Cover Story: RELAX
COMMENTARY: MEDIA CONTROL IS NARROWING. SHOULD WE WORRY?
Ah, media. Entertainment moguls are scrambling for partners and targets in a bold bid for industry dominance. For some, the sheer size and reach of these behemoths--Michael D. Eisner's Disney, Rupert Murdoch's News Corp., Sumner M. Redstone's Viacom, and Gerald M. Levin's Time Warner--raise troubling questions. Will the concentration of media power cut down on the diversity of information that nourishes a healthy democracy and a free-market economy? Will it stifle competition and creativity? Homogenize our culture?
In theory, it's possible--but not at all likely. Today's info-entertainment industry, marked by the historic confluence of media, computer, and communications technologies, is one that defies anticompetitive practices. No one really knows which companies and technologies will come out ahead, so everyone is rolling the dice. The result is an industry that requires more creativity than ever to make money. Any phenomenon that chills innovation, such as monopolistic behavior, quickly will be attacked by market forces. "If you stop being creative, someone will outflank you," says Richard Sylla, an economic historian at New York University.
DASHED AMBITIONS. Moreover, even as media companies get bigger, the potent combination of information technologies, the emerging global dataway infrastructure, and the global economy is vastly increasing the size of the market. At the same time, the media industry is being swept up in a wave of entrepreneurship. There's talk radio. Online services. Bloomberg. Wired. The Internet.
It doesn't look like a monopolized market, does it? "What strikes me is how incongruous are these boardroom-generated empires with what's going on in the Internet at the grass roots where people are pushing technology in extremely creative ways," says Eli M. Noam, professor of finance and economics at Columbia University. Adds Michael Schudson, professor of communications and sociology at the University of California at San Diego: "We have lots of sources of information even with all the agglomeration of media giants."
Moreover, one of the most striking lessons from the four prior great merger waves in U.S. history is how many of these corporate marriages ended up disappointing their builders. It's hard to find clear-cut success stories, especially when megadeals are struck in a takeover market with more than a hint of media madness and euphoria--like now. Expect a lot of dashed ambitions and divestitures in coming years.
The media and communications market is more competitive than before. There's cable television, satellite broadcast, videos, and so forth. But that's not enough. Going forward, the best way to ensure diversity of content and wellsprings of innovation is for policymakers to encourage the media business to become even more competitive than it is now.
The problem is that Congress, currently rewriting telecommunications law, isn't being bold enough. Legislators still want stringent limits on rivalry. There's a danger that the Baby Bell monopolies will be preserved, for example, which might allow them to restrain new competitors in their local markets.
REAL DEREGULATION. Instead, Congress should embrace genuine deregulation: Allow the Baby Bells, wireless, the long-distance telephone companies, cable television, and any other player to compete without fetters. Get rid of limits on foreign ownership. Open up the airwaves to more entrepreneurs. "What we need is more competitors in more markets," says Thomas Hazlett, director of the program on telecommunications policy at the University of California at Davis. Of course, in the free-for-all that would follow, some companies would try anticompetitive practices or alliances, but the nation's well-established antitrust laws could deal with that.
Americans have always had a deep mistrust of Big Business and a distaste for monopoly. History has shown that it is very difficult to establish or sustain an oligopoly without government sanction. Competition may ensure we all read or hear or see a lot of schlock. But competition will also block the consolidation of media power and allow for the unexpected, the occasional jewel, that enriches our culture.By Christopher Farrell