Compaine cites research by Adam Thierer and Daniel English, who found (PDF) that the newest neo-monopolists—Time Warner, Viacom, News Corp., Clear Channel, and Comcast—lost 52 percent of their value (in terms of market capitalization) over a five-year period at the beginning of this century.
"In large conglomerates, size and complexity is the enemy," Columbia University professor of economics Bruce Greenwald told the New York Times in 2005 in a story about the Viacom split. "Often, executives can't focus carefully on each of the businesses, so they don't run as well."
If far-flung media conglomerates so rarely harvest the bounty of their much-touted "synergies," why do CEOs keep building them?
The newspaper conglomeration that began in the 1960s owes much to a change in Internal Revenue Service appraising practices, writes (PDF) scholar Elizabeth M. Neiva. The new IRS rules convinced sole proprietors to swap their family newspapers for stock in companies like Gannett rather than take an inheritance tax soaking from the IRS.
Successful media companies ate up competitors because they had to do something with their profits. Purchasing a similar sort of business allowed them to hedge their current core holdings, and if they bought "growth" companies that moved their stock prices, Wall Street applauded. Some newspaper CEOs, mindful of newspaper publishing's cyclical nature, even bought timberland and paper mills as hedges!
Conglomeration works until it doesn't. And when it doesn't, it's because the lessons that, say, a newspaper CEO learned building his chain aren't always directly applicable to the running of superficially similar businesses such as radio, television, cable TV, network TV, outdoor advertising, music, and the movies. Sometimes the brilliant lessons a newspaper-broadcasting chain learned aren't directly applicable to the running of another newspaper-broadcasting chain it acquires, as Tribune found out when it gobbled up the Times Mirror Co.
Real estate mogul Sam Zell, set to take over Tribune, hasn't announced his plans for the troubled conglomerate, but he's never been sentimental about any of his holdings. He brags to The New Yorker's Connie Bruck that he's "had offers on every single asset in the portfolio." Zell continues, "Allentown's calling, Florida's calling, and, in L.A., David Geffen and Eli Broad. So all I can tell you is that for a dead industry with no future there are an awful lot of schmucks who want to take it away from me!" That's Zell's way of saying that he'll happily dismantle Tribune, piece by piece, if the prices are right.
Trimming limbs in the Scripps and Belo fashion won't automatically make the companies more profitable if the components are run as they were before. The destructive energy of today's market demands more than paper shuffling.
I'm reluctant to make predictions because I have a near-perfect record as a prognosticator—I'm almost always wrong. That said, I'm not climbing out on a limb to forecast that the Belo and Scripps splits, the Tribune deal, and other rumblings portend newspaper deconglomeration across the board to smaller, more nimble companies. That is, until the pendulum inevitably turns and somebody reinvents the media monolith.
Let's make a deal. What would you pay for the Los Angeles Times, the Nashville Tennessean, the Des Moines Register, Newsday, the Dallas Morning News, the Knoxville News Sentinel, or any other chain-owned property? Don't send your bids to me a firstname.lastname@example.org. Send them to the newspapers' respective owners and send me the finder's fee. (E-mail may be quoted by name in "The Fray," Slate's readers' forum, in a future article, or elsewhere unless the writer stipulates otherwise. Disclosure: Slate is owned by the Washington Post Co., a media conglomerate that never went insane with acquisitions as it expanded. Its smartest deal ever was to buy the Kaplan testing business.)
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