Mergers 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.

During 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 deals.

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.

At 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).

Time 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.

From 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.

In 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.)

A 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."

A 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.

But 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.

First, 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.

The 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.

Mergers 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.

-Douglas Gomery