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Merger Madness, Media Companies Consolidate for Survival

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For a generation that has grown up in an ever-expanding tech world, it may come as surprise to learn that digital media companies are struggling to survive. Described by some experts as being on a chokehold, the tech world is feeling an increasing economic strain leaving bold impacts for companies big and small.

Digital Media Companies Merging to Survive

Many tech companies are merging with others to keep afloat in an intense economic environment. This media consolidation has spawned a handful of media giants that now have control over majority of US-owned media. These mergers boldly impact smaller companies that allow for cultural diversity and free speech within the media industry.

For example, Disney, one of the largest global companies, recently acquired Marvel, Pixar, and even Lucas Film. Recently, the media titan proposed an idea of buying major parts of 20th Century Fox, including their television and movie production studios. Should this push through, titles from Fox’s deep library including Avatar, Deadpool, The Simpsons, and other significant titles become theirs.

Recently, just weeks after tech giants Google and Facebook announced their best earnings to date, there are many other top companies still nowhere near their projected revenues. In fact, some might not grow or make profit by the end of the year.

This rapid consolidation of companies, especially in the digital sector, is an indication of how digital media struggles to survive in a tech-dominated world. Big names in tech are definitely leading while various media companies are holding on for life. Here are just some media companies desperately trying to stay afloat:

  • Buzzfeed, an American internet media company, and Vice, a Canadian print and online magazine, will miss their 2017 revenue projections, as reported in The Wall Street Journal. Both companies hope to go public soon as well.
  • Mashable, a well-known digital media website, was sold recently according to The Wall Street Journal. Founded by Pete Cashmore in 2005, the company was sold to Ziff Davis for $50 million even though it had been previously valued at more than $200 million above that selling price.
  • Oath Inc., a subsidiary of Verizon Communications, is the umbrella company of various digital content companies including AOL, Yahoo, Huffington Post, and many others. Digiday reported that Oath is going to lay off around 560 staffers soon.
  • Univision Communications, a Spanish language broadcaster, is currently scouting for an investor willing to spend $200 million for a minority stake in Fusion Media Group (FMG). According to Recode, Univision bought FMG in April of last year, buying out Disney’s ownership. FMG includes Deadspin, Fusion TV, and The Onion.

Time Warner, Walt Disney, NBC and CBS are players in media mergers and acquisitions

It Doesn’t End There

Digital media and the trials they experience do not end there. These adverse tech effects have spread out to other sectors as well, including

  • Comcast and Verizon, big name telecommunications companies, are both interested in the possibility of acquiring 21st Century Fox’s entertainment properties, based on a news report by The Wall Street Journal. Various sources believe that Fox’s plans of divesting their entertainment properties is due to the dominance of Netflix in the on-demand video streaming industry.
  • Meredith Corp., a lifestyle media conglomerate, has sent out a bid for Time Inc., as reported by The Wall Street Journal. This piece of news came out as Condé Nast Inc. is reportedly laying off as many as 80 staffers, as well as closing print editions of some of its flagship publications, including Teen Vogue. This happened just weeks after their rival Hearst has acquired Rodale Inc. Several news reports have revealed that many publications have struggled in making up for the decline of print via digital ad revenues.

Similar tech platforms are also in danger of similar fates. Case in point: Twitter and Snapchat are both changing the way their apps look and work, in efforts to attract more users and hopefully meeting the expectations of Wall Street.

Regulatory Environment at Work

Media companies are consolidating to stay afloat, but there are also regulations at play – this has gotten so big that this industry is now under scrutiny.

The regulatory environment that has helped some of the world’s biggest tech companies grow so big is suddenly has gotten plenty of attention in their own right.

  • The antitrust chief of the Department of Justice (DOJ), Makan Delrahim, recently revealed that he does not approve of the types of “behavioral remedies” such as the one between NBC Universal and Comcast which happened in 2011. He and his DOJ colleagues are weighing a lawsuit with an intention to block a merger that may happen between Time Warner and AT&T; in addition, they have to yet approve the Tribune Media Company and Sinclair Broadcast Corporation.
  • On the same day as Delrahim’s reveal, the Federal Election Commission (FEC) also unanimously voted to advance a vote that may strengthen rules on online political ad disclaimers.
  • The Federal Communications Commission (FCC) also recently lifted a rule that has been around for decades, wherein media consolidation becomes limited. The lifting of such a limit has become a win for both newspapers and broadcasters.
  • The FCC lifted a decades-old rule that limited media consolidation on Thursday, a win for broadcasters and newspapers.

Bold Changes, Bold Impacts

With the aforementioned bold changes made by the FCC, there are reports that they are trying to pass a media ownership order allowing cross-ownership between newspapers/broadcast and radio/TV. Journalist John Eggerton recently revealed a report saying this cross-ownership might get rid of “the prohibition on owning two of the top four-rated stations in a market” as well as allowing what’s called “duopolies” pertaining to a single entity owning two stations in the same market.

For example, Sinclair and Tribune merging would allow a major TV name to have over 200 stations that have a reach of 72% of American TV households. Sinclair, along with other companies also in favor of the FCC’s new and updated media ownership rules, believe “that the future of local television is threatened unless TV station owners are allowed to bulk up to compete more effectively with MVPDs and digital competitors.”

These changes create bold impacts that could even possibly lead to media monopolies. For one, advocacy groups such as the Free Press and Public Knowledge are firm believers that media consolidation leads to only a few wealthy corporations having most, if not all, editorial control – thus, it may lessen or significantly diminish platforms for free speech and diversity in expression.

Second, groups such as the American Television Alliance argue that such changes in ownership thresholds affect consent agreements regarding retransmission. This means broadcasters have unfair bargaining power, leading to higher cable subscription fees, potentially threatening customers of channel blackouts if cable companies and broadcasters do not agree on retransmission terms on time.

While consolidation and merger madness in the media industry is most likely to happen according to experts, it is notable that many of these events happened in just a few short weeks’ time, an indication of its facing record disruption that may create bold impacts to the media industry.

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