A Capitalist Argument Against Conglomerates

Under the headline “Big Media. Bad Idea,” Sophia Banay argues (Portfolio, 10/15/08) that–for anyone “not named Murdoch or Redstone–big media just isn’t working.” Banay uses the language heeded by her audience when writing that you can “say what you want about the benefits of synergies and size for big media companies; for their shareholders, the bigger the company, the smaller the gains”:

Between last week and the same week a year ago, Time Warner shares were down 50 percent; Viacom was off 59 percent; GE had fallen 46; News Corp. slid 65 percent; and Disney, the big winner, had tumbled a mere 34 percent….

It sounds fairly logical. The supposed “synergies” between the divisions of modern conglomerates like Viacom, GE and Time Warner have never really blossomed. Time Warner‘s magazine group, cable networks, AOL, pay TV and movie-studio divisions barely communicate, let alone work together. And if that lumping together doesn’t deliver value in the stock market, why suffer through it?

Banay’s bright idea: “How about small media? Or at least smaller media?”