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Broadcasting Companies Get Bigger, But Their Backs Are Still Against the Wall

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The mega merger of Scripps and Journal Broadcasting seems to suggest there’s still plenty of money to be made in old media. As Al Tompkins writes at Poynter, “Wall Street loves broadcasting, and bigger companies have more leverage to negotiate retransmission deals with cable companies.”

Scripps becomes the fifth largest independent TV station group in the country, and as Barry Lucas, an analyst at Gabelli & Co., tells Bloomberg “Investors certainly seem to prize the combined companies.”

But here’s the problem: big mergers hide a real weakness: these media companies are getting bigger because they have to. “Leverage” is increasingly a matter of survival, as traditional broadcasters feel that leverage slipping away, into the hands of digital companies.

As Ken Auletta writes in The New Yorker, Rupert Murdoch’s bid to acquire Time Warner signals a company fighting for survival, not a goliath eating up the competition. Murdoch owns traditional media properties in the form of newspapers and the Fox television stations, but that’s hardly the power platform it used to be, especially compared to Comcast swallowing up Time Warner Cable, and A.T.&T. acquiring DirecTV:

“One digital venture capitalist says that if he were to affix a headline to a Fox/Time Warner marriage it would be “Old Media Buys Older Media.” But Murdoch has always tried to look to what’s coming next, and he knows that as consumers increasingly watch film and television online, and stop paying expensive monthly cable bills, and as the audience for network television dwindles, Fox may start to deliver programs directly to viewers on the Internet.”

Dominic Rushe makes a similar point in The Guardian, that the balance of power has shifted to new media, and the old media titans may be making big deals, but they have to—owning a fleet of television stations that date to the 1950s just isn’t a sure-fire financial strategy anymore. Hence, Murdoch’s play for Time Warner.

“The logic behind the deal is that a bigger company with all these big brands will be able to talk tougher terms with the Comcasts of the world. Inevitably someone will soon start using the word “synergies”.”

The merger allows Scripps to pivot away from declining print properties, and into a more powerful position to negotiate with players like ABC.

But it hardly solves the longer-term issue. It’s nice to have influence with a network, but even ABC has an uncertain future. The real question post-merger is this: how does Scripps plan to gain “leverage” with Facebook?

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