Source diversity after the Telecommunications Act of 1996: Media oligarchs begin
to colonize Cyberspace
Source diversity after the Telecommunications Act of 1996:
Media oligarchs begin to colonize Cyberspace[1]
by
JEFFREY LAYNE BLEVINS[2]
March 30, 1999
Abstract
Through integration of different types of media, corporate conglomerations can
produce a preponderance of the information and entertainment that circulates
through the media. While the Internet is often seen as being able to counteract
this locus of control, this study shows that Cyberspace is the next destination
for corporate colonies. By tracking corporate expansion into Cyberspace it
seems that the Internet will mainly function as yet another outlet for
mainstream media.
Introduction
The trend in media conglomeration has run at the speed of light over the past
couple of decades, accelerated by the passage of the Telecommunications Act of
1996. As corporate concentration subsists in practically all major media
(broadcast television, cable television, radio, newspapers, magazines, book
publishers, record distributors, etc.), the Internet, on the other hand, appears
to be a decentralized and undominated sphere for mass communication. Since the
passage of the Act the issue over lack of source diversity seemed easily
answerable by the potentialities of the Internet -- where every citizen can be a
receiver, and originator of mass mediated information. From a critical
political economy perspective, this study reviews conglomeration and lack of
source diversity in the media industry since the passage of the Act, and also
examines the current colonization of Cyberspace by the media empires, as well as
the implications for source diversity on the Internet. By tracking corporate
ownership of Internet service providers and search engines it is becoming
apparent that Cyberspace will merely be a facilitator of mainstream media, which
flows through just a handful of powerful media empires. This raises a critical
concern over the issue of source diversity: If the Internet cannot even provide
a multiform of information and entertainment, then what can? Therefore, it is
important to be acutely apprised of corporate presence on the Internet by
tracking its expansion into Cyberspace, which this study begins to do.
Media empires, old and new
As media have grown throughout the history of the U.S., corporate control of
them has also become greater. Communication empires began to develop in the
late nineteenth century when businessmen like William Randolph Hearst multiplied
their profits by putting together a chain of big-city newspapers. Since the
early twentieth century, newspaper monopolies have developed into more powerful
media territories as corporate presence in the communications industry has
increasingly been characterized by conglomeration. Today, "the preponderance of
U.S. mass communication is controlled by less than two dozen enormous
profit-maximizing corporations" (McChesney, 1997, p. 6). Three of the most
prominent of these conglomerates are Time-Warner, Walt Disney Company and News
Corporation (Fox).
Time Warner's holdings include an imposing number of cable channels, production
companies, home video and entertainment services, magazines, music companies and
book publishers. To mention just a few, Time-Warner owns HBO, Cinemax, CNN,
TNT, Warner Brothers television, Castle Rock Entertainment, Time-Life Video,
Warner Home Video, Turner Home Satellite, Sports Illustrated, People, Time,
Money, Entertainment Weekly, Parenting and Life magazines, Elektra, Columbia
House records, Time-Life Books, and Book-of-the-Month Club (Broadcasting &
Cable, July 7, 1997).
The Walt Disney Co. owns the ABC Television Network, several cable channels
(ESPN, Disney, A&E, The History Channel, Lifetime), numerous radio stations,
feature films (Disney, Touchstone, Hollywood, Miramax, Buena Vista, Caravan),
and boasts sizable holdings in music, retail, publications and theme parks
(Broadcasting & Cable, July 7, 1997).
News Corp. owns Fox Broadcasting Co., 23 U.S. television stations, several
television production companies, a host of motion picture companies (including
20th Century Fox and Columbia TriStar), as well as publications and music labels
(Broadcasting & Cable, July 7, 1997).
Lack of source diversity, and prescribed remedies
With these type of conglomerated media structures, newsstands still hold rows
and rows of newspapers and magazines on a variety of subjects, cable and
broadcast programming still churns out, as do movies and records. They are
likely, however, to be variations of the same themes and messages (Golding &
Murdock, 1996, p. 20). For instance, Top 40 radio, network prime-time
programming, and genre television programs have always been criticized for lack
of diversity, which is a significant phenomenon. Thus, while the wide array of
media may imply a rich variety of entertainment and information, it in fact
represents an increasingly narrow range of sources.
Since the "Golden Age" of television three broadcast networks controlled all of
prime-time programming in American homes, and there were many complaints about
the sameness among ABC, CBS and NBC. In 1970 the Federal Communications
Commission (FCC) established a "prime-time access" rule which limited the amount
of programming these networks could provide to their affiliates to just three
hours between 7 - 11 p.m. (EST). The rule was "designed to release some prime
television time from network control "so programming from independent producers
and local stations could develop (Barron, 1973, pp. 188-189). To no avail,
network affiliates often used off-network syndicated re-runs to fill the extra
hour because there was still pressure to select programming that was less
expensive and that would draw the largest audience possible. As FCC
Commissioner Reed Hundt recently admitted, the prime-time access rule "certainly
didn't promote program diversity," but further government intervention would not
work either (Hundt, 1996). A new (and reverse) strategy was adopted when the
FCC repealed the prime-time access rule in 1995, and sought to promote vertical
integration within media companies to increase horizontal competition among
providers (Hundt, 1996). Media companies were already lobbying Congress for
further de-regulation of their industry, and anticipating passage of the
Telecommunications Act, the flurry of mega-media-mergers began to erupt in 1995
when Disney purchased Capital Cities/ABC (which merged several film studios with
a major broadcast network, including 10 television stations, 21 radio stations,
cable networks, and publications). Shortly thereafter CBS acquired
Westinghouse, and News Corp. purchased New World Communications Group. This
acquisition united another film power house to another broadcast network and the
U.S.'s leading television station owner (Howard, 1998, p. 30; Chan-Olmsted,
1998, p. 40). The strategy, according to Hundt, was to allow the broadcast
networks to team-up with movie studios and other sources of programming to
compete with cable television (Hundt, 1996).
Ironically, at the same time the Telecommunications Act of 1996 was ushered in
under the rubric of "protecting consumers against monopolies" (Clinton, 1996).
President Clinton said at the signing ceremony that the new law "guarantees the
diversity of voices our democracy depends upon" (Clinton, 1996). Vice President
Gore, who had promoted the legislation, also added that "in the interest of
promoting diversity of voices and viewpoints that are so important to our
democracy, this legislation will prevent undue concentration in television and
radio ownership" (Gore, 1996). However, the new law has done exactly the
opposite of what it was proposed to do. Section 202(a) of the Act eliminates
"any provisions limiting the number of AM or FM broadcast stations which may be
controlled by any one entity." Section 202(c) erases any provision limiting the
number of television stations that can be owned by a single source, and Section
202(f) wipes away restraints against a single entity controlling a network of
broadcast stations and cable systems. The only limits placed on television
ownership was a 35% cap of the total national audience. Prior to the 1996 Act
television ownership was limited to just 12 stations and 25% of the national
market. Radio ownership was limited to just 40 stations and 25% of the national
market. Local ownership combinations of radio and television, television and
newspaper, radio and newspaper, and television and cable were also prohibited
before the Act. Now, however, all these restrictions were stripped away.
Rhetoric before the passage of the Act about preventing undue concentration of
media ownership appears to be a vacant promise.
Drushel (1998) found that since the passage of the Act horizontal concentration
of the top 50 radio markets in the U.S. has nearly doubled as major
conglomerates like Disney/ABC and CBS/Westinghouse have acquired individual
stations and other ownership groups. The concentration of ownership has not
resulted in increased listener choice, but rather, increased advertising rates
for fewer sources "in control of a popular and pervasive mass medium" (Drushel,
1998, p. 19).
Howard (1998) has shown that the number of group-owned stations increased from
898 in 1995 to 1,006 in 1997, while the number of group owners decreased from
210 in 1995 to 184 in 1997 (pp. 25-26). Thus, the number of television stations
per owner has increased substantially, and continues to do so. Currently, more
than eight out of every 10 television stations in the top 100 U.S. markets are
group owned (Howard, 1998, p. 31). The FCC is also considering whether or not
to allow some local television station duopolies, as well as local cross-media
ownership of newspapers and television stations in the near future (Howard,
1998, pp. 28-31). Some in Congress are even considering to remove any and all
limits on broadcast ownership, and the National Association of Broadcasters are
pushing them to make this happen quickly (Schwartzman, 1999, pp. 6 - 7).
Vertical integration of media
Through integration of different types of media, corporate conglomerations can
produce a preponderance of the information and entertainment that circulate
through the media. Through synergy, film studios, television networks, cable
networks, music studios, record distributors, publishing companies, magazines
and various commercial outlets under blanket ownership can help the market value
for each other. For instance, company newspapers can give free publicity to
their television stations, and television shows can give publicity to the movies
that their film studios are producing. It may not exactly be "free" publicity,
but the profits and expenditures seem to keep circulating via the same corporate
ties, which suggests more than a little advantage. Disney, for example, is able
to promote its films by selling soundtracks on their record labels, broadcast
the films on their television network, print a book version, deliver rave
magazine reviews and offer merchandising to boot (not to mention Saturday
morning cartoons) (Pecora, 1998).
This process of corporate conglomerations owning the companies that produce the
products that they also distribute is known as vertical integration. For
example, media conglomerates may own movie studios, record labels, television
shows, books and magazines, which represent the product line. Vertically
integrated conglomerates may also own cable systems, retail stores, music clubs,
book stores, theme parks, home video distributors and movie theaters, which
represent the distribution line. That corporations own several different forms
of media production and distribution outlets is a key element of conglomeration.
Through this type of vertical integration, conglomerates can re-package fewer
creative productions through more distribution outlets. Media conglomerates
that own motion picture studios want "blockbuster hits that can be reproduced in
a range of media forms. That is why the key holding for today's media
conglomerates is a film studio" (Video Age, 1998, p. 14). Film studio's can
provide television re-runs, home videos, book versions, sound tracks and a
plethora of merchandising (T-shirts, posters, and action-figures), just to name
a few.
Conglomerates with vast holdings also have greater financial power to either
drive-out new entrants into the marketplace or buy them out. In 1996, just
seven companies accounted for nearly all of U.S. music sales (The Nation, Sept.
1, 1997). Each of these seven companies (Time-Warner, Sony, Phillips
Electronics, Seagram, Bertelsmann AG, EMI and The Indies) control several
smaller labels. These conglomerates have the capacity to launch expensive
promotional campaigns and offer big discounts to advertisers. Meanwhile,
independent labels struggle each year not to be shut down by the major ones.
Growing dominance of the media conglomerates
Today's media conglomerates have far out-grown the newspaper chains of the late
19th and early 20th century. Now they are more akin to "global lords" as their
command of information production and dissemination is world-wide (Bagdikian,
1989). For instance, "Rupert Murdoch, Ted Turner and very few others [are] in a
position to transmit their Western images and commercial values directly into
the brains of 75 percent of the world's population" (Mander, 1996, p. 13).
Today's business community is a global one, and just as McDonalds and Pizza Hut
exist in Russia, so too does CNN. The difference here is that information, not
hamburgers, are the commodity, and that is troublesome. Via these patterns of
ownership it appears that the structure of today's media system is evolving in a
way where a handful of communication empires shape information and control
public images over increasingly larger populations (Mander, 1996). As Bagdikian
(1989) has suggested,
Neither Caesar nor Hitler, Franklin Roosevelt nor any Pope, has commanded as
much power to shape information on which so many people depend to make decisions
about everything from whom to vote for to what to eat. (p. 809).
In light of these concerns, however, it seems possible that new communication
technology may resist the pervading concentration of ownership.
One possibility of subverting the locus of control that the media elite now
enjoy is the Internet, because of some of its unique dynamics. Due to the
suffusion of telephone lines the Internet can connect individuals from all
around the globe by providing a decentralized, undominated public sphere, where
everyone could have access to receive and disseminate messages across the world.
Considering the overbearing structure of media conglomeration though, can the
veins of cyberspace effectively function as a conduit for information, ideas and
culture without the preponderant influence the corporate elite? As Lenert
(1998) has noted,
the trend toward convergence has accelerated, and the historical divisions among
the media categories of telephone, print, and broadcast are increasingly
difficult to sustain. Most major newspapers now have electronic editions.
Consumers can now access the Internet by using their television, and telephone
calls can be made using the infrastructure normally associated with cable
television. In light of technological pressures of convergence, it is often
easier for the state to deregulate communications rather than attempt to sustain
increasingly abstract distinctions among media (pp. 10-11).
McChesney (1997) has also warned that "the notion that the Internet will permit
humanity to leapfrog over capitalism and corporate communication is in sharp
contrast to the present rapid commercialization of the Internet" (p. 30).
Theoretical framework: Critical political economy
As the Internet may be seen as an alternative to the communications oligarchy,
this study seeks to demonstrate how the Internet is being incorporated into that
very same oligarchy. This is a well suited critical political economy critique,
as it "takes its intellectual vigor from [Marxism]" and sees monopolistic and
oligopolistic industries "as inimical to the social and economic benefits of the
masses" (Rush & Blanco, 1998, p. 6). Gandy (1992) has noted that one of the
challenges of traditional Marxist theory and political economy studies "is to
describe the ways in which more and more activities are incorporated into the
capitalist sphere of production" (p. 35). As a political economy critique, this
study is concerned with "ownership, support mechanisms (e.g. advertising), and
government policies [which] influence media behavior and content" (McChesney,
1998, p. 3). While many economists may see the marketplace as unquestionably
benevolent and self-righting, critical political economists do not automatically
make this assumption.
Perhaps, it is worth distinguishing critical political economy from two other
economic perspectives -- liberal political economy and classical political
economy -- as do Golding and Murdock (1996). Liberal political economists are
attentive to the market exchange between consumers and competing commodities.
They would assert that the greater play in market forces means greater "freedom"
of consumer choice (Golding & Murdock, 1996, p. 14). Therefore, liberal
political economists believe that privatization of public services and
communications is preferable because it increases consumer choice. Classical
political economists would also assert that government intervention should be
minimized so that market forces can have the widest "freedom" of operation
(Golding & Murdock, 1996, p. 17). Critical political economists diverge from
both of these perspectives by seeing beyond presupposed "freedoms," and focus on
distortions and inequalities in the market system, which is often characterized
by monopoly or oligarchy.
In political economy studies, Gomery (1993) argues that tracking corporate
ownership is but one part of the analysis, as the connection needs to be made
between media economics and normative concerns, such as "how best to promote
diversity" (pp. 191 - 192). Gomery also discusses how different market
structures (monopoly, oligopoly, and competition) influence corporate conduct.
For instance, an oligopoly where just a few entities dominate the market often
leads to sameness and lack of diversity among the key competitors. Gomery
offers the example of network television where if
NBC offers a new comedy at a particular time on a particular day, its rivals --
ABC, CBS, and Fox -- counterprogram. This leads to some experimentation,
although all too often it means only a numbing generic sameness where like
programs (e.g., comedies, dramas, or soap operas) face off against each other
(1993, p. 194).
An oligopolistic structure also influences corporate conduct at large, as the
recent trend in conglomeration indicates. Through synergy the major
conglomerates (Time-Warner, Disney, Fox) are not solely reliant on the profits
of a single operation, and unprofitable "subsidiaries can be reconstructed and
repositioned with funds generated from other profitable ongoing businesses,"
and thus, this "enables an oligopoly to offer a high barrier to entry; potential
rivals lack this conglomerate protection" (Gomery, 1993, p. 193). Even though
the Internet has been touted as a decentralized and undominated public sphere,
it is possible that the preeminent conglomerates in every other medium may be
staking substantial claims on this developing territory. The danger presented
here is that dominant media giants can use "their existing media to constantly
promote their on-line ventures, and their relationships with major advertisers
to bring them aboard Internet ventures" (McChesney, 1997, p. 31). Disney, for
instance, would be able to use an Internet portal as another outlet to
re-package their movies, books and cartoon characters. Moreover, search engines
controlled by commercial media companies are more likely to direct users to more
consumer oriented web sites, rather than information oriented sites that are not
sponsored by advertisers. Also, because search engines receive the most traffic
on the Internet, companies that control these sites can charge higher prices for
on-screen ads, and can charge higher toll fees from users.
Procedures for analysis
With these propositions in mind, this essay will examine the following
questions: What are the predominant commercial service providers and search
engines on the World Wide Web? Who owns these commercial service providers and
search engines? Are they connected vertically to other media conglomerates, or
horizontally to other service providers/search engines? Have the commercial
service providers or search engines been subject to the merger frenzy that has
characterizes most media ownership? And, do these commercial service providers
and search engines help popularize Internet versions of other mainstream media
(for instance, re-package other creative content within a conglomerate)?
To answer these questions the author has sought out the business sections of
major U.S. newspapers, and other popular news sources -- on-line and off --
(The Wall Street Journal, The New York Times, USA Today, Washington Post, MSNBC,
etc.) for information regarding mergers and acquisitions of on-line companies to
other media conglomerates. These are the primary sources for news regarding
corporate mergers and acquisitions, and are published daily, which makes them an
excellent reference to study. Internet ratings services, such as Nielsen Media
Research, NetRatings, Inc., and Media Metrix were also consulted for information
regarding search engine and portal rankings.
Destination: Cyberspace
The primacy of corporate control reigns supreme in all media industries, and
the Internet is turning out to be no exception as a few large commercial search
engines, such as Yahoo, Netscape, Excite, Lycos and Infoseek, have already risen
to popularity (NetRatings, 1999). Moreover, these popular search engines are
relentless being sought out by the popular broadcast networks. Just recently,
Fox (News Corp.) made a deal with Yahoo, CBS (Westinghouse) firmed-up an
agreement with America On-line, NBC (General Electric) has stakes in CNET's Snap
portal service, and ABC (Disney) has acquired a substantial portion of Infoseek
(Pope, 1999).
The major broadcast networks and other media conglomerates are also fighting it
out for Lycos, and "odds are someone will make the company an offer it can't
refuse in the near future" (Fry & Hanrahan, 1999). Lycos is currently
entertaining offers from CBS (Westinghouse), ABC (Disney), Fox (News Corp.),
Time-Warner, Bertelsmann AG, and Viacom, as well as other Internet companies,
such as Microsoft, America On-line, Yahoo and Amazon.com (Fry & Hanrahan, 1999).
An interesting point is that the top Internet service providers have also been
part of the merger frenzy that has characterized other media ownership. For
instance, in a bedazzling three-way deal Compu-Serve merged with America On-line
and WorldCom in January, 1998. The deal allowed WorldCom to sell CompuServe's
consumer subscriber base to America On-line. In addition, America On-line has a
pending acquisition of Netscape Communications Corp. (Fry & Hanrahan, 1999).
The ever-changing world of mergers and acquisitions in cyberspace may be to
fleeting for this essay, but the strategies behind the deal-making are not.
Media giants, and broadcast networks in particular, have found the Internet to
be another valuable tool in their synergy to attain larger audiences. As Pope
(1999) explains,
the Web until recently has been used primarily as a promotional vehicle. All of
the major networks have extensive sites that they use to pitch their shows, with
NBC even offering separate, online storylines for its drama "Homicide."
However, the deals are getting much sweeter, as Yahoo has agreed to spend $20
million in advertising on the Fox network, and in return Fox will insert Yahoo
into the storylines of some its shows (Pope, 1999).
Disney is probably making the most sophisticated user of its Internet arm after
purchasing a 43% stake (with an option to go up to 50% in three years) in
Infoseek last summer (Stone, 1999, p. 61). With Infoseek, "Disney improves its
ability to attract and keep Internet users and turn them into customers for a
wide variety of products both on line and off" (Koch, 1998). Indeed, Disney now
stems to the Internet as another outlet to re-package their movies, books and
cartoon characters. Jake Winebaum, who heads up Disney's Internet ventures,
said in a recent interview with Time magazine: "We know how to get a consumer
online to make purchases" (Maloney, 1998, p. 34). Ironically, Winebaum adds to
his comment that "the Internet is the ultimate medium about synergy" (Maloney,
1998, p. 34).
A negative implication for citizens who want to use commercial search engines
for information seeking is that they will most likely be directed to consumer
oriented web sites, rather than information oriented sites that are not
sponsored by advertisers. As Jennifer Klein of Credit Service / First Boston
told USA Today, there is growing "acceptance and success of on-line advertising,
which is forecast to grow from $500 million in 1997 to an estimated $65 billion
in 2001" (Koch, 1998). Also, because search engines receive the most amount of
traffic on the Internet, companies that control these sites can charge higher
prices for on-screen ads, and can charge higher toll fees from users.
Another ill in the lack of source diversity among search engines and service
providers is that they help popularize Internet versions of other mainstream
media. For instance, ABC, Disney and ESPN were among the most popular ten
Internet sites in 1997. Although ABC, Disney and ESPN appear as three separate
entities on the Top 10 list, they all stem from the corporate headquarters of
Disney. Although the Internet is a relatively young medium, a few major players
appear to already have dominant positions. "From month to month," one or two
companies may trade places on the Top 10, "but the list is relatively stable for
a medium as volatile as the web is supposed to be" (Dodge, 1998). Also,
corporate firms that control U.S. journalism are also major players in
"jockeying for the inside lane on the information highway" (McChesney, 1996, p.
5). The most popular news conglomerates in television, radio and newspapers are
already the most prominent sources for news in cyberspace. For example, NBC has
MSNBC, CNN has CNN on-line, Sports Illustrated (owned by the same as CNN) has a
web site, ESPN (owned by Disney) has the SportsZone on-line, Fox Sports has a
web site, as does USA Today, and the list goes on and on. It seems that
corporations had begun to colonize cyberspace just as soon as it started to
become popular (Shapiro, 1995).
Conclusion
The digitization of words, pictures, audio and video via such a pervasive
medium as the Internet should empower every person to be a highly individualized
producers and consumer of media. Every person from every continent should be
able to circumvent mainstream television and magazines by being able to
distribute media materials around the world themselves, and to receive an
infinite amount of other information from a vast array of sources -- a real
"marketplace of ideas," if you will.
Thus, we ought to be witnessing at the end of the twentieth century a
transformation of media industries into hundreds and hundreds of small
companies. That, anyway, is what was predicted at the start of the computer
revolution. We are supposed to be living at the end of "mass" society. This is
the age of media individualism, infinite free choice, consumer sovereignty.
Deregulation, espoused by politicians in country after country, should be
guaranteeing this great opening of the information and entertainment market
(Smith, 1991, p. 3).
Examples from recent history, however, are far from any prediction about
consumer sovereignty and empowering citizenry. In the U.S., at least,
privatization has meant commercialization, not democratization. Deregulation in
the name of competition has meant conglomeration and oligopoly in practice.
Therefore, the messages of advertisers and corporate hegemony proliferates at an
ever increasing rate, and cyberspace will not likely diffuse them, but rather,
echo them.
There is, of course, a more optimistic vision of things to come. Lenert (1998)
posits that the
emerging technologies of the Internet and the World Wide Web are the legitimate
successors to the great democratic traditions. It is yet to be decided how they
will be regulated and with what social consequences," but we "must resist the
assumption that 'liberalization equals democratization'" ( p. 19).
In this case, it will is important for those of us committed to a critical
political economy of mass communication to closely track a "fierce lobbying
battle" that has "erupted over whether the Federal Communications Commission
will consider forcing cable-television companies to open their vast networks to
rivals seeking to offer high-speed Internet service" (Fry & Hanrahan, 1999).
Telephone and technology companies have been the among lobbyists, as they have a
vested interest in the outcome. Their lobbying positions may be useful in
predicting the future of integrating the Internet with television, and might
help explain the furious land rush in cyberspace by the broadcast networks.
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Schwartzman, A. J. (1999). Ganging Up on the FCC. The Nation, Feb. 1, 1999.
Shapiro, A. L. (1995). Street Corners in Cyberspace. The Nation, July 3,
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[1] Paper submitted to the Qualitative Studies Division of the Association for
Education in Journalism and Mass Communication annual convention in New Orleans,
LA, August 4 - 7, 1999.
[2] Jeffrey Layne Blevins is a doctoral student in the School of
Telecommunications at Ohio University in Athens, OH. For inquiries, he can be
reached at 24 Home St. Apt. #303, Athens, OH, 45701; or by e-mail:
[log in to unmask]; or by phone, (740) 594-5215.
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