In my 2004 book, Media Myths: Making Sense of the Debate over Media Ownership, I pointed out that mergers and acquisitions represent just one of many strategies media companies utilize to respond to consumer demand and new market challenges. Other strategies include spin-offs and line-of-business divestitures on the one hand, and new technological investments or expanded product or service offerings on the other.
But those other strategies never seem to attract the same amount of attention as mergers and acquisitions even though they are far more common. In fact, as media guru Ben Compaine correctly observes, â€œBreak-ups and divestitures do not generally get front-page treatment.â€ Such stories usually get buried in papers and magazines, or get a small mention at the bottom a news website, if at all.
That's why I started this series of "media DE-consolidation series" of essays a few years ago. I wanted to highlight the other side of the story and show how the media marketplace is far more dynamic than critics care to admit. In fact, as FCC Commissioner Robert McDowell noted recently in an excellent speech on the true state of the media market, "Traditional mediaâ€™s numbers are shrinking," and "The ironic truth is: in many cases, media consolidation has actually become media divestiture. Companies such as Disney, Citadel, Clear Channel and Belo actually have been shedding properties to raise capital for new ventures."
That's exactly right, and the many other entries in this series prove that point. We're in the midst of a massive wave of media divestitures and downsizing. And today we have another example with News Corp's announcement that it will be shedding 8 of its Fox-affiliated TV stations in mid-sized markets.
News Corp. is selling the stations to Oak Hill Capital Partners for about $1.1 billion in cash. The sale leaves News Corp. with just 27 owned-and-operated Fox TV stations, most of which are located in major media markets.
I was impressed to see a story about this divestiture--albeit a very small one--in the "A" section of the Washington Post today. Again, usually news like this gets buried on page J28 of some obscure section of a paper.
Incidentally, where are the cries of â€œmedia conspiracyâ€ when such divestitures and spin-offs go all but unreported? Radical media critics are always saying that major media operators hide or under-report news about mergers or acquisitions in their business. In reality, the exact opposite is the case. Media industry M&A activity usually gets front page treatment accompanied by apocalyptic headlines. Remember all the front-page gloom-and-doomism about Viacom acquiring CBS and AOL merging with Time Warner? But what has happened as those deals came apart at the seams? That news has been relegated to the sections of papers, magazines, or websites that few people read. And we hear almost nothing about it on TV or radio. So much for those absurd media conspiracy theories.
The most recent hullabaloo was over News Corp's play for the Wall Street Journal, which made all sorts of news and was also accompanied by plenty of Chicken Little-ism. In the larger scheme of things, the deal is largely meaningless. It's not going to affect the character of the media marketplace, competition, diversity, or localism since the Journal is a national paper focused mostly on business news and national politics. By contrast, News Corp's spin-off of smaller TV stations should be exactly the sort of thing that media critics should be applauding since--at least in their scheme of things--this is the sort of move that should change things for the better. But don't hold your breath waiting for a response from them. It doesn't play well to their radical base of anti-capitalist activists.