What’s wrong with media mergers? A look at the history of ABC–the network that the Walt Disney Company is in the process of swallowing up–illustrates nearly every argument against consolidation of media ownership.
ABC can trace its origins back to 1919, when RCA, the Radio Corporation of America, was created by a consortium of General Electric, Westinghouse, AT&T and United Fruit. RCA and its allies controlled the patents for radio, and had a virtual monopoly until the alliance was declared to violate antitrust laws in 1932.
In the meantime, RCA had launched the National Broadcasting Company (NBC) which controlled two radio networks known as the Red and Blue networks. In order to reduce NBC‘s overwhelming dominance of the broadcasting industry–which threatened to monopolize the embryonic television medium–the Federal Communications Commission ordered NBC to sell one of its networks. In 1943, the Blue network was sold for $8 million to Edward J. Noble–the conservative businessman who invented Life Savers–and became the American Broadcasting Company (ABC).
In 1953, the ABC TV network, struggling in third place behind NBC and CBS, merged with the Paramount theater chain–itself a product of antitrust actions that separated the movie studios from their theater chains. The breakups in the film industry were necessary, according to the Justice Department, because if the producers of a media product like film also controlled the distribution of that product, then the public would be denied the free access to competing ideas envisioned by the First Amendment.
The ABC/Paramount Theaters merger raised similar objections–two FCC commissioners voted against approving the merger, saying that it threatened to create a “monopolistic multimedia economic power” (Networks of Power, Dennis Mazzacco).
More successful protests were launched in 1966, when ITT, a multinational powerhouse and major military contractor, attempted a friendly takeover of ABC. Critics charged that ITT–which had financial interests in some 118 companies–would be tempted to slant the news to assist its international dealings. “A company whose daily activities require it to manipulate governments at the highest level is likely to be left with little more regard for a free and independent press…than for conscientious government officials,” three of the seven FCC commissioners charged (Tube of Plenty, Erik Barnouw).
Nevertheless, a majority of the FCC board approved the merger, arguing that ITT owning ABC would be no different than the RCA conglomerate owning NBC. Commissioner Nicholas Johnson retorted (Tube of Plenty): “To say that because RCA owned NBC, ITT must be allowed to acquire ABC, is to say that things are so bad there is no point in doing anything to stop them from getting worse.”
Despite FCC approval, the Johnson administration’s Justice Department asked the U.S. Court of Appeals to block the takeover to protect ABC‘s journalistic independence. Faced with protracted litigation, ITT withdrew.
But a very different Justice Department existed in 1985, when ABC was bought for $3.5 billion by Capital Cities, a media company with a somewhat mysterious past–then-CIA Director William Casey was one of its founding investors. (Casey, in fact, may have actually held down the price of ABC stock at the time Cap Cities was acquiring it, by asking the FCC to strip ABC of its broadcast licenses in retaliation for negative reporting on the CIA–L.A. Weekly, 2/20/87).
The way for the Cap Cities takeover was paved by the deregulation drive of the Reagan era. While networks could previously own only seven stations, under Reagan that number was raised to 12–allowing Cap Cities to combine the ABC affiliates it owned with ABC‘s owned-and-operated stations. (ABC News contributed to Reagan’s re-election in 1984 by censoring several reports exposing administration corruption–Mother Jones, 11-12/85.)
Under Cap Cities‘ management, ABC–like the other two networks, which also changed hands in the ’80s–was under heavy pressure to cut costs and make its news operations profitable. By 1987, about 300 news staffers had lost their jobs–one-fifth of all employees there (Three Blind Mice, Ken Auletta).
The antitrust principles that broke up the radio trust, split up RCA‘s airwaves-dominating networks, severed the movie studios from their theater chains and blocked ITT from absorbing ABC are all but forgotten in Washington today. Warren Buffet, the billionaire investor who dominates ABC/Cap Cities, openly boasted that Disney‘s takeover of ABC is “a merger of the No. 1 content company with the No. 1 distribution company” (L.A. Times, 8/1/95). Where are the objections from the Clinton Justice Department, which is supposed to regulate against such anti-competitive alliances?
Disney, much like ITT, is a giant multinational corporation with interests around the world that will inevitably conflict with news decisions. Disney‘s Michael Eisner touted his vision of a world open to his company’s bland, nonthreatening fare:
Is that the vision of broadcasting that is going to guide ABC? Eisner may have found the key to creating programming that is acceptable to dictatorships around the world, but he clearly doesn’t understand the kind of media that a democracy needs.