Time Warner’s merger with America Online seems like yet another large media merger. Inevitably, the phrase “media giant” comes into play. As a sample, “Consumers do not want to be beholden to a giant media‐Internet dictatorship, even if it promises to be a benevolent one,” was proffered by a coalition of groups such as Consumers Union. But this is a merger with a difference. It shows the amazing potential for unregulated markets to shake up the status quo.
In the early nineties, AOL was not one of the big players in the media market. Could anyone have predicted that AOL could negotiate a merger of equals with Time Warner less than a decade later? AOL was in the right place at the right time–not in the stifled telephone business or the rate‐regulated cable business. In unregulated Internet business, where no one knows who will come from behind, and where regulatory gamesmanship cannot be deployed to delay competition.
Suddenly, AOL can challenge the giants. Time Warner’s merger with America Online will create a media company worth over $350 billion. That is a lot of capital to invest in new networks and new communications products. It gives AOL the distribution outlets it needs to compete with cable broadband networks. Time Warner will get an injection of fresh ideas and Internet‐speed management.
Complex and powerful forces of change begin to operate, transforming expectations of regulators and business alike almost overnight. Microsoft’s dominance is suddenly threatened. The regulatory debate about broadband–whether regulators should mandate “open access” to existing broadband networks–is transformed.
Will “bigness” inevitably lead media outlets to lose their independence? Every media merger is greeted with the expectations that editorial integrity will soon crumble away entirely. Professor Robert McChesney of the University of Illinois argues that “good journalism is bad business and bad journalism is, regrettably, at times good business.” This may be true for coverage of some individual stories, but media companies that abandon their integrity once too often find themselves stung by the court of public opinion. Witness CBS’s prompt apology for their blunder in altering the New Year’s scene in Times Square to remove an NBC logo.
If the media business values their reputation so little that consumer’s desire for reliable news cannot restrain its decline at all, one would think that the media would have utterly declined long ago. Big media companies are not a new thing.
And–there’s still the Internet. The business model that draws us to the Net is freedom of choice and interactivity; companies like AOL will fail if they abandon that model. Web companies simply have not adopted models that rigorously control content. As Professor Richard Epstein aptly put it, “the minnows still swim with the whales.”
Media independence is a real issue–but it is more complex than the size of the company. Media companies, big or small, have always faced conflicts of interest. One major threat to integrity stems from the need to stay on good terms with government. Imagine you are a journalist who regularly covers the White House. You cannot afford to be too critical and anger your sources there–or you will be cut off from first‐hand coverage of any major story from that outlet. So far, this more subtle threat has been overlooked by watchdog groups.
Instead of having the Department of Justice and the FCC scrutinize AOL/Time Warner or other private‐sector mergers, lets have the high‐tech companies scrutinize the Department of Justice and the Federal Communications Comission. Imagine the conversation between technological tycoons about the antitrust review process. “It’s a bottleneck,” they might say. “We ourselves cannot reliably predict where the market will be in five years–how could they know?” “How long is the FCC going to take with this–are we going to lose another year?” “We’d better not argue that their other rulemaking violates the free speech rights of our journalists–they might withhold our merger approval.”
Despite the dozens of hardworking experts employed at the FCC and DOJ and the best of intentions, those institutions act just like–monopolists (or at least the way monopolists are supposed to act on television). They’re slow, over‐confident, and the only change seems to be that they get bigger every year. If you want to avoid dealing with them, you have to emigrate to outer space–you don’t just turn off the TV. If you need an ominous looming giant to worry about, how about the federal government?