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Tuesday, November 6, 2007

Media Deconsolidation (Part 19): IAC/Interactive Corp. divides by 5
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Last week, a mob of anti-media activists gathered outside the FCC to protest what they regarded as the agency's willingness to embrace a radical deregulatory agenda on the media ownership front. The critics fear that the whole media marketplace is being gobbled up by a handful of evil media tycoons in New York and LA. If only the critics spent some time reading the headlines in the media outlets they criticize, they'd know that the marketplace reality is quite different.

In fact, over the past few years, I have been documenting the ongoing DE-consoldation taking place in America's media market. This series has built upon the themes and evidence I first presented in my 2005 book, Media Myths: Making Sense of the Debate over Media Ownership, in which I made the case that the media marketplace was far more dynamic than critics cared to admit.

And today we have yet another case study of DE-consolidation to report: Media tycoon Barry Diller announced yesterday that his conglomerate IAC/Interactive Corp. would be splitting into not 2, not 3, not 4, but FIVE different divisions. IAC controls more than 60 brands including Ticketmaster, Ask.com and the Home Shopping Network, but they have not been able to find a way to build "synergies" (an over-used business school term if there ever was one) together. And so Diller is separating those divisions so that they can pursue their "core competencies" (another business school term, but one that does not get enough attention).

Here's how the NY Times summarized what is going on:

The split is a sharp shift in strategy for a company that had nurtured the image of an opportunistic conglomerate eager to acquire new and appealing businesses. It also signals a rare retreat for Mr. Diller, who was certain of his ability to persuade Wall Street that his shopping bag of companies would pay off for investors. But the company’s share price was off almost 14 percent for the year.

“While we have created a lot of value, I have always believed that our complexity and many mouthfuls of sentences to explain who we are and what our strategy is have hampered clarity of understanding with all our constituencies, including investors,” Mr. Diller said.

The move, which follows split-ups at Viacom, Belo Corporation and E. W. Scripps & Company, is further confirmation that the Wall Street fad for media conglomerates has passed, replaced by a vogue in pure-play media companies.

As was the case with previous case studies in my media DE-consolidation series, what's going on here is that a traditional media provider is scrambling to come up with new strategies to meet the growing competition from new technologies and media outlets. Old giants like IAC are shedding properties and taking a “back-to-basics” approach to meeting this challenge by refocusing on their core competencies.

Again, this illustrates that the media sector is far more dynamic and competitive than most media critics care to admit. Giants come and go but, in the end, consumers are given more choices and better service with each passing year.

posted by Adam Thierer @ 9:28 AM | Mass Media

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