Size Matters

Capsule:  Is the US media suffering on size?  Big companies struggle with over-correlation on their advertising dependencies.  Small start-ups have seen capital dry up and venture capital threatened by potential new taxes on carried interest.  Is there a right-size for media health and public benefit?  In media terms, size relates to commercial success and age, where big numbers generally mean you're doing something right.  What's wrong with our looking glass when it comes to seeing the best in the mighty and the small?
(www.freepress.net/ownership/chart/main/ ;  http://www.carriedinterest.org/ )


Is it possible to divide media history into chapters favoring big companies versus small?  If so, we're living in the land of the giants.  Freepress.net, a free press advocacy website (in case you were wondering,) paints a clear picture of media consolidation, albeit without smart support for its signature campaign to "Stop Big Media." 

The freepress.net Ownership Chart names "The Big Six" US media firms that have "concentrated their control over what we see, hear and read."  In size order: General Electric (2008 revenue: $183 billion;) Walt Disney ($37.8 billion;) News Corp. ($33 billion;) Time Warner/Time Warner Cable ($29.8 billion;) Viacom ($14.6 billion;) and CBS ($14 billion.)  The super-sized TV chart adds:  Bertelsmann ($23.3 billion;) Cox ($15.4 billion;) Gannett ($6.8 billion;) Tribune ($5 billion;) Hearst ($4.38 billion;) Scripps ($1 billion;) Media General ($800 million;) Sinclair ($754 million;) and, Belo ($733 million.)

Telecom comes thundering in with the following giant adds:  AT&T ($124 billion;) Verizon ($97 billion;) Comcast ($34 billion;) Qwest ($13.5 billion;) Advance/Newhouse ($7.97 billion;) and Cablevision ($7.2 billion.)  Print adds: The Washington Post Company ($4.5 billion;) The New York Times Company ($2.9 billion;) The McClatchy Company ($1.9 billion;) and, Media News Group ($1.6 billion.)  Cable repeats pieces of the TV and Telecom lists.  And, Radio adds Clear Channel ($6.7 billion;) Citadel ($863 million;) Entercom ($438 million;) and, Cumulus ($311 million.)

On a 2008 Revenue list ranging from $183 billion down to $311 million, where are Google, Microsoft/Yahoo, Apple, Amazon, eBay, Facebook and the host of other usual media subjects?  They've got the revenue numbers to get in.  Is it possible that freepress.net is missing the point that these companies are as vertically integrated in terms of product ownership and horizontally integrated in terms of affiliated brands as the more traditional media giants? 

Maybe it's an age thing.  Maybe freepress.net believes that the giants the internet made are better than broadcasting, cable, telecom and print.  There is an age divide when it comes to media preferences in content and distribution.  But the concern about creating "truly competitive media markets that serve the public interest" with, among other things, "local ownership" applies to all of the major media companies--from the older brands, including Sony/Sony Motion Pictures, to the new iPod iPhone bearing Apple, whose future is, for now, well integrated with that of legendary AT&T.

If Apple had not made the horizontal, near-term exclusive AT&T distribution deal with its iPhone (which vertically integrates the iPod into a new voice and internet distribution device that not-only-vertically-integrates-but-requires a Mac) what would have happened to Apple's business?  Would iPods and Macbooks have been enough to carry the brand forward?  The newest digital media brands, not yet broadly criticized for consolidation villainy, seem to go even farther in brand and product consolidation than the traditionals dared, proving a reproachable lack of US critical awareness beyond the digital veil.   The last time we saw a major Federal action against a software brand, it was President Clinton's administration taking Microsoft to the Justice department woodshed for forcing computer makers into exclusive alignment.

It seems easier to see the new digital media giants as opposed to the old benefiting the consumer and job markets by being big.  Digital brands find it easier to create a steady stream of breakthrough products that draw international attention.  The costs of production and distribution for digital media are lower than traditional media by definition making the production cycle shorter and more efficient.  But being a fertile cheap date has its drawbacks in fierce and easy competition, which all of the digital giants have successfully withstood.  There may be lessons to learn for even the most revered traditional media brands in the digital competitive temperment.

Apple keeps reinventing itself with products that are as well-differentiated from their predecessors as they are dependent on them.  Amazon, a book seller, became the internet Walmart in its assortment range if not in price, and then invented the Kindle ahead of the tablet-toting market. 

Google originated search which reinvented the internet and maintained a quality edge for an extraordinary length of time.  It also reinvented the advertising business with supreme efficiency and some huge unforeseen consequences, literally bringing the house down on a lot of traditional media.  The tremendous scrutiny on the Google books deal here and in Europe is a predictable reaction to the potential for unacceptably destructive creative destruction.

Are the Big Six (actually, the big 29) old media giants on the "Stop Big Media" list on the same page with their younger giant counterparts?  Not when it comes to originality, which may be the inevitable sacrifice of age for wisdom. 

It may be that as media companies get big and then get older, they lose their internal ability to remain curious, to celebrate new ideas and to reform their operations around new executions.   Broadcasting invented TV and cable perfected it. Cable and telecom invented high-speed internet.  Telecom invented telephony and then reinvented it with wireless.  Print invented a still prized transport system for ideas; then paused breathless after jumping into the idea-laden waters of the internet without thinking about a boat.

What have broadcasting, cable, telecom and print done lately?  In order to realize their full future potential, older media giants should move away from their general "bigness" and celebrate the curiosity and fragility of being small again.  The challenge of thinking small is huge.  It's also counterintuitive for major media players who got big and old by offering products that linked to the past for stability as well as quality.  Both content and distribution companies are suffering from their ages and size in challenges to their originality.  Hundreds of channels of TV were once the promise of cable and satellite; now they're bemoaned as not being well enough differentiated by a new generation loving YouTube videos en route to the next big thing.

At the same time in this strangest of economies, there's small comfort for the smallest amongst us.  Capital has dried up and venture capital firms are challenged in their ability to bring new products forward.  The fact that some of the most successful new media brands in the world started as venture-backed--including Microsoft, Google, Cisco, Apple and many others--doesn't seem to have raised serious concerns about the role of the venture capital industry in bringing entrepreneurs with true growth brands to market.  IPO's in decline make it harder for VC firms to make high exit multiples.  And, a hungry Federal government is looking to increase taxes on the carried interest inside VC partnerships by viewing the money made on development investments as the same as ordinary income.

We all benefit from variety in size and age, making the biggest advantages out of the hands we're dealt, even as those hands keep changing.  But we need to find a better understanding of how the media works to guarantee it remains prolific and, along with it, our national idea flow and our narrative.  The problem these days with being small is that bigger institutions are not doing enough to protect entrepreneurs and the support structure for start-up businesses.  The problem with being big is that as giants age--including media and the government that regulates it--we can't seem to get far enough away from replicating our own DNA.  Maybe that's why almost everything new these days seems achingly familiar.