Market pressures as well as business expediency has seen attempts by media organizations
Market pressures as well as business expediency has seen attempts by media organizations to combine their resources and expertise in an effort to reach a larger audience through diverse media channels. The evolution of the digital media, including the internet, cable, satellite and digital television as well as wireless devices has challenged the traditional media. The variety that is available to the mass audience has meant that there is a tendency to access a number of media sources. Ratings and the advertising revenues are becoming increasingly important and the investments associated with acquisition of new media technologies are high. In such an environment, media organizations have attempted to pool their resources and expertise in order to operate synergistically and attempt to reach a greater number of audiences through a variety of channels.
The media organizations today are increasingly more interested in making money, becoming a commercial success and selling content or advertisements. Pressures for commercial success have resulted in vertical as well as horizontal integration, and the evolution of the mega- media groups. The leading media groups of the 1980s have shrunk to ten mega -conglomerates as a result of mergers and fears have been expressed about the concentration of media ownership in a few elitist hands. Concerns about the power of the media to present an imposed reality to suite capitalist government and the media owners have been presented but the governments are more inclined to let free market forces operate. Hence, there are commercial pressures associated with news reporting and the journalists are also expected to have more commercial sense. This paper discusses the commercial influences acting on media organizations and the implications for news making. The AOL and Time – Warner merger is also discussed as an example of the creation of a mega-media group.
The reporting of news can be a complicated business with the media existing in a complex environment which is characterised by interactions between the media, the audience, government and those who are the stakeholders or the owners of the media organizations as well as other businesses. The institutional relationships that exist between various actors have the capacity to influence the truth that is being reported in the news.
On the other hand, global opportunities and the constantly evolving technologies for news gathering and reporting as well as the unique strengths and capabilities that have been developed by various media groups lend themselves to cooperation and synergy in the gathering as well as the reporting of news to the mass audience. The financial requirements associated with the capacity to own technology and the apparatus for the gathering as well as reporting of news and the presentation of entertainment as well as advertising content to the mass audience means that there is a tendency towards the concentration of media ownership in the hands of the elite sections of the society from different parts of the world.
Concerns have been expressed that such concentration of media ownership may result in a dominant world view and a media imposed reality which the mass audience will have to accept because they have few alternative versions of the truth available and limited means of judging what is being presented. The journalists operating in a highly commercialised world are not only expected to present news but they are also expected to generate content that will sell and enhance ratings. Journalists and editors are employed by media owners who also have other commercial interests that are expected to be protected.
The production of news, current affairs and content has not evolved into a precise art and it is still a creative effort that is undertaken by humans. The human element in the production of news and content lends itself to a host of influences in the selection as well as presentation of news or content. Not all news is ‘newsworthy’ and the criteria for selection of material that will be presented to the mass audience often includes timeliness, interest and clarity as well as consequence, proximity, human interest, novelty and prominence. The selection as well as presentation of news can be further influenced by commercial interests and public relations practitioners through direct approaches, mailing of press releases and purchase of advertising.
Cash for comment and approaches through the internet have also been known to influence news. Hence, the process of making news can be influenced by newsworthiness, ratings, ownership interference, syndication, advertisers, political relationships, competitive influences, career aspirations of news producers as well as ethics. Commercial interests and concentrated ownership can result in abuse of power, lack of diversity, denial of journalistic freedom and conflict of interest in news making. Bias, intrusiveness, sensationalism and inaccurate reporting are amongst the other evils that can corrupt news making.
Commercial pressures in the free market have assumed an increasing importance and have an impact on media groups, journalists and the process of news making. It is these commercial forces, operating in the free markets which have assisted in the formation of giant media groups that are in existence today. The merger of AOL and Time-Warner media groups in 2000 produced an even bigger media entity worth about $350 billion. In this paper, the increasing importance of commercial influences on media organizations is considered and the merger of AOL and Time-Warner studied in an attempt to understand how commercial forces influence the media.
2.1 Commercial Influences on the Media
Along with concerns about concentration of media ownership falling into few elitist hands, there are also considerations associated with economic impact of the rapid evolution and proliferation of new media related communication technologies. The traditional print, radio and television media is being increasingly challenged by next generation wireless, second generation internet, digital television as well as the streaming and rich media. Commercial interest in the web and the internet as well as the electronic media have forced the so called traditional media to compete for advertising revenue as well as the attention of the mass audience.
Cable and satellite television has been instrumental in enabling the consumer to access a variety of media sources which were not previously available. Thus the media organisations in general are faced with shifts in channels of delivery, rapid changes in consumer attitudes as well as sudden changes in the marketplace that can result in rapid changes to the advertising content. Such changes can make an impact on the revenue of the media organizations which have already spent considerable financial resources and effort in developing the expertise and the capability to present their message on the media channel of their choosing. The digital media is in a constant state of flux and there is a greater convergence between promotion, marketing and commerce.
Wireless and wireless related gadgets for presenting the media message have been slowly evolving into a new market force. With the media technology and the environment in such a rapid state of flux, there is a tendency amongst the media organizations to unite in an effort to use their unique expertise related to presentation on a medium in a synergetic manner and access additional audience through a variety of media technologies. Although such mergers of media organizations certainly lend themselves to a sharing of resources and expertise to compete successfully on the commercial front, fears have been expressed that the giant media organizations which will be created as a result will have a monopoly on the ‘truth’ that is being presented to the mass audience. The giant media organizations that can be created as a result of the mergers will have the capability of producing a partial and selective reality which can serve the interests of those with power in the society and the media owners.
Commentators have also stated that with such a control over the reality that is presented to the mass audience, the bourgeois, or those with the power to control, will be in a position to maintain their hold on power and control the resources while justifying their wealth and privilege. Profits are important in the media because of the ideological sense of capitalism and an economic sense of achieving surplus revenue. Thus, on the one hand there are the requirement for profit maximisation and synergy involving optimising the returns associated with investments in technology and expertise and on the other hand, there is a requirement of the public and the mass audience to see a fair and diversified media capable of presenting a number of views without a monopoly on news.
The American scholar and linguist Chomsky, amongst others, has expressed a view that the commercial organisations in the media can develop a relationship with capitalist government to present politically biased versions of the truth to the mass audience. Market pressures on the left wing political press, aided by legislation and industrialisation has meant that this media segment has been considerably weakened. The requirement for massive investment has meant that media ownership is increasingly limited with cross ownership becoming more permissive as a result of changes in government regulation. The requirements for media licensing may mean that media organizations can be under pressure to forge ties with government officials and ratings as well as advertising revenue are crucial for funding.
The high costs and efforts associated with news gathering result in the journalists being increasingly dependant on the powers that exist, such as the government, to source news. The realities of a complex world have meant that there is a sense of mutual dependency in the media, government and the large corporations. Spin doctoring and bias against threatening ideologies is possible, with the media attacking communists or others who are opposed to capitalist government policy. However, despite the possibilities, the western media has seen the governments support free market policies in the grant of licences with consideration being given to the highest bidders. Hence, there is a tendency towards a free market for media in which commercial pressures have become more important then ever before and the government as a protector of the public interest has tended to permit the operation of free market forces.
Public debates do continue, however, on various issues related to the media including media ownership and this keeps the pressure on the media organisations to maintain an unbiased posture. However, the fact remains that in 1997, the biggest media corporations had shrunk to ten, from fifty in 1983. The AOL and Times-Warner merger that took place in 2000 produced a $350 billion media corporation and this merger was 1000 times the largest merger deal of 1980s. There is also a trend towards vertical integration with media corporations owning entertainment companies, distribution and manufacturing in addition to the media organisation. The directors of the media organization may also be the directors of other industrial corporations and can control an increasing number of communication resources as well as employing many journalists.
The opportunities that open up to cross-sell and promote media brands and content to companies in a conglomerate also provide an incentive to build up the giant media empires that are to be seen today. Rupert Murdoch’s news empire consists of News Corp, British Sky Broadcasting, Star TV and DirecTV which is owned by Hughes Electronics whose assets are also managed by Mr. Murdoch. Because of the shared management, News Corp has an increasing influence over programming in Latin America due to the fact that DirecTV is dominant in Central and South America. After the mergers, the top ten media companies in the world today consist of AOL Time Warner, Disney, General Electric, News Corporation, Viacom, Vivendi, Sony, Bertelsmann, AT&T and Liberty Media.
CNN international is viewed in 212 countries with a daily audience numbering about a billion. Despite the public concerns about bias, it must be said that the giant media multinationals have done a lot of good when they expended their operations into many nations served by corrupt and crony media. The global mass audience is now not only better informed and capable of appreciating or gauging diverse points of view, but there is a move towards a global culture and outlook. Hence, despite the fears of power becoming concentrated in a few hands, the existence of a muted marketplace, journalistic and content control as well as the influence of the media bosses, there appears to be a need for the kind of media giants which are to be seen in existence today because of their ability to link the world like it has never been linked before. Without the large media organizations, the choices that are available to the mass audience in regard to the variety of content may not have been possible.
Media interests argue that any attempt to restrict media ownership is tantamount to denying freedom of speech to the media organizations. It is further argued that the giant media organisations are better equipped to serve the local communities then a large number of small media organisations. It has also been suggested that through corporate control, media groups are better able to provide diversity and better quality local journalism that is backed up by inputs from other regions and the distributed resources of a mega-media organization. Perhaps, the evolution of the large media groups occurred as a result of the process of natural selection and was inevitable.
In 2001, the United States Federal Communications Commission FCC moved to eliminate rules which restricted cable and newspaper / broadcasting cross – ownership. It seems that the United States government had decided in favour of the right to freedom of commerce and the right of the mass audience to decide whose messages they wanted to listen to along with the right of the advertisers to present their advertising budgets to whosoever they wanted to. Thus, the United States FCC let the decision about the success of media organizations rest with the market and the audience, without unduly hindering well managed organizations or their owners.
The next section presents a discussion related to the AOL and Time – Warner merger as a study in the shaping of a media organization by commercial considerations.
3.1 The AOL and Times – Warner Media Merger
The AOL and Time – Warner merger was a blending of the traditional and the new media which created a company with unique capabilities involving online services, media as well as cable television. It was thought that the merger would stifle competition in entertainment, interactive television and the internet, but the United States FCC sought and obtained assurances that the merged company will protect “consumer choice” at all times, prior to approving the merger. The merger deal was approved on January 11, 2001 and the new media company with a market value of $350 billion was born.
The internet expertise belonged to AOL which had achieved prominence as a result of the internet boom of the 1990’s. The internet offered many possibilities for information and knowledge management as well as quick retrieval of information, yet AOL had not achieved sophistication in news gathering, information sourcing or content creation. The advantages of the internet had dawned but segments of the mass audience still preferred the written text, newspapers and books. However, this was slowly going to change and it was not sufficient to have massive internet presence, but this presence had to be used to present content which was still the king. Time –Warner group had been presenting news and entertainment to generations of Americans but was concerned about the future possibilities that had opened up as a result of the evolution of the electronic media.
There had to be a better way of presenting the content which Time – Warner excelled at producing and had been presenting on the traditional media. Both AOL and Time –Warner had realised that they could not easily develop the strengths that belonged to the other without massive financial outlay and acquisition of expertise. Hence, the AOL and Time – Warner merger was a result of the desire of both companies to ensure their future in a changing world and benefit from each other. Time – Warner was itself created as a result of the merger of Time Inc which had excelled in news gathering and publishing while Warner Communications had been entertaining the world by producing movies and high technology content such as cartoons and computer animations.
Time – Warner later merged with Turner Broadcasting or CNN to create a company that led the world in many facets of the media, but which lacked expertise in the internet and this shortcoming was fixed by the AOL and Time – Warner merger. AOL also needed funds to enhance its internet operations. Its customers were irate because of the need to introduce a monthly access fee and there was a shortage of capacity resulting in a denial of connections. AT&T had also tried to take over AOL, but there was not much merit in the attempt as AOL had been using the internet for advertising in association with companies such as GM and Compaq. AOL also had future plans to succeed in the handheld wireless device market and the merger with Time – Warner guaranteed the company access to the Time – Warner broadband network, which had future possibilities.
Both AOL and Time – Warner were generating profits at the time of the merger, with AOL bringing in $6.8 billion from online sales as well as subscriptions and Time – Warner had $27.3 billion in revenue from film, TV and news services. Time – Warner had established a decade long record of failures in penetrating the ISP market and the digital realm. With the AOL and Time – Warner merger, the possibility of promoting the traditional Time – Warner media forms consisting of magazines, music, news and movies to the 28 million AOL users had opened up. Time – Warner had leapfrogged the competition in developing a capability to present its content through different forms of media.
AOL’s lead in developing the instant messenger service had contributed to its commercial success with subscribers preferring AOL because of the availability of this service. The FCC had attempted to protect public interest by seeking guarantees that the AOL and Time – Warner instant messenger service would also be made available to other users and no monopoly was to be created. The FCC also ensured that other ISP’s such as EarthLink which had been using the Time – Warner broadband network would continue to be carried by the new company in order to ensure the ‘open and competitive nature of the internet’.
AOL and Time – Warner expected that the advertising on broad media forms would bring in as much as 23% of its revenues and there were pressures after the merger to produce some benefits from the merger. However, the problems with dot com companies further demonstrated the synergetic nature of the merger when AOL was able to rely on Time – Warner during the slowdown. Hence the AOL and Time – Warner merger produced a company in which the two parties to the merger complimented each other’s strengths and weaknesses.
In the next section, some fears that had been expressed about the AOL and Times – Warner merger related to commercial influences operating on the media company are discussed.
4.1 Commercial Influences on AOL and Time – Warner
In the statement presented to the FCC regarding public interest policy, AOL and Times – Warner had stated that “driving vision [is] to make [its] content and services available to consumers through any and all means of access, including cable, DSL, satellite, and wireless”. It was feared that the giant company produced as a result of the merger could deter new entrants in the content production arena and a monopoly may result. Commentators lamented that the company could loose its editorial independence when dealing objectively with stories associated with its many divisions.
It was thought that CNN, a division of AOL and Times – Warner would never cover any stories related to internet, films and broadband without bias. The culture-clash between AOL and Time – Warner was expected to generate losses for the company, similar to the problems that were experienced by Sony when it diversified into entertainment. A generation gap existed between the young AOL executives and the seasoned Times – Warner veterans. The Chief Operating Officer of the company, however, placed the emphasis on revenue generation and provided broad leeway to division heads to operate their parts of the business and generate profits.
The company did post enhanced first quarter profits and the workforce had to be reduced to eliminate a duplication of job functions. No great scandals have been reported about the new company and it can, therefore, be concluded that the merger has worked, benefiting all apart from those employees who had put in the hard work and had to look for new jobs. Hence, it was synergy that was responsible for the creation of a media giant.
It may be concluded that commercial influences operating on media organizations have the potential to negatively influence the news making process. However, commercial realities and the quest for profits as well as success are natural tendencies that will make the media organizations act in their best interest, pursuing the course which best serves them. Public as well as journalistic debate and ethical traditions will maintain pressure to keep the media straight and it can be hoped that a culture can be nurtured within the giant media organizations that will satisfy all concerned so that all can benefit from the functioning of these media giants.
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