cents than in terms of public interest.
5. Revenue: ads, subscription
Two key flows of revenue that come from sale of the product. Media have two audiences -- advertisers and viewers/readers. Selling a product to both.
Advertising revenues constitute what portion of revenues for:
% revenues from advertising
WHAT DO ADVERTISERS WANT? They want media to bring them potential buyers of their products and services. Advertisers want media organizations to provide an environment and content that not only ATTRACTS certain audiences but RETAINS them, so that they might reach audiences with their message over and over again.
6. News: industry standards
Not governmentally imposed standards, but what have emerged from the industry itself, from the occupation group.
7. Competitive environment
Competing with other media companies.
Costs a lot of money to get started (Barriers to Entry; Entry costs) and to operate.
8. Economies of scale
Unit costs drop in mass production. Radio/TV networks: created to share programming. Large-budget program formats or genres require a mass audience (e.g., feature films, TV action/adventure series, TV network newscasts).
9. Economic efficiency:
Vertical/horizontal integration. Vertical: production, distribution, exhibition
Vertical integration: OWNING ALL STEPS IN THE PROCESS
(Production, distribution, exhibition)
It is possible for a single company to:
own an article put out by a magazine
turn the article into a book it sells
turn the book into a movie through its own production co.
show the movie in its own theaters
turn the movie into a TV show owned by the company
issue the movie sound track on its own record label
feature the vocalist on the cover of one of its magazines
get its radio stations to play the soundtrack.
Horizontal: across media (newspapers, television, radio, books, magazines)
Across media. Radio and the recording industry -- once were bitter rivals (radio: live music; records were canned). Now often owned by the same company.
MTV: record companies use it as a promotional tool. MTV uses video supplied by record companies. Radio stations use MTV as sounding board for new releases.
IV. Conglomerates, Groups
Post-war trend in U.S. media industries. Instead of multiple and diverse owners, US media tend to be concentrated in the hands of about 20 corporations. Forecasters predict that by 2005 or 2010 that 5-10 media giants will control most of the world’s important newspapers, magazines, books, broadcast stations, movies, recordings and video cassettes.
All 6 TV networks are owned by huge corporations.
NBC --- RCA/General Electric
CBS --- Westinghouse
ABC --- Disney
FOX --- News Corporation
UPN --- Viacom
WB --- Time Warner
The parent companies, in turn, are large media conglomerates -- made up of a wide variety of media properties.
Global Media Giants
1998 revenues in billions
1. Time Warner ($27)
2. Disney ($26)
3. Bertelsman ($16)
4. Viacom ($16)
5. News Corp. ($14)
6. Sony ($12)
7. TCI ($10)
8. Universal/Seagram ($9)
9. NBC/GE ($7)
Class handout: Media Conglomerates
Time Warner (Partial ownership by U.S. West, Honshu, Toshiba)
Print: Time, Fortune, Life, Sports Illustrated, People. Time-Life Books, Little Brown, Book-of-the-Month Club, DC Comics, Mad, Turner Publishing.
TV, Films, Cable: Turner Broadcasting, WB, CNN, TBS, TNT, Turner Classic Movies, Cartoon Network, Airport Channel, HBO, HBO Video, HBO International, CNN International, New Line Cinema, Castle Rock, Warner Bros. Pictures, Warner Bros. TV, Warner Bros. Home Video, Warner Cable.
Music: Warner Bros. Records, Atlantic Records, WEA Intl., Elektra.
Multimedia: Pathfinder WWW site, Atari (25%), Crystal Dynamics, Sega Channel
Other: Atlanta Hawks, Braves; 100+ retail stores; 1,000+ theaters outside US.
Print: Simon & Schuster, Pocket Books, Free Press, Macmillan, Scribner’s.
TV, Films and Cable: Paramount Pictures, Paramount TV, UPN, Cinamerica, Viacom Cable, Showtime, Movie Channel, MTV, MTV International, VH1, Nickelodeon, SciFi Channel, Blockbuster Video.
Music: Blockbuster Music, Famous Music.
Multimedia: Simon & Schuster Interactive, Viacom Interactive, Viacom New Media, MacMillan Digital.
Print: London Times, Boston Herald, The Sun, San Antonio Express, Daily Telegraph, Herald Sun, South China Morning Post, Fiji Times, HarperCollins, Triangle Publications, TV Guide.
TV, Films, Cable: 20th Century Fox, Fox Broadcast, 22 U.S. TV stations, Fox Video, Fox Cable Net, f/x, British Sky Broadcast, Star TV (Hong Kong).
Music: 20th Century Fox Records.
Multimedia: Online venture with MCI, Delphi.
Print: USA Today, Gannett Dailies (92), Gannett News Service.
TV, Films, Cable: GTG Entertainment, 10 TV Stations.
Music: 16 radio stations Multimedia: USA Today Online.
Transportation, Turbines for nuclear reactors and electric power plants, Electrical Equipment, Motors and Controls, Plastics, Networking software, Financial, Lighting, Appliances, Medical Services, Insurance, Aircraft engines, NBC, 9 TV stations, CNBC, Bravo; Partial ownership of A&E, History Channel, Independent Film Channel, News Sport, Prism, 7 regional sports channels (Cincinnati, Chicago, Florida, New England, Pacific, Ohio, Philadelphia).
V. Further information on some of the leading U.S. and world-wide media companies
1. Time Warner.
$25 billion in 1997. $27b in 1998. Largest media corporation in the world. Formed in 1989 through the merger of Time Inc. and Warner Communications. In 1992, Time Warner split off its entertainment group and sold 25% of it to US West and 5.6% of it to each of the Japanese conglomerates Itochu and Toshiba. It regained from Disney its position as the world’s largest media firm with the 1996 acquisition of Turner Broadcasting.
In 1996, about 65% of its income came from the US; that figure should drop to 60% by 2000 and eventually less than 50%.
20% news and publishing.
40% entertainment: film, video and TV.
Time Warner is a major force in virtually every medium and in every continent.
Time Warner has zeroed in on global TV as the most lucrative area for growth. Time Warner has devoted itself to producing programming and channels rather than developing entire satellite systems. It is one of the largest movie theater owners in the world, with about 1000 screens outside US and more planned.
HBO. HBO International: has already established itself as the leading subscription TV channel in the world. It has a family of pay channels and is available in over 35 countries.
CNN. CNN International, a subsidiary of CNN, is the premier global TV news channel, beamed via 10 satellites to over 200 nations and 90 million subscribers. The long term goal for CNN International is to operate (or joint ventures) in channels in French, Japanese, Hindi, Arabic, and perhaps one or two other regional languages. CNN launched a Spanish language service for Latin America in 1997, based in Atlanta.
Before their 1996 merger, Turner and Time Warner were both global TV powers with the TNT/Cartoon Network and Warner channels, drawing upon their respective large libraries of cartoons and motion pictures.
Now these channels will be redeployed to better utilize each other’s resources, with plans being drawn up to develop several more global cable channels to take advantage of the world’s largest film, TV and cartoon libraries.
Viacom bought Paramount and Blockbuster in 1994.
33% from film studios.
33% from music, video rentals and theme parks.
14% from publishing.
CEO Sumner Redstone’s strategy: to make Viacom "the world’s premier software driven growth company."
Viacom growth strategy: 2 fold.
1. Aggressive policy of using company wide cross promotions to improve sales.
MTV, for example, plugged the movie CLUELESS extensively in 1995.
Simon and Schuster is establishing a Nickelodeon book imprint and a Beavis and Butthead book series based on the MTV characters.
Viacom plans to establish a comic book imprint based on Paramount characters.
Considering a record label to exploit its MTV brand name.
Plans to open retail stores to capitalize on its brands (a la Disney)
Paramount producing movies for Nickelodeon and MTV.
2. Global growth plans.
Stated goal of earning 40 per cent of revenues outside of US by 2000. Heavy investment in world-wide expansion.
Major weapons in this plan for global growth: Nickelodeon and MTV. Nickelodeon has expanded to every continent but Antarctica in 1996/1997; offers programs in several languages. It is already a world leader in kid’s TV, reaching 90 million TV households in 70 countries other than the US (where it can be seen by 68 million households and completely dominates kid’s TV).
MTV is the pre eminent global music TV channel, available in 250 million homes worldwide and in scores of nations. MTV has used new digital technologies to make it possible to customize programming inexpensively for different regions and nations around the world.
3. News Corp.
The News Corporation is often identified with its head, Rupert Murdoch, whose family controls some 30 per cent of its stock.
His goal is for News Corp. to own multiple forms of programming: news, sports, films and kid shows -- and beam them via satellite or TV stations to homes in US, Europe, Asia and South America.
After establishing the News Corporation in his native Australia, Murdoch entered the British market in the 1960s and by the 1980s had become a dominant force in the US market.
News Corp. went heavily into debt to subsidize its purchase of 20th Century Fox and the formation of the FOX TV network in the 1980s. By the mid 1990s, News Corp. had eliminated much of that debt.
News Corporation operates in 9 different media on 6 continents.
12% book publishing.
The Company is very good at utilizing its various properties for cross-promotional purposes and using its media power to curry influence with public officials worldwide.
The only media sector in which News Corp. lacks a major presence is music, but it has a half interest in the Channel V music TV channel in Asia.
Music (about 60% of revenues): former CBS records
Film and Television Production. (40%): Columbia Pictures.
VI. Why media concentration?
Concentration of ownership -- fewer owners in the marketplace -- has been occurring since the end of WW2. But it picked up in 1980s and continues. Why?
1. Relaxation of Federal Rules on Ownership.
(a) Federal Communications Commission
Sharply reduced restrictions on ownership of broadcast properties by a single company. The FCC also abandoned its rule that a new owner must hold a broadcast license for at least three years before selling it.
In the early 1980s, the FCC Okd a single licensee to own 12 radio, 12 FM and 12 TV stations so long as the TV holdings did not reach more than 25 per cent of the total US viewing audience.
(b) Telecommunications Act of 1996 allowed a single company to own 5 local radio stations and virtually an unlimited number of stations nationally.
2. Media properties very profitable
Thus they are very attractive to investors.
Lucrative because huge flow of advertising dollars into them.
Consumer goods in US: much alike. Not much product differentiation.
Soft drinks, beers, cigarettes, automobiles, clothing, soap: you name it, not a lot of difference in quality or cost of many of these products.
So manufacturers turn increasingly to marketing to create the sense of value in their product.
The major beneficiaries of these large expenditures: mass media.
By virtually any meaningful statistical measure (such as return on investment, profit margin, or whatever), newspapers, magazines, radio and TV stations all do considerably better than shoe manufacturers, food processors or virtually any other industry you can think of.
This profitability makes the mass media a desirable target for persons interested in getting a good return on their investments.
3. Existing Media Company. profits.
Media companies can generate a lot of profit.
--can pay it as dividends to shareholders.
--can keep it -- and be taxed heavily.
-- or can spend it on some sort of improvement or expansion.
Improvements limited (only so much new equipment you can buy)
-- but with expansion: can get other profitable companies.
Media companies a great target, so buy more.
End up buying existing media companies (e.g., virtually all communities that can support a newspaper already have one, so you buy an established one).
4. Attractive for owners to sell media properties.
(If a company earned $3 million last year and sold for $30 million == the sale multiple is ten times earnings).
Most businesses sell at 10 times earnings.
Media companies: 30, 40 or 50 times earnings not uncommon.
The lure of such profits: quite the nudge.
5. U.S. tax laws.
With sales at 40 or 50 times earnings, taxes can be very high -- particularly inheritance taxes.
No choice but to sell. Imagine: newspaper with real assets (land, building, equipment ) with a real value (book value ) of $5 million. The market value is, let’s say, $15 million. Also: intangible assets (successful publication, etc.): $35 million.
So: Total value of the property for tax purposes is $50 million. Estate tax on that amount in 1990 was $27 million. How is the heir to raise that much money without selling the newspaper? Tests heirs -- many of whom don’t want to run the companies themselves and are thus happy to take their huge profits.
6. Concentration can save a lot of money
Centralization of many business functions -- share expenses among all units in a company. One attorney, for example, can advise several different companies within a larger company. Elaborate/expensive computer facilities can be shared among several newspapers through satellite and microwave transmissions. A newspaper or broadcast chain can share the cost of a Washington or foreign news bureau and a national advertising staff. Economies of scale: A big company buys everything from newsprint to paper clips at prices well below those paid by a single newspaper. Those economies of scale can result in significant cost savings. Easier to borrow money at the bank, pay less interest on what is borrowed; more easily refinance the loan when needed. Easier to use the growing number of automated labor-saving production systems.
7. Synergy Possible.
Disney makes movies. If it buys ABC TV network: it has a guaranteed place to show them. ABC TV shows in turn can promote Disney products -- such as its theme parks or its cable channels (such as ESPN).
VII. Good? Bad?
There are good conglomerates, bad ones. Good chains, bad ones.
In many ways, the criticism about conglomerates and newspaper chains reflects concerns not just about media but about American business generally.
It also speaks to our schizophrenic attitudes toward media.
1. We expect the media to serve public functions but
2. We also want the media to operate as private, for profit companies (so that much of the cost is absorbed by others).
The for-profit environment creates the momentum for many of these trends (conglomerates, chains, etc.)
VIII. Rupert Murdoch?
Is it a danger to democracy to have one man who owns so much?
Murdoch: one of the largest media owners in the world. And one of the most grasping. heavily criticized for providing self-serving information, self-promotion, playing favorites and disguising political advocacy as news. Example of the modern media tycoon.
His company: News. Corp.
Generally conservative and plays favorites.
Various studies showed that Fox Cable News stood out in carrying anti-Clinton material, general criticism of non-conservative politicians (including Democrats, moderate Republicans).
Plays favorites with politicians (England: Margaret Thatcher, John Major, later Tony Blair); United States with Newt Gingrich ($4m book deal while major legislation pending). Close ties to Clarence Thomas; Fox TV scrapped a TV drama based on a book about Thomas by two Wall Street Journal reporters. Project stopped after Murdoch (a personal friend of Thomas) read the book. Book: Meticulous project; won National Book Award.
2. Wooing China
China represents the world’s largest media market; five times bigger than U.S. Murdoch trying to get a foothold in China. Murdoch’s satellite companies censor reports critical of China; Refuses to broadcast BBC reports that include criticism of China (on human rights, criticism of Mao). Huge advance for book by Deng (former paramount leader of China; seen by many as bribe); Publication of book critical of China (over Hong Kong) stopped by Murdoch himself (book by Chris Patten, last British governor general in Hong Kong; Murdoch book interests had a contract, were going to publish the book; book project moving along until Murdoch personally killed the project; highly unusual for him to be so involved in these projects. Claim: book poorly written. Internal memo shows real reason: politically unwise but cannot say that, so get employees to say book poorly written). 20th Century Fox: no movies on Tibet.
3. Content Strategy
Tabloids in Australia and United Kingdom: Sex, sex, sex. Including women with bare breasts in Australia or in skimpy swim suits.
Fox TV in US: Bringing sex into prime time: Melrose Place, Beverly Hills 90210. Set the stage for 1980s TV sex/sizzle.
Attack enemies: particularly Clinton.
Promote friends: Rudy Giuliani in New York City
Synergy: TV Guide promotes Fox TV shows; NY Post promotes Titanic (a Fox movie)
Wants to have a greater U.S. presence; seeking repeal of current FCC rules that limits a single owner to access to more than 35% of U.S. market.
Murdoch: claims to reach 75% of earth’s population. Do we want him to reach more?
His defenders argue: He’s an efficient big business guy. Very shrewd.
His critics: Dangerous trend here, with one person or company heading toward global domination.
Is it possible that a scenario such as the one in the Bond movie, Tomorrow Never Dies, would come to pass?
Media mogul Elliot Carver wants to run the world..