Sunday, November 25, 2007

Media giants downsizing

It's a pattern we've seen before in many industries, going back to the building of "conglomerates" back in the 1960s. The tender-hearted worry that a few companies will control just everything, and we hear calls to break them up. Then, generally well before the wheels of politics can get cranking, economies of scale yield to the emerging reality that a company that tries to do everything turns out not ot be able to do much of it too well. Market forces, rather than alert regulators, break them up.

Now it's happening with media companies. As Jack Shafer's post here explains, E.W. Scripps and Belo Corp. (both of which were mentioned a few years ago when there was a possibility that Freedom Communications might go on the auction block) have both spun themsleves into two separate companies, to handle their disparate products. Gannett was trading at around $90 a share back in 2004 but is now down to $40 and might be pressured by investment bankers with a heftystake to break itself apart. The New York Times Co. sold off its nine TV stations a year ago, but is under pressure to divest itself still further.

As Shafer puts it, "Conglomeration works until it doesn't." I wouldn't be surprised to see more divestiture in the media businesses. But kneejerk interventionists are unlikely to learn that the interplay of market forces usually corrects economic "imbalances" faster and more sensitively than regulation or legislation.

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