and acquisitions have been a constant theme in the U.S. television
business since its commercial beginnings. The vast majority of the
dominant companies have been built by taking over other enterprises.
All four of the original television networks, for example, developed
as products of mergers.
Indeed, no better example can be found that the complex formation
of ABC television. During World War II, when the federal government
forced NBC to divest itself of one of its two radio networks, Edward
Nobel's Lifesavers company acquired the NBC Blue network and renamed
it ABC. For nearly a decade ABC struggled and would probably not
made a major impact in television had not it been acquired by another
company, United Paramount Theaters, in 1952. Leonard Goldenson,
then head of United Paramount, took control of the merged units
and sold movie theaters to finance the creation of ABC.
this same early period another television company, DuMont, was able
to mount a TV network largely because it had been acquired by Hollywood's
Paramount Pictures, Inc. and even the NBC and CBS television networks,
usually thought of as stable corporate entities, relied on merger
to increase their stable of owned and operated television stations.
As the three-network oligopoly solidified its position in the American
news and entertainment contexts, and in the wake of specific Federal
Communication Commission (FCC) rulings on the allocation of spectrum
space, the television industry appeared to be in something of a
established situation. Through the 1960s and 1970s the "Big Three"
TV networks acquired few TV properties and the only big news in
the late 1960s was an "almost merger" as ITT tried and failed to
take control of ABC. The FCC carefully investigated that proposed
deal and the delay caused the parties to abandoned the merger. CBS
and NBC were satisfied to acquire ancillary entertainment units,
from baseball teams to book publishers.
This stability of the three major TV network empires was shattered
in the mid-1980s. The television business was changing rapidly.
Cable and home video made major inroads into the landscape dominated
by terrestrially based broadcasters. Longtime owners, such as William
Paley of CBS, began to ponder retirement, and, perhaps most significantly,
the FCC lowered the level of its threatened opposition to proposed
In 1986 General Electric, Inc. purchased RCA for in excess of $6
billion, and thus acquired NBC. GE, one of the biggest corporations
in the world, immediately sold off the NBC radio network and stations,
as well as RCA manufacturing. GE's stripped down NBC then began
to expand into cable television, a move most strongly exemplified
by its acquisition of shares of the CNBC, Bravo, American Movie
Classics, and Arts and Entertainment cable television networks.
Also in 1986 Lawrence Tisch and his Loew's, Inc. investment company
took over CBS. Earlier as Ted Turner attempted a hostile bid for
CBS, longtime CBS chieftain William S. Paley looked for a "white
knight" to save his beloved company and in October 1985 asked Tisch
to join the CBS's board of directors to thwart the Atlanta-based
broadcaster. The following year Tisch took full control and, to
no one's surprise, systematically began sell everything CBS owned
in order to concentrate on television. First to go was CBS Educational
and Professional Publishing, which included Holt, Rinehart & Winston,
one of the country's leading publishers of textbooks, and W.B. Saunders,
a major publisher of medical tomes. Next Tisch picked up $2 billion
from the Sony Corporation of Japan for CBS' Music Group, one of
the world's dominant sellers of popular music.
ABC was the third of the big three to be merged into another company.
By the early 1980s Leonard Goldenson had transformed ABC into the
top TV network, but had passed his 80th birthday and wanted out
of the day-to-day grind of running a billion dollar corporation.
In 1986 Capital Cities, Inc., backed by Warren Buffett's Berkshire
Hathaway investment group, bought ABC for $3.5 billion. Capital
Cities, Inc. had long ranked as a top group owner of television
stations and through the late 1980s and into the 1990s the new "Cap
Cities," led by chief executive officer Thomas Murphy, moved ABC
into cable television, most notably by taking control of the cable
sports network, ESPN.
this same time the cable television industry was also in the process
of consolidating. Giant companies were created through acquisitions
and mergers based on the core of the cable television operation--the
local franchise. To take advantage of economies of operation, corporations
merged cable franchises under single corporate umbrellas, creating
MSOs, "multiple system operators." No two corporations did this
better than Time Warner and Tele-Communications, Inc. (TCI).
Warner was formed by the merger of two communications giants in
1989; assets approached $20 billion and yearly revenues topped $10
billion. While the colossus covered all phases of the mass media,
its heart was a vast nation-wide collection of cable franchises.
But this merger to end all mergers also included Warner Brothers,
one of Hollywood's major studios, a leading home video distributor,
one of the world's top six major music labels, and Time's vast array
of publishing interests from magazines as well known as Time,
Fortune, and Sports Illustrated to Time-Life Books. In
1995 Time Warner acquired Turner Broadcasting--which had itself
acquired other film libraries, production companies, and cable entities--making
an already vast empire ever larger.
The other huge cable player, also created through an array of mergers,
was TCI. In the mid-1990s John Malone had acquired so many MSOs
that TCI controlled cable supply to almost one in three households
in the United States with cable. To ensure that TCI could feed these
tens of millions of households top programming, Malone acquired
significant interests in a vast array of different programming operations
including BET (Black Entertainment Television), the sole national
channel aimed at the largest minority group in the United States,
the Discovery Channel, programming documentaries, and the Family
Channel, formerly a religious channel, which in the early 1990s
re-invented itself into a programming haven for safe family viewing.
the outside, to challenge the "Big Three" networks and these vast
cable corporations, came Rupert Murdoch and his News Corp., Inc.
From a confederation of independent stations around the United States,
Murdoch fashioned the FOX TV network. He began by taking over the
Twentieth Century-Fox Hollywood studio and thus obtaining a steady
source of programming. Next he took the most powerful non-network
collection of television stations, Metromedia, for well in excess
of $1 billion. These six over-the-air television stations, plus
a score more in smaller markets Murdoch would later acquire as legal
ownership maximums increased, could reach nearly one-third of homes
in the United States. As a capstone Murdoch spent well in excess
of $1 billion for TV Guide, the magazine that was best able
to promote his new TV empire.
1990, with the Time Warner merger settled, Rupert Murdoch on scene
as a new player, and the new owners for each of the "Big Three"
TV networks, it seemed it would be well into the next century before
the television industry in the United States would experience another
important wave of mergers. Instead, a frenzy of acquisition came
in 1995, far sooner than anyone expected.
That summer Disney acquired Capital Cities/ABC, adding not only
a famous TV network but also a score of FM and AM radio stations,
and two dozen newspapers to the entertainment and theme park company.
Within a month Lawrence Tisch sold CBS to Westinghouse. At the time
Westinghouse stood as a major manufacturer of industrial equipment
in the United States, with but a single division owning and operating
television and radio stations. (Later in 1995 came the aforementioned
acquisition of Turner Broadcasting by Time Warner.)
cornerstone event in the history of mergers and acquisitions in
the television business had taken place. Critics stood up and asserted
that this takeover wave had created a very real threat, a few corporations
controlling television, the most important communications medium
of the late 20th century. Before 1995 we had associated TV networks
with one part of the business (distribution run from New York) and
Hollywood with another (production of prime-time entertainment).
The 1995 merger movement changed all that, consolidating all economic
functions into single corporations. Indeed, critics went still farther,
and argued that the television industry seemed on the verge of domination
by one unit: "The ABC - CBS - NBC - Fox - Disney - Westinghouse
- News Corp.- Entertainment and Appliance Group."
core concern for critics of such alliances is the reduction in forms
of social and cultural expression. They cite various form of vertical
integration--the unification of production, distribution, and presentation
of mediated material--as serious threats to experimentation, variation,
and diversity among social and cultural groups. Profit margins,
rather than the needs and aspirations of groups and individuals,
determine what is produced and exhibited. Moreover, because most
of the major participants in the giant new merged media corporations
also have international interests, critics point to the possibility
of a reduction in cultural diversity, forms of expression, and dissemination
of information on a global scale. And the model of consolidation
and merger outlined here in the context of the United States is
equally significant among a shrinking handful of European and Asian
media conglomerates. Control of communication- and media-based corporations
throughout the world, then, is scrutinized as a form of extraordinary
political, economic, social, and cultural power.
the future will surely bring new alliances, as mergers and acquisitions
continue, as corporate players try to anticipate what it means to
operate in the new world of 500 channels and the World Wide Web.
Future media mergers will come in three forms.
outsiders will want in. This was exemplified by the Westinghouse
takeover of CBS, continuing a trend that started in the mid-1980s
with GE taking over NBC, and the Japanese moves into Hollywood.
More often than not (and surely in the case with Westinghouse),
the outsider acquires the media company because it is struggling,
seeking to re-invent itself. Thus, the fact that Westinghouse borrowed
extensively to buy CBS because its own core businesses were languishing
becomes the central point to be taken from this case.
Second, there will be increased vertical integration. Disney, a
"software producer," for example, acquires ABC, a top distributor
of video, in part to enable Disney to gain a guaranteed market for
its future products. Vertical alliances will continue to signal
attempts by the rich to protect what they have.
third merger strategy will be corporate diversification. Corporate
CEOs will seek to spread risk over as many media enterprises as
possible in order to hedge bets in an ever changing media marketplace.
With divisions devoted to all forms of the mass media, the diversified
corporation can ride through future recessions and catch the technological
wave of the future--wherever it goes.
and acquisitions will always be a central activity in the television
business as oligopolists (few owners) maneuver to become the dominant
player in one segment, be it television or music or movies or magazines.
Television, whether defined by networks (distributors) or Hollywood
studios (producers), has long been comprised of small exclusive
clubs. All club members make money--but some make more than others.
As long as television remains a major industry, outsiders will attempt
to buy in, current players will struggle to protect what they have,
and all will strive to minimize risk. Simply put, it is cheaper
to play these games of oligopolistic merger and acquisition than
to start new companies from scratch, a fact as true in the days
of Sarnoff, Paley, and Goldenson as it is today.
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Broadcasting Company; Columbia
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Broadcasting Company; Hollywood
and Television; National
Broadcasting Company; Time
Broadcasting Systems; United