Why Mass Media Mergers are Meaningless; A. Thierer

The Department of Justice has already said it may challenge elements of the Time Warner-Turner deal and is now looking into the Disney-ABC merger. This would be a mistake. Prohibiting such alliances from occurring would be anti competitive and an utter waste of regula tors' time. There simply is no credible evidence that these mergers will hurt con sumers. The old days of mass-media mo nopolies and shovel-fed couch-potato fare are over. These corporations will compete in a radically modernized media market place that is eroding their traditional advanMr. Thierer is the Walker Fellow in Economic Policy with The Heritage Foundation in Wash ington, D.C., and author ofthe series, "A Policy Maker's Guide to Deregulating Telecommunica tions." 4 tages while forcing them to further improve the quality of their own offerings. Today's communications, entertainment, and computer markets are becoming in creasingly demand-driven. That is, consum ers are now, more than ever, being provided with the tools to tailor-make programming to meet their own tastes. A critical juncture is about to be reached in the history of these three distinct sectors as they merge into one new larger industry: the information sector.

The digitalization of information-its coding and distribution in a more efficient and cost-effective fashion-has facilitated this process. As it continues, the costs of infor mation processing, storage, and distribution will continue to fall rapidly. Consequently, countless new sources of information and entertainment will make their way into American homes and workplaces, espe cially via the computer. It's already happening. Internet survey ists Matrix Information and Directory Ser vices (MIDS) estimate that roughly 13.5 million people currently use the Internet, and that the number is doubling every year. If Internet access continued to grow at that rate (as it has for the past six years), everyone in the world would be wired by 2003! Of course, that won't happen, but such remarkable growth bodes unfavorably for the older media moguls, whose idea of viewer empowerment is a remote control with more buttons.

No Uncompetitive Advantage The merging media giants may gain some programming advantages in the short run via their combined pool of investment cap ital. But, they certainly will have no uncom petitive advantages since they will be just one of many providers consumers can re quest service from in the near future. With consumers calling the shots, the idea that programmers like ABC, CBS, Turner, Time Warner, and Disney will have a serious advantage over all other information-enter tainment providers is unrealistic. Indeed, one must wonder if the television itself will survive the digital storm. Techno logical visionaries like George Gilder and Nicholas Negroponte warn of the impending death of TV and its eventual overthrow by the more intelligent, programmable per sonal computer along with its many on-line, consumer-driven services. If the Internet revolution continues apace, they may be right. No wonder the broadcast industry is currently begging Congress to give them additional broadcast licenses free of charge to make their transition into the digital world.

This is the real meaning behind the new mergers. Older firms are looking to merge as the world around them becomes less cer tain. In reality, Americans should feel some what sorry for these firmsthat feel they must "merge or die," so to speak. In essence, 5 their actions are a signal to the world that the old media empires are modern-day di nosaurs headed for extinction. Scholars like Harvard Business School professor Michael Porter have noted that alliances "proliferate in industries undergoing struc tural change or escalating competition, where managers fear they cannot cope. They are a response to uncertainty, and provide comfort that the firm is taking ac tion." In other words, the merger or alliance is often the last refuge of a desperate cor poration, a lifeboat to grab hold of while the bigger ship is sinking. For America's mass-media firms looking to buy competi tive advantages both upstream and down stream, they have to hope this strategy works. Meanwhile, pesky information-age entrepreneurs will continue to chip away at the broadcast empire by continuing to offer more innovative services.

But regardless of whether these media merger experiments succeed in the long run, there is no need for policymakers to inter vene and micromanage their transitional efforts. As Negroponte notes: "The com bined forces of technology and human na ture will ultimately take a stronger hand in plurality than any laws Congress can in vent. " Being that this is undoubtedly al ready the case, legislators and regulators can rest easier knowing Disney's Mickey Mouse and his new broadcast buddies won't be monopolists any time soon. D Op-Ed Watch T he Foundation for Economic Education continues to expand in its efforts to spread the message of liberty. Part of our important work is our newspaper editorial pro gram. Special versions of our best Freeman articles are appearing in newspapers across the country-and around the globe. You can help us to monitor our work. If you see one of our articles in your paper, drop us a line or give us a call.