excerpted from the book, The Big Five
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... it would have been difficult to imagine in 1983 that the corporations that owned ALL the country's dominant mass media would, in less than twenty years, shrink from fifty separate companies to five.
If however one looks at the properties of the dominant five, it provides some insight into how it could have happened. Their steady accumulation of power in the world of news, radio, television, magazines, books, and movies gave them a steady accumulation of power in politics. Political leaders and parties know that the news media control how those politicians are depicted to the voting public; the more powerful the leading media, the more powerful their influence over politicians and national policy. Prudent politicians treat the desires of all large corporations with care. But politicians treat the country's most powerful media corporations with something approaching reverence.
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Who and what are these dominant five media corporations?
Time Warner
On January10,2000, the American television audience was invited to the most expensive marriage ceremony in history. It was a corporate wedding, so the loving couple were two men, and it was not uncouth to mention money. In the Wall Street Book of Common Stock, it is mandatory to mention the wealth of newly joined couples. That is why the news mentioned that the ritual combined one party worth $163 billion with its soul mate worth $120 billion.
The merger joined America Online, headed by Steven Case, and Time Warner, headed by Gerald Levin (in corporate weddings it is not always easy to distinguish which is the groom and which the bride). Case, forty-two years old, had built a firm with the most common acronym, aol, for the servers that lead to sites in the vast universe of the Internet. Earlier, AOL had already merged with competitors Netscape and CompuServe. Levin's Time Warner bad been the empire Henry Luce had built seventy-seven years earlier when Luce had co-founded Time magazine. Long before the marriage, Luce and his successors at Time, Inc. had spawned a growing family of magazines that included Life, Fortune, Holiday, Sports Illustrated, and People; Time, Inc. later merged with Warner Brothers, which itself had gathered other firms in music, movies, television, and newer media.
In addition to its other headline-making news, the merger became the most spectacular celebration of what was, at the time, the ultimate holy word on Wall Street, synergy. Synergy, borrowed from physiology, describes how the combination of two separate entities produces a power greater than the simple addition of the two. The word became a mantra with merger specialists, investment bankers, and entrepreneurs. it seemed inevitable that combining the two corporations would more than double their separate powers in the marketplace.
AOL Time Warner was seen as synergy perfected: Time Warner had by this time a large quantity of media products from magazines to movies (an undifferentiated commodity known on Wall Street as "content"), and AOL had the best pipeline through which to send this "content" instantly to customers' computers.
A list of the properties controlled by AOL Time Warner takes ten typed pages listing 292 separate companies and subsidiaries. Of these, twenty-two are joint ventures with other major corporations involved in varying degrees with media operations. These partners include 3Com, eBay, Hewlett-Packard, Citigroup, Ticketmaster, American Express, Homestore, Sony, Viva, Bertelsmann, Polygram, and Amazon.com. Some of the more familiar fully owned properties of Time Warner include Book-of-the-Month Club; Little, Brown publishers; HBO, with its seven channels; CNN; seven specialized and foreign-language channels; Road Runner; Warner Brothers Studios; Weight Watchers; Popular Science; and fifty-two different record labels.
The marriage ran into difficulties over, as usual, money. The couple's wedding required massive debt, but it was a time when debt was considered unimportant. In 2000, the marketplace was flooded by investors in the digital world eager for magical pieces of paper called stock options that had made some people millionaires overnight. Major banks with fine old nineteenth-century names lent billions without looking too closely at the arithmetic in the borrowers' balance sheets (or at their own, it later became clear). The public was told that this was the "new economy." Dismissed as hopelessly obsolete were notions like judging a company on the basis of whether there was some relationship between income and outgo or between assets and liabilities.
The new economy developed, at the very least, birth pains. By 2003, Time Warner had a metaphoric yard sale on its front lawn. It was trying to sell its book divisions, the fifth largest in the country, worth more than $30 million. Steven Case and Gerald Levin had been unseated by unhappy board members, and by 2002 the Securities and Exchange Commission and the Department of justice had announced that they wished to examine how AOL had kept its books before the merger.
But it was still the biggest media firm in the world.
Disney
The lovable rodent with big ears, the one called Mickey, with the squeaky, baby-like voice and the innocent charm, is really more than seventy-five years old and makes more than $25 billion a year. To be more precise, he and his playmates really make that money for his corporate parent, the Walt Disney Company. The firm now controls more subsidiaries than Walt himself had added, like his first Disneyland. The innocence of Mickey and his friends Goofy, Dumbo, and the Seven Dwarfs enchanted generations of children around the world. David Low, the British political cartoonist, called Walt "the most significant figure in graphic arts since Leonardo."
The Disney company grew in ways Walt might not have imagined. It would become the seventy-third largest industry in the United States under Michael Eisner, chairman and CEO of the Walt Disney Company. Eisner had caught the merger and acquisition fever of the 1980s and 1990s. In 1984 he was named ABC's chairman and CEO, and ten years later acquired the newspaper-broadcast chain ABC/Cap Cities. It became the Walt Disney Company.
Eisner, who has a talent for promoting his own enterprises, had a reputation for wanting nothing about his personal life publicized. If he heard of some possibility, he made rigorous efforts to suppress it. But inevitably there were moves for the usual tell-it-all books about any powerful national figure, and that began a battle. Broadway Books commissioned an Eisner biography, Keys to the Kingdom, by Kim Masters, a contributor to Vanity Fair, with a $700,000 advance. The publisher's spring catalog listed it as "brilliantly reported." But the head of Broadway Books suddenly decided that the "brilliantly reported" manuscript was "unacceptable." The suspicion was that Eisner, increasingly powerful, had the original contract killed.
In the nature of many celebrity biographies, this became a mud fight. The book was said to include Eisner's quarrel with his former protégé Jeffrey Katzenberg. Author Masters said her original editor had received a Disney demand to cancel the book. There were Hollywood rumors that Broadways Book's parent firm, Bertelsmann, was planning to buy some German television stations from Eisner's Disney company and did not wish to displease Eisner.
Disney ownership of a hockey team called The Mighty Ducks of Anaheim does not begin to describe the vastness of the kingdom. Hollywood is still its symbolic heart, with eight movie production studios and distributors: Walt Disney Pictures, Touchstone Pictures, Miramax, Buena Vista Home Video, Buena Vista Home Entertainment, Buena Vista International, Hollywood Pictures, and Caravan Pictures.
The Walt Disney Company controls eight book house imprints under Walt Disney Company Book Publishing and ABC Publishing Group; seventeen magazines; the ABC Television Network, with ten owned and operated stations of its own including in the five top markets; thirty radio stations, including all the major markets; eleven cable channels, including Disney, ESPN (jointly), A&E, and the History Channel; thirteen international broadcast channels stretching from Australia to Brazil; seven production and sports units around the world; and seventeen Internet sites, including the ABC group, ESPN.sportszone, NFL.com, NBAZ.com, and NASCAR.com. Its five music groups include the Buena Vista, Lyric Street, and Walt Disney labels, and live theater productions growing out of the movies The Lion King, Beauty and the Beast, and King David.
The company has a quarter interest in the Anaheim Angels baseball team and owns fifteen theme parks and its cruise line. It has its own interactive subsidiaries, with CDROMs for video games, and computer software. Its more than one hundred retail stores sell Disney-related products. Almost as an after-thought, it has a part interest in Bass oil and gas production.
Like all other dominant media corporations, Disney takes on cartel-like character through twenty-six joint ventures with other corporations, most of them media companies that constitute Disney's main "competitors." Some of the joint ventures are with General Electric (whose NBC competes head to head with ABC, Hearst, ESPN, Comcast, and Liberty Media).
By late 2003, Eisner's leadership of the Disney empire was seriously threatened. Disney stock was falling in value and Roy Disney, nephew of Walt Disney and vice chairman of the board, resigned along with another board member. He issued a highly publicized demand that Eisner resign as well.
The "magic kingdom" apparently had lost some of its magic, especially in financial performance of its ABC network and one of its most profitable divisions, the Disney cruises. This encouraged big cable's Comcast to move toward merger or purchase.
Murdoch's News Corp and FOX
When Murdoch's News Corporation acquired Hughes's DirecTV satellite system, it not only added $9 billion a year in annual income but also gave his Fox programs a new medium for reaching millions of homes through small rooftop satellite dishes. Though fiberoptic channel, with its huge transmission capacity, has a better foothold, Murdoch's new acquisition gave him the power to intimidate bigger systems like Time Warner and cable systems, by offering home gadgets to record his programs via DirecTV without commercials. The possibility of eliminating commercials is a perpetual nightmare for media industries and their advertisers. Consequently, promises of adless commercial television and cable programs have a short half-life: once adless cable programs have accumulated a large enough audience, grateful for the absence of commercial interruptions, the program owners seem unable to resist selling their audiences to eager advertisers.
Furthermore, Murdoch realized be could use DirecTV to put himself on both sides of bargaining tables. He is a tough and patient negotiator and can use earlier acquisitions of his cluster of Fox sports channels plus DirecTV to get his own price for carrying schedules of big sports teams and special events. Other network outlets, like Disney's ESPN, ESPN2, and ESPNRegional (some held jointly with Hearst) may have to deal with DirecTV, as will cable companies for households desiring Fox-originated sports. Professional teams use broadcast rights as a major source of their income, but Murdoch can make them sell him their broadcast rights for less because his acquisitions have further reduced the number of bidders.
In bargaining between owners of sports teams selling broadcast rights and the broadcasters bidding for them, Murdoch found a way to be both buyer and seller. Like other media companies, he wanted broadcast rights for popular sports events. So he bought the teams. At one time he owned the Los Angeles Dodgers, New York Knicks, and part interest in four others, plus Fox Sports Radio Network. Gene Kimmelman of Consumers Union said, "Hold on to your wallets. Prices will go through the roof." The rising prices will, of course, result in higher payments by the public.
Those who possess that kind of power seldom permit it to remain idle. The mass media, especially the news media, have used their power to obtain special governmental favors for themselves and their proper-ties. Rupert Murdoch, brazen in his methods, makes clear what other major media owners achieve by more conventional methods, like campaign contributions and lobbying in Washington.
Brazen or not, two impulses seem to drive Murdoch's business life -the accumulation of as much media power as possible and the use of that power to promote his deep-seated conservative politics.
Born Keith Rupert Murdoch in 1931, he soon dropped the Keith and, at the age of twenty-three, was given control of a faltering paper in Adelaide, a tiny part of his father's Australian news empire (an echo of the original William Randolph Hearst, whose rich father gave him a present of his first paper, the San Francisco Examiner). At Oxford, Murdoch had been a wild Marxist, nicknamed "Red Rupert," a youthful fling with leftism that settled into ultraconservatism (again, a parallel with the transformation of young socialist Hearst, who soon became the adult reactionary Hearst).
Murdoch became an unrelenting builder of international media empires. He left his Australian papers for England, where he soon owned two of Great Britain's largest papers, an afternoon sleazy tabloid and a Sunday paper full of overflowing female bodies and sensational gossip.
Wanting direct political power beyond his sensationalist moneymakers, he moved to acquire two more newspapers that happened to be among the world's most influential, the Sunday Times and the (daily) Times. Because he already had acquired two national newspapers with circulations in the millions, his acquisition of the Sunday and daily Times was forbidden by England's Monopoly Commission. But he obtained stock pending official approval and used his media to help Conservative candidate Margaret Thatcher win election as prime minister. With Thatcher's cooperation, Murdoch broke the Minority Commission rules and acquired both Times newspapers. The Economist magazine reported that Murdochs British holdings in 2000 had $2.1 billion in profits, but by creative bookkeeping and political influence he did not pay a shilling in British taxes. This would not be the first time Murdoch would use his media power to evade laws and regulations that might interfere with his acquiring still more media power.