Media sharks just got bigger
By Sean Healy
The January 11 US$350 billion merger of the world's largest media company, Time Warner, and US internet giant America Online (AOL) will spur a new wave of mergers and acquisitions, centralising control of the world's information sources in even fewer, private hands.
Nine giant corporations dominate almost every corner of the world media market. Eight are from the US: Time Warner, News, Viacom, Disney, AT&T/Liberty Media, General Electric, Sony and Seagram; the ninth, publishing giant Bertelsmann, is German. The 1998 revenue of Time Warner was US$27 billion, 50 times larger than the revenue of the world's 50th-largest media company.
"Time Warner is a major force in virtually every medium and on every continent", according to Robert McChesney, an associate professor with the Institute of Communications Research at the University of Illinois.
Time Warner owns, amongst other holdings, cable news station CNN, which beams to 200 nations and 90 million subscribers; 16 US television stations; the largest cable system in the US; half a dozen major pay-television channels (including TNT/Cartoon Channel, Home Box Office and the Comedy Channel); Warner Brothers and New Line film studios; 24 magazines including Time, People and Sports Illustrated; a library of more than 6000 films, 25,000 television programs and thousands of cartoons; 50% of DC Comics, the publisher of Superman, Batman and 60 other titles; and the Warner Music Group, one of the world's largest music businesses. Time Warner even owns sports teams: the Atlanta Hawks (basketball) and the Atlanta Braves (baseball).
IT bubble
The merger of such a media giant and an internet company is a new development, although long predicted. Writing in the November/December 1997 issue of the US Nation, McChesney argued, "Some once posited that the rise of the internet would eliminate the monopoly power of the global media giants. Such talk has declined recently as the largest media, telecommunication and computer firms have done everything within their immense powers to colonise the internet, or at least neutralise its threat. The global media cartel may be evolving into a global communication cartel."
Even more unprecedented than the merger, however, is the fact that Time Warner didn't buy AOL — AOL bought Time Warner. AOL's shareholders will take 55% of the stock in the joint company.
The IT industry has gone through a two-decades-long process of merger and takeover and has produced its share of global giants; Microsoft, Intel and America Online are among the most highly capitalised companies in the world.
AOL has swallowed up rival CompuServe and web pioneer Netscape and now has 22 million subscribers in the US. Its merger with Time Warner will allow it to use Time Warner's cable television system to further its domination of internet service provision.
AOL's offer to Time Warner was helped by an enormous boom in its share price. Speculation has driven the share price of many IT companies, AOL included, far above their real value.
By the end of trading on January 11, AOL had a market capitalisation of 214 times its yearly revenue; Time Warner's was 140 times its revenue. These figures are at least 10 times what would normally be expected for a healthy, profitable company (by contrast, News's capitalisation in December was only 1.35 times its yearly earnings).
At some point, this bubble will have to burst. In the meantime, the AOL-Time Warner merger will put pressure on all the other major media and IT companies to keep up and will fuel further buy-outs.
The merger will have a significant impact in Australia. It will increase the pressure on the federal government to scrap existing cross-media ownership laws and allow the media empires free reign. These laws prevent companies from owning both print and television interests in the same location and have stood in the way of Kerry Packer's desire to own the Fairfax chain of newspapers and of Rupert Murdoch's desire to buy, or set up, a television station of his own.
In November, PM John Howard called these laws "silly", but he doesn't have the numbers in the Senate, or in his own party, to scrap them — yet. You can expect to see more than a few propaganda pieces in the coming months in the Australian and the Herald-Sun, and on Channel Nine, about the "unfairness" of these laws.
The AOL-Time Warner merger will also put greater pressure on the government to privatise the rest of Telstra. Telstra fancies itself as a potentially major player in the IT-media market and former chief Frank Blount has already warned that it can't become such if it is still 51% government owned.
Corporate control
But the biggest impact will be on the consumers of news and entertainment: us.
Writing in the November 29 issue of the US Nation, McChesney argues: "With hypercommercialism and growing corporate control comes an implicit political bias in media content. Consumerism, class inequality and individualism tend to be taken as natural and even benevolent, whereas political activity, civic values and anti-market activities are marginalised. The best journalism is pitched to the business class and suited to its needs and prejudices; with a few notable exceptions, the journalism reserved for the masses tends to be the sort of drivel provided by the media giants on their US television stations."
This trend is already noticeable on the internet, too, as media companies scramble to set up news sites of their own and entice subscribers.
Media and information technology could be immensely democratising. But the corporate empires have another idea: to subordinate all the major sources of information (television, print, the internet) to their own interests, to choke off dissident voices and to make themselves a happy fortune. We shouldn't let them.