Media Convergence,
Competition Law , and
Industrial, and Media
Policies
Robert G. Picard
Media Management and Transformation Centre
Jönköping International Business School
Jönköping University
Convergence is




blending of industries and activities in
information society
built upon technological changes that provide
more control of entire value chains
based in linking the value chains of different
products and services
built upon assumptions of synergy and critical
mass
Types of Convergence

Technical convergence
 Production
convergence
 Network convergence
 Device convergence


Service convergence
Market convergence
technological convergence

service convergence

market convergence
Convergence Situations Involving
Media Platforms and Producers
Convergence producing
limited benefits
Convergence producing
limited benefits
print
Online
broadcast
Convergence is being
actively resisted
audio
recordings
motion
pictures
Some convergence is
spurred by common
interests in soundtracks
and distribution systems
Strong linkages have
been formed in visual
entertainment sectors
Media Business Effects of
Convergence
development of media product portfolios
 increasing emphasis on cross-media
activities
 rising complexity in media firm
organisation and operations
 consolidation and concentration among
media firms

Consolidation and Concentration

Consolidation
 fusions

(mergers & acquisitions, joint ventures
Concentration
 involves
control over market activities
 concept at the heart of competition law

Consolidation may or may not create
concentration
Consolidation and Concentration

Market changes can keep consolidation
from becoming concentration
 growth
of number of magazines, radio
channels, television channels, cable
channels, online and mobile content providers

2 examples from the “poster children” of
concentration
Why consolidation and
concentration occur
 managers seek to reduce risk
 managers seek to control sources of necessary
resources
 managers seek financial stability
 growth imperatives for firms and managers
 mangers’ fear of the future
 lack of internal innovation in firms
 ego needs of strong leaders
 avarice
Policy Approaches to Media
Convergence and Operations
 Industrial Policy


designed to promote growth and development of an industry
designed to promote competitiveness and sustainability of
enterprises
 Competition Policy


designed to protect competition and halt harmful practices and
developments that provide undue market power
Concerned with harm to competitors and harm to consumers
 Cultural Policy

designed to promote and protect cultural and social interests
 Political Support Policy

designed to serve political interests and concerns
Policymaking in Europe
European Commission sets broad
philosophical framework and common
principles of policy for member states
 Latitude for member states to set national
law and regulation within the EU
framework and principles
 EC establishes law and regulation for the
combined internal market

Competition Law and Policy

Primary concerns
 to
ensure markets aren’t controlled and keep
market dominance from growing
 defining relevant market and measure for
dominance and control
 enforcement proceedings
Competition Law and Policy

Primary concerns in Europe
 to
create and protect a competitive internal
market for products and services
 to promote domestic competition law enforcement


history of tolerating and promoting cartels
competition law and enforcement for only about 25 years
in most nations
 to prohibits business activities that reduce or distort
competition
 to prohibits governmental activities that reduce or distort
competition

state aid (subsidies) to enterprises that provide competitive advantages
to specific firms
Competition Law and Policy

Primary concentration law solutions to
concentration
 halting
competition from developing and
growing further

Scrutinize M&A activities and joint ventures to
ensure economic harm doesn’t occur
 dismantling
firms with high concentration
levels

rarely used
European Competition Law

Operating aid is prohibited unless it is
part of
a
regional developmental programme
 an industry development plan
 a rescue and restructuring effort for failing firms

Conflict: Subsidies and operating aid
exist for broadcast and print media in
many EC member states
Competition Law and Media

A partial exemption from competition
law exists for aid for cultural purposes
 must

Irish TV documentary subsidies permitted


not seriously harm the internal market
single payments to support production
Sociéte Français de Production general subsidies were found
to be operating aid that harmed competitors

paid over number of years to same firms without restructuring plan
Competition Law and Media

Disputes over state support of public
broadcasting
 commercial
firms argued mixed funding (license
fee and advertising) created unfair competition
 protocol to Treaty of Amsterdam enacted to
protect PSB and license fee because of their
public service obligations
Competition Law and Media

Protocol subjects commercial activities (usually
converged activities) to competition policy



magazine and internet operations of BBC
Sale of access to digital network for data transmission by
SVT
requires separation of public service and commercial
activities

Portuguese public broadcasting case required clear accounting of
subsidies and uses and separation of commercial activities


ruled RTP was using subsidies for public service activities and could show use through accounting
practices
policies on internal cost transfer issues and brand transfer advantages
remain undecided
Competition Law and Media

Regulators are increasingly concerned
about mergers and acquisitions that create
or increase dominant positions
 by
joining dominant positions in production and
distribution
 by creating potential to exclude or significantly
disadvantage competitors
Recent Merger and Acquisition
Concerns

Vivendi acquisition of Seagram ($34 billion)

Vivendi a major shareholder in Canal+ and BSkyB
 Seagram owns Universal Studios and many broadcast rights


EC concerned deal would increase dominance of
European pay cable and satellite broadcasting by
vertical integration of the two firms
EC requirements for approval

Sale of BSkyB shares (22.7% stake)

Vivendi agreement not to discriminate against other pay TV operators in
access to Universal Studio products
Time Warner and AOL


Both have significant European operations
EC concerned about dominance in online
distribution and sale of video and audio products



because of AOL online market dominance, Time Warner product
dominance, and Bertelsmann AOL ownership
Complicated by Time Warner - EMI merger
EC required Bertelsmann-AOL divestiture
Time Warner, Warner Music
Group, EMI Merger

$20 billion merger of music interests


EC indicated it would block the deal



including Virgin Records (EMI), Chappell Music (Warner)
production and distribution operation merger was not
problematic
EC concerned about collective dominance of recordings and
catalogues. AOL ownership also a factor
TW and EMI cancelled the merger
Media Policy Approach
Increasing efforts to establish mediaspecific policy to control convergence
effects
 Proponents see competition law as not
effective in addressing social concerns
about media consolidation and
concentration

1992 EU Green Paper on Media
Concentration and Pluralism

argued that guaranteeing pluralism and
cultural diversity necessary
 provided
the philosophy against consolidation
and concentration
asserted that action is the responsibility of
member states
 no effective results achieved

Ownership Limitations in Media
Specific Policy Efforts


Major shift during 1990s to begin regulating by
audience share rather than number of media
units owned by a firm
In 1997 the EC rejected an effort to create panEuropean ownership limit

Proposal limited maximum ownership to



30 percent of TV audience share
30 percent of radio audience share
10 percent of total audience of all cross-owned media
2002 European Parliament
Resolution on Media Concentration
EC should examine political, economic,
and legal implications of a European-level
framework
 EC should identify regulatory options for
safeguarding freedom of expression and
pluralism and fair competition in
advertising market
 direction and results uncertain

National Media Ownership
Limits

France
 limits
newspaper ownership to 30 percent of
newspaper market
 forbids foreign ownership of broadcasting

United Kingdom
 limits
TV ownership to no more than 15 percent of
total audience share
 newspapers with more than 20 percent of national
circulation cannot own TV licenses
 foreign ownership prohibitions on broadcasting are
being removed
National Ownership Limits

Germany
 TV
companies limited to 30 percent of total
audience



law prohibits “predominant opinion power”
Special obligations for firms over 10 percent of audience
some discretion to lower the limit when one company already
has high newspaper and TV ownership
National Ownership Limits

United States
 No
basis to regulation print media ownership except
competition law
 foreign ownership of broadcast stations limited (25
percent)
 No firm can own television channels providing access
to more than 35 percent of TV households
 no firm can own more than 5 radio stations in market
with 14 stations or 8 stations in market with 45
stations