Pitfalls of Media Mega-Mergers

The merger of America Online and Time Warner, announced in January and scheduled to close in the fall, is a monumental union by any reckoning. In dollar terms$165 billionit is among the largest corporate mergers ever. And to overstate its importance for the communications and entertainment industries would be a rhetorical feat. Even allowing for the fast pace of technological change, the resulting colossus will have a major impact on how we inform and divert ourselves.

With around 22 million subscribers, AOL is the largest Internet service provider by far. TW, the world’s biggest entertainment company, owns three film studios, the television units CNN, HBO and the WB network, the premier stable of magazines, powerhouse book publishers, three major record companies, the second biggest domestic cable television system and more. Size alone, however, is not the key. Neither company will gain market share in an existing business through the merger. The deal has been ballyhooed because of how their assets fit together; it is an awesome combination of content and delivery. The infrastructure for transmitting digitized information is profitably in place. The genius of the merger stems from being able to feed it with quality, homegrown content that can be cross-promoted and advertised within the corporate family. This will create substantial efficiencies.


Thus AOL-TW gives real meaning to the term corporate synergy. Its relationships with other companies, including direct competitors, will also be greatly enhanced. A hallmark of the so-called "new economy" is the role of alliances, joint ventures, equity stakes and other pacts among huge corporations in the entertainment and communication sectors. Rivals such as Sony, Disney and Viacom must be in business togetheras must telephone, cable and satellite companiessince everyone has to hedge bets on delivery methods and offer the most desirable content.

In every respect except wireless technology, AOL-TW is in the catbird seat. Yet these synergies create conflicts of interest on an unprecedented scale, particularly with respect to journalism. Before looking at the adverse effects of media conglomeration on journalism and public discourse, some other issues deserve mention.

A Monopolistic Giant?

Labor is usually the first casualty in a merger, but here there is little if any workforce overlap. It is difficult to generalize about the effect on consumer fees. Lawmakers and regulators can protect consumers from gouging if they choose. The tougher consumer issue is privacy. AOL has detailed records on its users and where they go on the web; TW tracks the habits of their subscribers. How will this information be used? The possibilities range from annoying explosions of junk mail to prosecutions for wandering with malicious intent into the wrong Web site.

With the Microsoft antitrust verdict in the air, AOL-TW conjures fears of a monopoly dragon swooping through cyberspace devouring or fatally maiming competitors. The respective chairmen, Steve Case of AOL and Gerald Levin of TW, have appeared before one suspicious Senate committee already, and regulatory scrutiny will be intense. Legal challenges by consumer groups are possible. Competitors, however, are hesitant to criticize the merger publicly because doing so might damage their own interests. Furthermore, they might find themselves in a similar position some day. In any event, garden variety charges of monopoly do not seem to apply since, again, neither company is getting more market share in its existing businesses.

There are still many ways for AOL-TW to behave in an anti-competitive manner. Open access to cable lines has received the most attention. What is to prevent the company from denying other Internet service providers access, let alone equal access, to their pipelines into homes? Addressing this fear, AOL-TW has pledgedin a toothless, non-binding agreementto give other service providers equal access to TW’s cable lines. According to Senator Orrin Hatch, hardly an anti-business type, "healthy skepticism" is warranted on this score.

Open access on the content side is trickier. What will stop other media outlets from being denied a place, or at least prominent places, on AOL? And why shouldn’t AOL-TW use its market power to favor its own content? Why feature Newsweek when you own Time? AOL-TW argues it would simply be bad business not to include the best or most popular information on its site. This is compelling reasoning as far as it goes. Eventually your bottom line will suffer if you deny your customers what they want; and any short-term disadvantage to AOL-TW in offering copy from competitors like Newsweek or Reuters can be offset by its ability to cross-promote and give price breaks to sister divisions.

Undue Influence Over Public Opinion?

But something more vital than profits will suffer if AOL-TW chokes the delivery and content funnels: media diversity. We assume that when power is concentrated in a handful of giants, some kind of Orwellian total control of information is inevitable. Many see the Internet as a mitigating factoreveryone can have a voice on the Net. The challenge is to find those voices, and that is why AOL’s portal and search engines are so valuable. So to assert that the Internet gives everyone a voice begs the question. While it represents a quantum leap in the amount of information readily available, the medium is likely to be dominated by behemoths.

The crucial aspect of the diversity issue can be termed the danger of undue influence. Do we want a few media corporations to have a disproportionate role in shaping public policyby pushing their own political agendas, for example? Worse, do we want them forcing their tastes on usdeciding what movies we watch, what magazines we read and what music we listen to? I do not rank this as one of the major pitfalls of conglomeration mainly because it is an unlikely eventuality, given the bureaucracy in large corporations and the checks and balances of a properly functioning marketplace. Moreover it is a better result than what we appear headed for, namely, public discourse that lacks point of view, belief and taste altogether.

Conflicts of Interest Over News Reporting

Anyway, media diversity really boils down to ensuring editorial independence, and with it accuracy and fairness. In this environment of incestuous media entanglements, the most serious threat to independence is conflicts between a news gathering division and its corporate family. How will AOL-TW’s journalistic units act when covering stories involving its siblings? Will an editor at Entertainment Weekly be reluctant to assign an exposé on AOL’s entertainment links? Will a CNN segment producer shy away from reporting on problems in the Internet industry? There is also the danger that "reporting safe zones" will be established. If the company is seeking a big contract in Indonesia, its news outlets might refrain from running a piece critical of the Indonesian government. The motivations of columnists and critics when writing on topics related to the parent will be open to suspicion. Are they showing favoritism, or are they overcompensating by being hypercritical?

These tensions are hardly new and resist simple solutions. Disclaimers within a story or news broadcast are certainly inadequate. Media giants must adopt new journalistic guidelines and strengthen and extend traditional ones in order to police themselves. It should also be noted, of course, that size can benefit journalistic standards. A large corporation has greater resources to spend on enhancing news coverage, hiring ombudsmen and whatever else it might take to safeguard news gathering and reporting practices.

Size might help guarantee journalistic integrity for a practical reason discussed by Michael Kinsley, the editor of slate.com, in a somewhat tongue-in-cheek essay published, typically enough, in Time following the merger announcement. He argued it is impossible to figure out the interconnections within a media conglomerate. Journalists cannot discern who they might be offending, what is or isn’t a conflict, so they will just carry on as usual, presumably guided by the precepts of journalistic ethics. Maybe. But it is not just job security or the company’s health that discourages aggressive reporting. Journalists often have a financial stake in the parent. A reporter with stock options is not ipso facto compromised, but it is an added pressure. Another rationalization would be to argue that internecine muckraking will not hurt the bottom line because any harm to one division will be offset by gain in another, through higher ratings or better newsstand sales.

The best organic safeguard against losing editorial independence is good journalism unfettered by any other considerations. The most worrisome outcome would be for journalists to avoid potential conflicts altogether. If they will not publish an exposé about fraudulent accounting practices at their sister studio, the editors at Entertainment Weekly will be only slightly less reluctant to go after Disney. If they will not pursue rumors of insider trading at CNN’s "Moneyline," the editors at Fortune cannot justify putting CNBC’s "Market Wrap" under similar scrutiny. Important stories simply will not be investigated and reported; at best the reporting will be soft.


One can argue we have already reached the point of mass trivialization. Past media consolidation has resulted in homogenization. There are plenty of news outlets, they all just sound alike because stories are constantly being repackaged and recycled, both within the outlets of one company and among competing outlets. When Time Warner bought CNN, the magazines were immediately raided for programming content and used for promotional purposes. It makes perfect business sense. Unfortunately, recycled material becomes watered down as it passes through various media and technologieswhen a magazine article is fashioned into a television report, for example. The explosion of information technology cannot leave the information untouched.

Poaching from competing media also contributes to sameness. Television and radio news broadcasts, especially on the local level, often lift their stories from daily newspapers. Reflexiveness contributes to uniformity. The percentage of press reports about the press is too high. This cannibalism generates a certain frisson for media junkies, but the lasting result is to make it all sound and read the same. Most pernicious are the effects of journalism on its subject matter. I am not thinking of microphones being thrust in a grieving mother’s face, but of the tendency of press attention literally to change the story. The ability of the financial cable TV programs to influence investors and move financial markets, for instance, is highly problematic.

To conclude, systemic pressure to raze the wall between the editorial and business sides of a journalistic entity is increased exponentially by conglomeration. But media gigantism is itself a consequence of a far-reaching societal shiftthe digital revolution. No matter what journalists do or don’t do, the Internet and subsequent technologies will accelerate the commodification of journalism. The blurring of lines between news and entertainment will be fueled by the need to get consumers to pay for content and the need to create real revenue streams.

The threat to informed public debate is not that consumers will have to pay for news, howeverthey already do thatbut that the news will be indistinguishable from other data, specifically information designed to trigger a purchase and not a thought. This means content devoid of opinions, principles and ideas. Propaganda from media giants is preferable to sanitized public discourse and a diet of pasteurized data lacking any context other than commerce and the goals of pleasure and complacency. In other words, we are closer to Aldous Huxley’s dystopia than to Orwell’s. Such a bleak future may come to pass with or without AOL-TW, but this bellwether merger will not be innocuous, no matter how seamless and visionary.

Comments are automatically closed two weeks after an article's initial publication. See our comments policy for more.


The latest from america

In cities across the country, local activists marched in support of a progressive agenda centered on economic justice, racial justice and immigrant rights.
Brandon SanchezJanuary 20, 2019
Screengrab from a viral video showcasing a confrontation between a Native American drummer and a group of Catholic high school students in Washington, D.C. on Jan. 18, 2019. Screenshot via YouTube.
Several clips of the encounter circulating on social media show a small group of Native American drummers, who were in Washington for the Indigenous People’s March, being surrounded by a much larger band of teenagers.
Pope Francis has suppressed the Ecclesia Dei Commission, a significant decision with consequences for the Holy See’s relations with the priestly Fraternity of St. Pius X.
Gerard O’ConnellJanuary 19, 2019
Photo: IMDB
A new Netflix miniseries brings out the story’s aspects of adventure and conflict, with occasionally pulse-pounding results.
Rob Weinert-KendtJanuary 19, 2019