Abstract
In the convergence age of media, telecommunication and Internet, firms need more media contents, audiences or platforms to acquire the economics of scale or scope. Some critics argued that the traditional antitrust law handles the violation of horizontal and vertical merger & acquisition, but not for the
conglomeration. If the conglomerate’s shares are small in each individual market, whether the sum of the total shares will deter new competitors from entering the market requires further discussion. The KEK, the index of cross‐media concentration used in German, is applied to examine the degree of multiple market concentration. However, this study found that for most countries they did not analyzed M&A cases by using the similar KEK index because there are many questions raised in the calculation and definition.
Currently the antitrust law is practicable enough to keep the cross media competitive if the barrier could be removed and new entry could enter the market.
Key words: merger, acquisition, conglomerate, concentration, cross media, antitrust law
I. Introduction
Traditionally the antitrust law concerns the manipulative market power of the horizontal or vertical merger and concentration (Horwitz, 2005; Just, 2009; Shelanski, 2006). For those big conglomerates across different industries, it is hard to regulate their anti‐competitive conducts and market structures since they belong to the separated industries or hard to evaluate the impact of the entry barriers. For example, the FCC would clearly set the limitation of cable system subscription in the deal of the merger of Comcast and Warner Brother. However, it is difficult to question whether those conglomerates might charge the unreasonable prices to control those programming channels from their competitors.
In the digital media age, it is harder to define the originally separated markets. The media compete for the same advertising and audience attention. There are more and more media conglomerates arising across mergers of the music, television, newspaper, telecommunication and Internet markets. They maybe are not big enough to violate the antitrust law in the individual market. However, they can perform great influence if you count all kinds of media together (Iosifides, 1997).
Some country regulatory, like KEK in German, began to calculate the index of the cross‐media
concentration by weighting the media availability, importance and influence. However, most of the countries still apply only the antitrust law in the same media market. As the convergence continuing and the mergers extending to telecommunication and the Internet industry, it is important to understand the real control powers of the cross‐media conglomerates. Therefore, whether to construct a reliable regulatory tool and index might become vital in the future.
II. Literature Review
1. The trends of Mergers & Acquisitions
In the convergence age of media, telecommunication and Internet, firms require diversities of media contents to attract audiences, or merge as giant platforms to extend the market power of the economics of scale or scope. In figure 1, there are more and more mergers & acquisitions (M&A) announced worldwide in the media & entertainment industry. For example, in the 2014 year, there are several huge M&A cases
announced in the U.S., for example, Facebook to acquire WhatsApp for $19 billion, Comcast to merge with Time Warner Cable for $45.2 billion, and AT&T to buy DirectTV for $48.5 Billion.
Figure 1, the worldwide announced mergers & acquisitions in the media and entertainment industry.
2. The Problem of Media Consolidation and Conglomeration
Many critics concern that the giant conglomerates may favor their own media contents and influence the free market of opinions (Group of Specialists on Media Diversity, 2008; Noam, 2009). For example, Jung (2002) suggested Time and Fortune favored their parent company in terms of valence or direction of
coverage of merger, emphasis on the company, and amount of coverage. Similarly, Lee and Hwang also (2004) found that conglomerate ownership leads to a highly regarded newsmagazine showing favoritism toward the entertainment products of its parent corporation.
Besides, if the conglomerate also owns the journalistic companies, it will raise the institutional conflict of interest (Davis and Craft, 2000). For example, if the food product of the parent company violates the code of the law, could the affiliated journalistic company reports professionally and tries to dig the facts to beneficial to the society? McKnight (2010) even argued that Murdoch’s News corporation is a media institution with a mission to exercise political influence in the US, UK and Australia.
Smith (2009) analyzed the newscasts of one of the US first duopolies, a single company to own two
television stations in the same media market to compare content qualities of the before and after
consolidation newscasts. The results show the number of stories and time dedicated to local news increased significantly. However, the allocation of reporters to news coverage did not increase. Journalists would be working simultaneously in several media, including some in which they lacked training, and some felt that pressures on journalists working in multiple media would provide news of lower quality (Edwardson, 2007).
3. The Current Regulation of Cross Media Concentration
Many countries have implemented cross‐media and other ownership restrictions to prevent excessive concentration of media assets and thus promote a diversity of sources of opinion. However, at the convergence age, the conglomerates expect to look for the scale efficiency and the regulatory agency began to reduce of restriction among the dual markets. For example, in 2003 year, the FCC brought newspaper into its relation of ownership rules when it proposed permitting to own a newspaper and a broadcast station under some circumstances. The commission created a sliding scale by which a newspaper also could control broadcast stations in area with at least four television stations (Edwardson, 2007).
The British media regulator Ofcom is recommending that local cross‐media ownership rules are liberalized, with companies only barred from owning all three of: more than 50% of the local newspapers in a regional market, a radio station and the ITV license for the area. The recommendations will be welcomed by newspaper, TV and radio companies, which have been urging the government to liberalize local cross‐media ownership rules as they struggle with plunging advertising revenues in the recession. However, the regulator has ruled out relaxing national cross‐media ownership rules which restrict cross‐ownership of ITV licenses and national newspapers.
Similarly proposed changes to the Australian cross‐media regulation prohibiting the common ownership of commercial free‐to‐air television and radio services and daily newspapers in the same market (Papandrea, 2006). The replacement of the existing bans on cross‐media ownership with the proposed minimum number of voices rule will undoubtedly lead to increased concentration of ownership of main media with a likely significant consequential impact on diversity.
For example, the German Commission on Concentration in the Media (KEK) proposed new
measurements for media markets in view of the proposed acquisition of the broadcasterProSiebenSAT1 by the press group Axel Springer Media in 2006. KEK developed a new weighting system which converted the market share of press, radio, the Internet into the equivalent in television audience share (Picard, 2009; Just 2009).
III. Research Question
Therefore, this study hopes to review the index of the cross‐media concentration constructed and applied in German, to see what kind of media should be included and how to weigh their importance? Does the index can really provide enough regulatory information? How to interpret the number of the index? (Just, 2009)
IV. The Index Construction of Cross Media Concentration
Most countries concern the problems of cross‐media concentration in the digital age, and they usually examine the impacts of merger & acquisition case by case. They analyze the case in the individual media market, or in the dual markets which share the similar audiences or advertisings. However, few of them deal with the conglomerate merger case across many different markets.
Currently this study only found that KEK used in the case of Axel Springer AG and ProSiebenSat.1 Media AG in German was the most popular index applied. The Korean Communication Commission (KCC) also calculated the similar index, except for the advertising market share was also considered. Recently, the Taiwanese’s draft of the media antitrust law also includes the similar KEK index to calculate the cross‐media market power (Figure 2). However, there are several concepts were used mistakenly by many scholars. The result of KEK (140%) was overstated.
Figure 2, Example of Want Want China Times Merger Case KEK Calculation
1. The weighting factors
For various media, originally they are belonged to the separated markets. In order to compare the sharing in a single market, it is necessary to weigh for each medium. For example, in the KEK case, the weighting factor was 1 for TV, 2/3 for radio, 1/2 for Internet, 2/3 for newspaper and 1/10 for magazine, based on their power suggestion, impact potency and availability.
However, whether the factors are suitable for different countries and market should be discussed.
For example, the penetration of radio is less than 30%, compared to 96% of television in Taiwan. Besides, the influence and advertising of television is much greater than those in radio, the weighting factor of radio may be reduced from 67% to 50% is more reasonable in the Taiwanese media market.
Table 1, the example to illustrate the problem of the weighting factors