V I D E O • A G E OC T O B E R 2 0 1 1 46 BY GIOVANNI VERLINI The diminishing financial importance of traditional media conglomerates witnessed over the last few years could be an indication of a seismic shift underway in the industry. This is despite the fact that, according to the Motion Picture Association of America, Hollywood generated an $11.7 billion trade surplus in 2008, larger than industries such as telecommunications, consulting, legal and insurance services. Media companies fill the silver screen, the small screen and, more recently, the computer monitor, with images and dreams that dominate people’s imaginations all over the world. Yet, most of this global audience would be surprised to find out how marginal media companies have become when it comes to sheer economic force and size. But this wasn’t always the case. Take the FT Global 500 list, a ranking of the world’s largest listed companies by market capitalization compiled by the London-based Financial Times. In the 2011 list, the largest media company is the U.S.’ Walt Disney, which came in at 75th place, up from 82nd a year earlier, at a value of U.S.$81.8 billion. No other media conglomerate made it into the top 100. Comcast fell just short, notching 101st place thanks to a market capitalization of U.S.$67.4 billion, while News Corp., whose stock before the News of the World phone hacking scandal was worth U.S.$47 billion, is a distant 171st. The rest of the list included: TimeWarner (211), DirecTV (230), Vivendi (244), Thomson Reuters (266), Viacom (320), Time Warner Cable (374), British Sky Broadcasting (397), Naspers (421), Reed Elsevier (475). The U.S.’ Liberty Media closed the list in 481st position with a market capitalization of U.S.$19.7 billion. Despite its high visibility and glamorous profile, the media is one of the smallest industrial sectors in the world. Banks and oil companies remain the two most valuable businesses on the list, while in 2011 mining increased its position from ninth to fifth on the back of rising demand for hard commodities such as gold and rare earths. Even more interesting, however, is that not all companies listed under media produce content, at least not as their primary line of business. While a company like Comcast wears a double hat (i.e., that of a provider of entertainment, information and communications products and services, as well as that of a producer anddistributor of entertainment, news and sports throughNBCUniversal), other companies have a more limited role. BSkyB and DirecTV are mainly satellite platform operators. Thomson Reuters defines itself as a “source of intelligent information for businesses and professionals,” best known for its news agency operation. South Africa’s Naspers focuses on Internet platforms, pay-TV and the provision of related technologies and print media in developing countries, while Time Warner Cable delivers the same range of services across the U.S. market. Reed Elsevier is a publisher for the scientific, legal, educational and business markets, while Liberty Media owns a broad range of electronic retailing, media, communications and entertainment businesses. In other words, they are first and foremost distributors of content. This leaves a total of five conglomerates: Time Warner, Vivendi, Viacom, Walt Disney and Comcast, as the only true producers of entertainment content — though all of them also control or have interests in distribution platforms. Vivendi, a French company that managed to weather the storm it experienced under the stewardship of former CEO Jean-Marie Messier in the early 2000s, was the only challenger to U.S. supremacy in this sector. So far, this is the picture for 2011. But how did these companies do in the past? And how have things evolved for the media sector? A quick look at the 2003 FT Global rankings, the oldest of such rankings available, revealed stimulating details. In 2003, five media companies made it to the top 100: Comcast (43), Viacom (44), AOL Time Warner (48), Walt Disney (83), and News Corporation (93) — which at the time was still incorporated in Australia. Besides the top five, the list included 18 additional conglomerates classified as “media and entertainment” companies among the top 500. These were: Liberty Media (153), Clear Channel Communications (171), Gannett (196), Thomson (207), BSkyB (210), Vivendi Universal (222), Cox Communications (226), Reed Elsevier (234), General Motors ‘H’ (274), Fuji Photo Film (286), Tribune (305), Omnicom (320), McGraw Hill (379), Mediaset (422), Dai Nippon Printing (444), WPP Group (465), Fox Entertainment Group (473) and Echostar Comms ‘A’ (499). The companies’ market capitalization ranged from Comcast’s U.S.$68 billion to Echostar’s U.S.$9.4 billion. All in all, in 2003 a total of 23 media companies made it to the top 500, as opposed to just 13 in 2011, which represents a reduction just short of 50 percent. The companies’ ranking also decreased, with five companies within the top 100 in 2003 as opposed to only one in 2011. The only constant between the 2003 and 2011 lists is the U.S.’ position of dominance in the media sector. So what happened between 2003 and 2011 to cause these changes? Some mergers, of course, took place. For example, News Corp. took over Fox Entertainment Group, and the new entity was eventually incorporated in the U.S. Yet, at the same time some companies were also broken up. In 2009, for example, AOL Time Warner spun off its cable and Internet business, creating Time Warner and Time Warner Cable. This is widely believed to be proof of the fact that the much-anticipated “convergence” between content and multiple delivery systems does not work — at least, not so far. This means that the discrepancy between the two lists is due to the fact that, over the last eight years, media companies have simply failed to grow at the same rate as other conglomerates. There might be several reasons for that. First, in an industry rife with piracy and notorious unpredictability, content and entertainment cannot be easily measured in monetary terms. In addition, this data highlights once again the importance of small producers in a sector in which creativity plays a crucial role. Yet, there areother elements that should be taken into consideration. In the 2011 FT Global list, a company called Google ranks 28th in the world. Needless to say, in 2003 Google was neither on the list, nor on the stock market, as it had its Initial Public Offering in 2004. At the same time, a company called Facebook is reportedly planning a U.S.$100 billion flotation in the near future. IT giants such as Microsoft, which still ranks as the 10th largest company in the world, are trying hard to become players in the new Internet age. Meanwhile, philosophers, social scientists and media analysts are debating the so-called “social media generation,” one that is increasingly shying away from traditional consumption of entertainment, while embracing new, Internet-supported media channels. The new platforms for delivering content, in other words, are not just itching to replace old ones. They are also affecting the type of content consumers demand: consumerproduced, collaborative material. However, some experts are nowopenly talking about the fact that we might be witnessing a second Internet bubble, one that might be even more inflated and dangerous than the one that burst in 2000. Yet, regardless of whether an Internet 2.0 bubble materializes the trends media companies experienced between 2003 and 2011 could turn out to be just a preview of things to come. F i n a n c i a l S t a t u s Traditional Media Losing FT Global 500 Rank “Just like Big Business”
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