Lets Break It Down: Media Mergers and Aquisitions

On Nov. 16, 2017, the Federal Communication Commission, which is responsible for regulating communications enterprises like phone, television and radio companies, rolled back regulations established in the 1970s on media mergers, making it easier for media mergers to take place.

Media mergers consolidate ownership of media outlets, which has already happened drastically over the years. According to Business Insider, about 50 media companies controlled approximately 90 percent of the information that the public received in 1983. In 2017, the number is down to just 6 companies: General Electric, Newscorp, Disney, Viacom, Time Warner and CBS.

The1970s FCC restrictions were created to ensure that a diverse group of media outlets would provide citizens with a well-rounded view of news and opinion with which to make decisions, like voting. One such regulation the FCC repealed now makes it possible for one company in a specific media market, which is a region of the country where residents have access to the same television and radio stations, to own both a daily newspaper and a television station. Another long-standing rule states that television stations in the same media market cannot merge with each other if it leaves the market with less than eight independently-owned stations, but this was also repealed.

However, the federal government has also recently shown concern over media mergers. On Nov. 20, the Justice Department sued to block AT&T’s proposed $85.4 billion bid to buy Time Warner. AT&T is one of the largest communications companies in the world and is also the largest distributor of paid TV in the United States, with services like DIRECTV. Time Warner owns television network HBO, movie studio Warner Brothers and media service Turner Broadcasting, which contains news channel CNN, just to name a few. The Justice Department is concerned that if the proposed merger becomes reality, too much of the media and entertainment industry would be in too few hands.

The Justice Department, however, is willing to allow AT&T’s proposal if the company agrees to sell CNN after the merger, but AT&T Chief Executive Officer Randall L. Stephenson has announced that the company has no intention of doing so. Instead, AT&T questioned the motivation behind the pressure to separate CNN. President Donald Trump’s relationship with the 24-hour news channel got off to a bad start during the 2016 presidential campaign and has continued to sour since he took office.  There has been speculation that Trump’s justice department is using the CNN sale stipulation as part of the AT&T-Time Warner merger to punish the news channel often publicly called out by the president.

Mergers are one of the ways media outlets hold up against competition. Some merge and enhance services like television subscriptions in order to compete with independent services like Netflix, but this competition also drives other companies to set up mergers in order to stay relevant. 

Telecommunications company Sinclair Broadcast Group is proposing a $3.9 billion merger with Tribune Media Services, but still needs to be approved by the FCC. This merger would make right-leaning Sinclair the country’s largest broadcaster, reaching about 72 percent of American homes, surpassing the federally mandated maximum amount of 39 percent. 

In July, Discovery Communications announced its plans to acquire Scripps Networks Interactive for $14.6 billion. Meredith Corporation recently bought Time Inc., along with all the magazines published under it, with the financial help of Koch Equity Development, a private equity group owned by avowed Libertarians and billionaires Charles and David Koch, after talk of acquisition began in 2013. It has also been speculated that Disney will buy part of 21st Century Fox, but it has not been confirmed yet. 

As for the AT&T merger with Time Warner, the issue is still being contested by the Justice Department on the grounds of avoiding a media monopoly, despite the conjecture about Trump’s dislike for CNN playing a role. Either way, Stephenson has announced that AT&T is prepared to legally fight the Justice Department should the case go to court.


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