Issues in Transnational

Media Management (Richard a Gerson, Micihigan University)

The transnational corporation is a nationally based company with overseas operations in
two or more countries. One distinctive feature of the transnational corporation (TNC) is
that strategic decision making and the allocation of resources are predicated on economic
goals and efficiencies with little regard to national boundaries. What distinguishes the
transnational media corporation (TNC) from other types of TNCs is that the principal
commodity being sold is information and entertainment. !t has become a salient feature of
today"s global economic landscape (#lbarran $ Chan%Olmsted& '(()* +emers& '(((*
,ershon& '((-& .///* 0erman $ cChesney& '((-).
The TNC is the most powerful economic force for global media activity in the world
today. #s 0erman and cChesney ('((-) point out& transnational media are a necessary
component of global capitalism. Through a process of foreign direct investment& the
TNC actively promotes the use of advanced media and information technology on a
worldwide basis. This chapter will consider some of the critical issues facing today1s
TNC. Table '/.' identifies the seven leading TNCs& including information pertaining
to their country of origin and principal business operations.
T02 TNC3 #4456T!ON4 #N+ !4CONC26T!ON4
+uring the past two decades& scholars and media critics alike have become increasingly
suspicious of the better known& high%profile media mergers. 4uch suspicions have given
way to a number of misconceptions concerning the intentions of TNCs and the people
who run them. The first misconception is that such companies are monolithic in their
approach to business. !n fact& 7ust the opposite is true. 8esearchers like ,ershon $ 4uri&
(.//9)&,ershon&('((-&.///)&orley $ 4hockley% :alabak ('((')and ;ennis ('()<)
argue that the business strategies and corporate culture of a company are often adirect
reflection of the person (or persons) who were responsible for developing the
organi=ation and its business mission.
The 4ony Corporation& for e>ample& is a company that was largely shaped and developed
by its founders asaru !buka and #kio orita. Together& they formed a uni?ue
partnership that has left an indelible imprint on 4ony1s worldwide business operations. #s
a company& 4ony is decidedly @apanese in its business values. 4enior managers operating
in the company1s Tokyo head?uarters identify themselves as @apanese first and
entrepreneurs second(4ony&'((<).;ycontrast&;ertelsmann#.,.isaTNC that reflects the
business philosophy of its founder&8einhard ohn&who believe din the importance of
decentrali=ation.;ertelsmann1success can be attributed to long%range strategic planning
and decentrali=ation& a legacy that ohn instilled in the company before his retirement in
'()'.
# second misconception is that the TNC operates in most or all markets of the world.
While today1s TNCs are indeed highly global in their approach to business& few
companies operate in all markets of the world. !nstead& the TNC tends to operate in
preferred markets with an obvious preference (and familiarity)toward one1s home market
(,ershon& '((-& .///). News Corporation Atd& for e>ample& generates -<B of its total
revenues inside the 5nited 4tates and Canada followed by 2urope '<B and #ustralasia
)B respectively (News Corporation& .//C& p. <). 4imilarly& Diacom generates an
estimated )9B of its revenues inside the 5nited 4tates and Canada (Diacom !nternational&
.//.&
T02 ,AO;#A!:#T!ON OE #8F2T4
The world has become a series of economic centers consisting of both nation states and
transnational corporations. The globali=ation of markets involves the full integration of
transnational business& nation%states and technologies operating at high speed.
,lobali=ation is being driven by a broad and powerful set of forces including3 worldwide
deregulation and privati=ation trends& advancements in new technology& market
integration (such as the 2uropean Community& N#ET#& ercosur& etc.) and the fall of
communism. !t is admittedly a fast%paced and uncertain world. The basic re?uirements
for all would%be players are free trade and a willingness to compete on an international
basis. #ccording to ,erman political theorist Carl 4chmitt& GThe Cold War was a world
of friends and enemies. The globali=ation world& by contrast& tends to turn all friends and
enemies into competitorsH (Eriedman& '(((& p. '').
Eoreign +irect !nvestment
Eoreign direct investment (E+!) refers to the ownership of a company in a foreign
country. This includes the control of assets. #s part of its commitment& the investing
company will transfer some of its managerial& financial& and technical e>pertise to the
foreignowned company (,rosse $ Fu7awa& '())). The decision to engage in E+! is
based on the profitability of the market& growth potential& regulatory climate and e>isting
competitive situation (;ehrman $ ,rosse& '((/* ,rosse $ Fu7awa& '())). The TNC is
arguably better able to invest in the development of new media products and services
than are smaller& nationally based companies or government supported industries. There
are five reasons that help to e>plain why a company engages in E+!. They include3
6roprietary #ssets and Natural 8esources
4ome TNCs invest abroad for the purpose of obtaining specific proprietary assets and
natural resources. The ownership of talent or speciali=ed e>pertise can be considered a
type of proprietary asset. 4ony Corporation1s purchase of C;4 8ecords in '()) and
Columbia 6ictures in '()( enabled the company to become a formidable player in the
field of music and entertainment. 8ather than trying to create and together new company&
4ony purchased proprietary assets in the form of e>clusive contracts with some of the
world1s leading musicians and entertainers. The company also holds the copyright to
various music recordings and films (,ershon& .///).
Eoreign arket 6enetration
# second consideration is the obvious need to e>pandin to new markets.4omeTNCs
invest abroad for the purpose of entering a foreign market and serving it from that
location. The market may e>ist or may have to be developed. The ability to buy an
e>isting media property is the easiest and most direct method for market entry. This was
the strategy employed by ;ertelsmann #.,. when it entered the 5nited 4tates in '()< and
purchased +ouble day 6ublishing (I9-J million) and 8C# 8ecords (ICC/ million). One
year later& ;ertelsmann consolidated its 5.4. recording labels by forming the ;ertelsmann
usic ,roup which is head?uartered in New Kork City. Today& the 5nited 4tates is
responsible for .9.9B of the company1s revenues worldwide.
8esearch& 6roduction and +istribution 2fficiencies
The cost of research& production& and labor are important factors in the selection of
foreign locations. 4ome countries offer significant advantages such as a well%trained
workforce& lower labor costs& ta> relief& and technology infrastructure. !ndia& for e>ample&
is fast becoming an important engineering and manufacturing facility for many computer
and telecommunications companies located in the 5nited 4tates. Companies like Te>as
!nstruments and !ntel use !ndia as a research and development hub for microprocessors
and multimedia chips. 4imilarly& companies like !; and Oracle use !ndian !T engineers
to develop new kinds of software applications. ;y some estimates& there are more
information technology engineers in ;angalore& !ndia ('J/&///) than in 4ilcon Dalley
('./&///). 8esearch studies performed by +eloitte 8esearch and the ,artner ,roup re%
port that outsourcing and work performed in !ndia have reduced costs to 5.4. companies
by an estimated 9/B to </B (GThe 8ise of !ndia&H .//C& p. <().
Overcoming 8egulatory ;arriers to 2ntry
4ome TNCs invest abroad for the purpose of entering into a market that is heavily
tariffed. !t is not uncommon for nations to engage in various protectionist policies
designed to protect local industry. 4uch protectionist policies usually take the form of
tariffs or import ?uotas. On October C& '()(& the 2uropean Community (2C)& in a
meeting of the '. nations1 foreign ministers& adopted by a '/ to . vote the Television
Without Erontiers directive. 4pecifically& 2C +irective )(LJJ. was intended to promote
2uropean television and film production. The plan called for an open market for
television broadcasting by reducing barriers and restrictions placed on cross%border
transmissions. The 2C was concerned that the ma7ority of broadcast airtime be filled with
2uropean programming. The Television Without Erontiers directive re?uired member
states to insure& where practical and by appropriate means that broadcasters reserve for
2uropean works a ma7ority of their transmission time e>cluding the time allocated for
news& sports and games (Cate& '((/* Fevin& .//C).
Eor TNCs (and other television and film distributors)& the 2C +irective was initially
viewed as a form of trade protectionism. !n order to offset the potential effects of
program ?uotas& TNCs and second tier television and film distributors ad7usted to the
2C +irective by forming international partnerships andLor engaging in coproduction
ventures. ;y becoming a 2uropean company (or having a 2uropean affiliate)& a TNC is
able to circumvent perceived regulatory barriers and is able to e>ercise greater control
over international televisionLfilm trade matters (Aitman& '(()).
2mpire ;uilding
Writers like ;ennis ('()<) contend that the C2O is the person most responsible for
shaping the beliefs& motivations& and e>pectations for the organi=ation as a whole. The
importance of the C2O is particularly evident when it comes to the formation of business
strategy. Eor C2Os like 8upert urdoch (News Corp.)& 4umner 8edstone (Diacom)& and
@ohn alone (Aiberty edia)& there is a certain amount of personal competitiveness and
business gamesmanship that goes along with managing a ma7or company. 4uccess is
measured in ways that go beyond straight profitability. # high premium is placed on
successful deal making and new pro7ect ventures. Today1s generation of transnational
media owners and C2Os are risk takers at the highest level& willing and able to spend
billions of dollar s in order to advance the cause of a new pro7ect
venture.Diacom1s4umner 8edstone& for e>ample& is known for his aggressive leadership
style and his tenacity as a negotiator. 0e is a fierce competitor. 8edstone1s competitive
style can be seen in a comment he made in Eortune maga=ine.
There are two or three of us who started with nothing. Ted Turner started with a half%
bankrupt billboard company. 8upert urdoch started with a little newspaper someplace
in #ustralia. ! was born in a tenement& my father became reasonably successful& and !
started with two drive%in theaters before people knew what a drive%in theater was . . . 4o !
do share that sort of background with 8upert. 6eople say ! want to emulate him
MurdochN. ! don1t want to emulate him. !1d like to beat him . . . (GThere1s No ;usiness&H
'(()& p. '/9)
The 8isks #ssociated with E+!
The decision to invest in a foreign country can pose serious risks to the company oper%
ating abroad. The TNC is sub7ect to the laws and regulations of the host country. !t is also
vulnerable to the host country1s politics and business policies. What are the kinds of risks
associated with E+!O There are the problems associated with political instability
including wars& revolutions& and coups. Aess dramatic& but e?ually important& are changes
stemming from the election of socialist or nationalist governments that may prove hostile
to private business and particularly to foreign%owned business (;all $ cCulloch& '((<).
Changes in labor conditions and wage re?uirements are also relevant factors in terms of a
company1s ability to do business abroad. Eoreign governments may impose laws
concerning ta>es& currency convertibility& andLor impose re?uirements involving
technology transfer. E+! can only occur if the host country is perceived to be politically
stable& provides sufficient economic investment opportunities& and if its business regula%
tions are considered reasonable. !n light of such issues& the TNC will carefully consider
the potential risks by doing what is called a country risk assessment before committing
capital and resources.
TRANSNATIONA M!"IA AN" #USIN!SS STRAT!G$
The main role of strategy is to plan for the future as well as to react to changes in the
marketplace. 4trategic planning is the set of managerial decisions and actions that
determine the long%term performance of a company or organi=ation. # competitive
business strategy is the master plan& including specific product lines and approaches to be
used by the organi=ation in order to reach a stated set of goals and ob7ectives. 6orter
('()J) argues that a firm1s competitive business strategy needs to be understood in terms
of scope& that is& the breadth of the company1s product line as well as the markets it is
prepared to serve. 4trategy formulation presupposes an ongoing willingness to enlarge
and improve the flow of a company1s products and services.
4trategic planning presupposes the use of environmental scanning to monitor& evaluate&
and disseminate information from both the internal and e>ternal business environments
for the key decision makers within the organi=ation. 8esearchers like Wheelen and
0unger ('(())& suggest that the need for strategic planning is sometimes caused by
triggering events. # triggering can be caused by changes in the competitive marketplace&
changes in the management structure of an organi=ation& or changes associated with
internal performance and operations.
The %ur&ose o' a Glo(al #usiness Strategy
ost companies do not set out with an established plan for becoming a ma7or
international company. 8ather& as a company1s e>ports steadily increase& it establishes a
foreign office to handle the sales and services of its products. !n the beginning stages& the
foreign office tends to be fle>ible and highly independent. #s the firm gains e>perience& it
may get involved in other facets of international business such as licensing and
manufacturing abroad. Aater& as pressures arise from various international operations& the
company begins to recogni=e the need for a more comprehensive global strategy
(,ershon& '((-* 8obock $ 4immonds& '()(). !n sum& most companies develop a global
business strategy through a process of gradual evolution rather than by deliberate choice.
Understanding )ore )om&etency
The term core competency describes something that an organi=ation does well (0itt&
!reland& $ 0oskisson '(((). The principle of core competency suggests that a highly
successful company is one that possesses a speciali=ed production process& brand recog%
nition& or ownership of talent that enables it to achieve higher revenues and market
dominance when compared to its competitors (+aft& '((-). Core competency can be
measured in many ways& including3 brand identity (+isney& 246N& CNN)& technological
leadership (Cisco& !ntel& icrosoft)& superior research and development (4ony& 6hilips)&
and customer service (+ell& #ma=on.com). 4ony Corporation& which speciali=es in
consumer electronics&is agood e>ample of core competency.Consumer electronics
represent </B of 4ony1s worldwide business operations.
0istorically& the TNC begins as a company that is especially strong in one or two areas.
#t the start of the '()/s& for e>ample& Time !nc. (prior to its merger with Warner
Communication) was principally in the business of maga=ine publishing and pay cable
television& whereas News Corporation Atd. (News Corp.)& parent company to Eo>
Television& was primarily a newspaper publisher. Today& both companies are transnational
in scope with a highly diverse set of media products and services. Over time& the TNC
develops additional sets of core competencies. News Corp.& for e>ample& has become the
world1s preeminent company in the business of direct broadcast satellite communication.
News Corp. either fully owns or is a partial investor in five +;4 services worldwide.
,lobal edia ;rands
;randing has emerged as a speciali=ed field of marketing and advertising& and the bur%
geoning field of business literature reflects this pattern. #aker1s seminal work& anaging
;rand 2?uity ('((')& suggests that a highly successful brand is one that creates a strong
resonance connection in the consumer1s mind and leaves a lasting impression. #ccording
to #aker& brands can be divided into five key elements3 brand loyalty& brand awareness&
perceived ?uality& brand associations& and proprietary brand assets. ,lobal media brands&
like 4ony& +isney& 0;O& icrosoft& and TD& represent hardware and software products
used by consumers worldwide. 4uch products are locali=ed to the e>tent that they are
made to fit into the local re?uirements (i.e.& language& manufacturing& marketing style) of
the host nation and culture. To that end& a successful brand name creates a resonance or
connection in the consumer1s mind toward a company1s product or service.
6rofiling the 4ony Walkman
Through the years& 4ony has introduced a number of firsts in the development of new
communication products. !n some cases& the products were truly revolutionary in terms of
a planning and design concept (;eamish '(((). Words like Trinitron& Walkman& and
6laystation have become part of the public le>icon of terms to describe consumer
electronics. Ket several of these products are more than 7ust products. They have con%
tributed to a profound change in consumer lifestyle. This& more than anything else& has
contributed to 4ony1s brand identity.
The creation of 4ony1s highly popular Walkman portable music player was highly
serendipitous in its origins. Erom '(<< onward& 4ony and other @apanese manufacturers
beganthemassproductionofcassettetapesandrecordersinresponsetogrowingdemand. #t
first& cassette tape recorders could not match the sound ?uality of reel%to%reel recorders
and were mainly used as study aids and for general purpose recording. ;y the late '(-/s&
audio ?uality had steadily improved and the stereo tape cassette machine had become a
standard fi>ture in many homes and automobiles (Nathan& '((().
!t so happened that asaru !buka (who was then honorary Chairman of 4ony) was
planning a trip to the 5nited 4tates. +espite its heaviness as a machine& !buka would
often take a TC%+J reel%to%reel tape machine when he traveled. This time& however& he
asked 4ony 6resident& Norio Ohga for a simple& stereo playback version. Ohga contacted
Fo=o Ohsone& general manager of the tape recorder business division. Ohsone had his
staff alter a 6ressman stereo cassette by removing the recording function and had them
convert it into a portable stereo playback device. The problem at that point was to find a
set of headphones to go with it. ost headphones at the time were ?uite large. When
!buka returned from his 5.4. trip he was ?uite pleased with the unit& even if it had no
recording capability (,ershon $ Fanayama& .//.).
!buka soon went to orita (then Chairman) and said& GTry this. +on1t you think a stereo
cassette player that you can listen to while walking around is a good ideaOH (4ony& '((<&
p. ./-). orita took it home and tried it out over the weekend. 0e immediately saw the
possibilities. !n Eebruary '(-(& orita called a meeting that included a number of the
company1s electrical and mechanical design engineers. 0e instructed the group that this
product would enable someone to listen to music anytime& anywhere.
#kio orita was the ?uintessential marketer. 0e understood how to translate new and
interesting technologies into usable products (,ershon $ Fanayama& .//.* Nathan&
'(((). #fter re7ecting several names& the publicity department came up with the name
GWalkman.H The product name was partially inspired by the movie 4uperman and 4ony1s
e>isting 6ressman portable tape cassette machine (4ony& '((<). The Walkman created a
totally new market for portable music systems. ;y combining the features of mobility and
privacy& the Walkman has contributed to an important change in consumer lifestyle.
Today& portable music systems have become commonplace ranging from ma7or urban
subways to health and recreation facilities to city parks worldwide.
%ro'iling MT*
usic Television channel (TD) is an advertiser supported music entertainment cable
channel that began as a 7oint venture between #merican 2>press and Warner #me>
Communications* then a subsidiary of Warner Communications. !t was conceived by
@ohn #. Aack in '()/ who was then vice president of Warner #me>. Aack recruited
8obert 6ittman (who would later oversee the #OALTime Warner merger) to assemble a
team responsible for developing the TD concept. TD was launched on #ugust '&
'()'. ;y '()C& TD had become successful and achieved profitability a year later.
TD1s originator& @ohn Aack& left the network in '()9. 8obert 6ittman rose to the
position of president and C2O of TD before leaving in '()<. !n arch '()<& TD&
Nickelodeon& and D0' were sold to Diacom for IJ'C million. 4hortly thereafter& Diacom
C2O 4umner 8edstone appointed Tom Ereston as C2O. Ereston was the last remaining
member of 6ittman1s original development team. TD1s global success is in part due to
the innovative management and programming strategies that Ereston implemented early
on in his tenure (Ogles& '((C).
!n '()-& TD launched its first overseas channel in 2urope& which was a single feed
consisting of #merican music programming hosted by 2nglish%speaking artists. TD
soon discovered that although #merican music was popular in 2urope& it could not offset
differences in language and culture and an obvious preference for local artists. 2uropean
broadcasters& however& ?uickly understood the importance of TD as a new program%
ming concept. They soon adapted the TD format and began broadcasting music videos
in various languages throughout the whole of 2urope. This& in turn& negatively affected
TD1s financial performance in 2urope.
!n '((J& TD was able to harness the power of digital satellite communications in order
to create regional and locali=ed programming. TD1s international programming draws
on the talent& language& and cultural themes from locali=ed regions which are then
satellite fed to that same geographic area. #ppro>imately -/B of TD1s content is
generated locally. TD airs more than .. different feeds around the world& all tailored to
their respective markets. They comprise a mi>ture of licensing agreements& 7oint
ventures& and wholly owned operations& with TD !nternational still holding the creative
control of these programs (G4umner1s ,emstone&H .///).
Today& the music video has become a staple of modern broadcast and cable television.
6resently TD has a huge market share in #sia& 2urope& China& @apan& and 8ussia. TD
!nternational is organi=ed into < ma7or divisions& including TD #sia (0indi& andarin)&
TD #ustralia& TD ;ra=il (6ortuguese)& TD 2urope& TD Aatin #merica (4panish)&
and TD 8ussia (G4umner1s ,emstone&H .///). The management of TD1s inter%
national operations is highly decentrali=ed& which allows local managers the ability to
develop programming and marketing strategies to fit the needs of each individual market.
*ertical Integration and )om&lementary Assets
There are several ways that a ma7or corporation can strategically plan for its future. One
common growth strategy is vertical integration& whereby a company will control most or
all of its operational phases. !n principle& the TNC can control an idea from its
appearance in a book or maga=ine& to its debut in domestic and foreign movie theaters& as
well as later distribution via cable& satellite& or +D+ (#lbarran& .//.). The rationale is
that vertical integration will allow a large%si=e company to be more efficient and creative
by promoting combined synergies between (and among) its various operating divisions.
To that end& many of today1s TNCs engage in cross%media ownership& that is& owning a
combination of news& entertainment and enhanced information services. Cross%media
ownership allows for a variety of efficiencies& such as news gathering as well as cross
licensing and marketing opportunities between company%owned properties.
%ro'iling Ne+s )or&oration td
The desire to control most or all of a company1s operational phases and thereby create
internal synergies is a primary goal for any company or organi=ation. 8upert urdoch is
a master of the vertical integration game. !n #pril '()-& urdoch1s #ustralian based
News Corporation Atd. launched the Eo> Television Network with '/) affiliates. !n the
process& urdoch became a 5.4. citi=en. !n the years that followed& urdoch steadily
improved the position of Eo> television by combining a steady source of programming
with greatly improved distribution outlets (Aee $ Aitman& '(('). !n '((C& for e>ample&
News Corp. ac?uired the rights to televise the National Eootball Aeague (NEA). The NEA
established Eo> as a highly credible player in the field of television entertainment.
4hortly thereafter& News Corp. negotiated with New World Communications for partial
ownership of '. D0E stations in key markets throughout the 5nited 4tates& thus
improving Eo> Network1s affiliation and direct viewer access. News Corp. has taken the
philosophy of vertical integration (and complementary assets) to a whole new level by
producing films and television programs that can be seen worldwide& including the Eo>
Television Network (54#)* ;ritish 4ky ;roadcasting (5.F $ !reland)* 4tar Television
(#sia)& 9/ program services in - languages in JC countries* and +irecTD (54#).
#ccording to 6eter Chernin (.//C)& News Corp1s COO3
#bout -JB of the world1s population is covered by satellite and television platforms we
control . . . mostly in #sia . . . We believe that in this period of global e>pansion& there are
some important strategic bets to make. #nd we1ve been making them. (p. (.)
The Strategic Necessity o' O+ning #oth So't+are and "istri(ution in,s
The once clear lines and historic boundaries that separated media and
telecommunications are becoming less distinct. The result is a convergence of modes&
whereby technologies and services are becoming more fully integrated. The main driving
force behind convergence is the digitali=ation of media and information technology.
+igital technology improves the ?uality and efficiency of switching& routing& and storing
of information. !t increases the potential for manipulation and transformation of data. #s
researcher !thiel de 4ola 6oole ('((/) writes& the organi=ation that owns both software
content as well as the means of distribution to the home represents a formidable player in
the new world of telecommunications and residential services. Today1s TNC wants to
own both software and the means of distribution into people1s homes. # clear e>ample of
this was Diacom1s '((( decision to purchase C;4 for IC- billion. Eor Diacom& the
purchase of C;4 represented an opportunity to obtain a well%established television
network as well as a company that owned more than '</ 5.4. radio stations (i.e.& !nfinity
;roadcasting). Eor its part& Diacom already owned several well%established cable network
services& including TD& Nickelodeon& and 4howtime. 4o& the purchase of C;4 provided
it with a steady distribution outlet for Diacom programs and offered it numerous cross
licensing and marketing opportunities (,ershon $ 4uri& .//9).
#road(and )ommunication
The term broadband communication is used to describe the ability to distribute
multichannel information and entertainment services to the home. The goal for both cable
operators and local e>change carriers is to offer consumers a whole host of software
products via an electronic supermarket (i.e.& broadband cable) to the home. ;roadband is
also a term used to describe the delivery of high speed !nternet access via a cable modem
or digital subscriber line (+4A). The issue of convergence becomes an important
consideration in describing the ability to deliver information and entertainment services
to the home using a variety of information delivery platforms& including cable television&
telephony& and direct broadcast satellite as well as combined multimedia formats& the
!nternet& Web TD& online videogames& etc. (Chan%Olmsted $ Fang& .//C). The future of
tomorrow1s so%called Gsmart homeH will allow for the full integration of voice& data and
video services and give new meaning to the term programming.
"iversi'ication
+iversification is a growth strategy that recogni=es the value of owning a wide variety of
related and unrelated businesses. !n principle& a company that owns a diverse portfolio of
businesses is spreading the risk of its investment. Thus& a downturn in any one business
during a fiscal year is more than offset by the company1s successful performance in other
areas. The disadvantage& however& is that some companies can become too large and un%
wieldy in order to be properly managed. The ,eneral 2lectric Corporation& for e>ample&
is consistently ranked as one of the world1s leading TNCs. The company is comprised of
'' ma7or divisions including ,2 Consumer !ndustrial (appliances& home electronics)&
,2 0ealthcare (medical imaging and diagnostics e?uipment)& ,2 Commercial Einance
and N;C 5niversal (television and media entertainment) to name only a few.
#s a business strategy& diversification can also occur within the parameters of a general
product line (#lbarran $ +immick& '((<). #ccordingly& some TNCs are more diverse
than others* the differences being a matter of product relatedness and geographical
location. !n one study performed by Chan%Olmsted $ Chang (.//C)& the authors
e>amined the diversity of product line and geographical operations among seven leading
TNCs. Companies like Divendi 5niversal and ;ertelsmann were found to be more
diverse in terms of product line than companies like +isney and Diacom& which were
considered less diverse. Non%5.4.%based companies like ;ertelsmann& 4ony& and News
Corp. were found to be the most geographically diverse. The same study points to the fact
that the North #merican market is especially important from the standpoint of E+! and
creating strategic alliances.
News Corp. is an e>ample of a highly diverse TNC& but whose product line falls within
the general scope of media news and entertainment. !t is also a company whose E+!
strategies reflect an abiding philosophy of preferred markets (see Table '/..).
TRANSNATIONA M!"IA AN" GO#A )OM%!TITION
The decades of the '((/s and the early .'st century have witnessed a new round of
international mergers and ac?uisitions that have brought about a ma7or realignment of
business players. Concerns for antitrust violations seem to be overshadowed by a general
acceptance that such changes are inevitable in a global economy. The result has been a
consolidation of players in all aspects of business& including banking& aviation&
pharmaceuticals&media and telecommunications #lbarran $ Chan Olmsted&'(()*
Compaine $ ,omery& .///* ,ershon& '((-& .///). The communication industries& in
particular& have taken full advantage of deregulatory trends to make ever%larger
combinations. 4ome of the more high%profile mergers and ac?uisitions include3 Diacom1s
purchase of C;4 for IC- billion (in '((()& #merica Online1s (#OA) purchase of Time
Warner for I'C/ billion (in .//') and Comcast1s IJ9 billion purchase of #T$T
;roadband in .//. (Compaine $ ,omery& .///). The goal& simply put& is to possess the
si=e and resources necessary in order to compete on a global playing field. Table '/.C
identifies the ma7or mergers and ac?uisitions of media and telecommunications
companies for the years '((( to .//J.
-hen Mergers and Ac.uisitions /ail
Not all mergers and ac?uisitions are successful. #s companies feel the pressures of
increased competition& they embrace a somewhat faulty assumption that increased si=e
makes for a better company. Ket on closer e>amination& it becomes clear that this is not
always the case. Often& the combining of two ma7or firms creates problems that no one
could foresee. # failed merger or ac?uisition can be highly disruptive to both
organi=ations in terms of lost revenue& capital debt& and decreased 7ob performance. The
inevitable result is the elimination of staff and operations as well as the potential for
bankruptcy. !n addition& the effects on the support (or host) communities can be ?uite

destructive (Wasserstein& '(()). There are four reasons that help to e>plain why mergers
and ac?uisitions can sometimes fail. They include3 the lack of a compelling strategic
rationale& failure to perform due diligence& post%merger planning and integration failures&
and financing and the problems of e>cessive debt (GThe Case #gainst ergers&H '((J).
The ac, o' a )om&elling Strategic Rationale
!n the desire to be globally competitive& both companies go into the proposed merger (or
ac?uisition) with unrealistic e>pectations of complementary strengths and presumed
synergies. #s O=anich $ Wirth ('(()) point out& once a target company has been
identified& a price level must be established. The challenging aspect to this is the
valuation to be placed on the target company. Once negotiations are underway& there is
sometimes undue pressure brought to bear to complete the deal. 5nwarranted optimism
regarding future performance can sometimes cloud critical 7udgment. The negotiation
process suffers from what some observers call winners curse. The ac?uiring company
often winds up paying too much for the ac?uisition. !n the worst case scenario& the very
issues and problems that prompted consideration of a merger in the first place become
further e>acerbated once the merger is complete.
/ailure to %er'orm "ue "iligence
!n the highly charged atmosphere of intense negotiations& the merging parties will
sometimes fail to perform due diligence prior to the merger agreement. ;oth companies
only later discover that the intended merger or ac?uisition may not accomplish the
desired ob7ectives (GThe Case #gainst ergers&H '((J). The lack of due diligence can
result in the ac?uiring company paying too much for the ac?uisition andLor later
discovering hidden problems and costs. #n e>ample of this problem can be seen in
#T$T1s '(() ac?uisition of TC! Cable for I9) billion. The stock and debt transaction
would give #T$T direct connections into CC million 5.4. homes through TC! owned and
affiliated cable systems. Eor #T$T& the merger agreement represented an opportunity to
enter the unregulated business of cable television. !t was an intriguing strategy that
earned #rmstrong respect from all ?uarters of the telecommunications field for its sheer
breadth of vision. The plan& however& did not work out as originally conceived. !n
October .///& C2O ichael #rmstrong& in a stunning reversal of strategy& announced
plans to discontinue #T$T1s original broadband strategy by dividing the company into
four separate companies (G#rmstrong1s Dision&H .///). !n the final analysis& #T$T was
unable to surmount the continuing decline in long distance revenues coupled with the
enormous costs of transforming TC!1s cable operation into a state%of%the%art broadband
network.!n.//'&#T$TagreedtosellitsbroadbanddivisiontoComcastCorporationfor IJ9
billion.
%ostmerger %lanning and Integration /ailures
One of the most important reasons that mergers fail is due to bad postmerger planning
and integration. !f the proposed merger does not include an effective plan for combining
divisions with similar products& the duplication can be a source of friction rather than
synergy. Turf wars erupt and reporting functions among managers become divisive. The
problem becomes further complicated when there are significant differences in corporate
culture.
The postmerger difficulties surrounding #OA and Time Warner& for e>ample& demonstrate
the difficulty of 7oining two very different kinds of organi=ational culture. #OA typified
the fast and loose dot%com culture of the '((/s& whereas Time Warner demonstrated a
staid& more button down approach to media management. The #OAPTime Warner merger
was promoted as the marriage of old media and new media. !n the end& the once hoped
for synergies did not materiali=e& leaving the company with an unwieldy
structure and bitter corporate infighting. Once the value of #OA stock began to plummet&
Time Warner soon took control of the company& and those people associated with #OA
were ?uickly overlooked when it came to strategic decision making. #dding to the
tension were new ?uestions about #OA1s accounting practices and the way ad revenues
were recorded (GKou1ve ,ot New anagement&H .//.).
/inancing and the %ro(lem o' !0cessive "e(t
!n order to finance the merger or ac?uisition& some companies will assume ma7or
amounts of debt through short%term loans. !f or when performance does not meet
e>pectations&suchcompaniesmaybeunabletomeettheirloanobligations.Thecompany may
then be forced to sell off entire divisions in order to raise capital or& worse still& default on
its payment altogether.
8upert urdoch& president and C2O of News Corp. Atd.& is uni?ue in his ability to
structure debt and to obtain global financing. The urdoch formula was to carefully
build cash flow while borrowing aggressively. Throughout the early '()/s& urdoch1s
e>cellent credit rating proved to be the essential ingredient to this formula. 2ach ma7or
purchase was e>pected to generate positive cash flow and thereby pay off what had been
borrowed. 2ach successive purchase was e>pected to be bigger than the one before&
thereby& ensuring greater cash flow. !n his desire to maintain control over his operations&
urdoch developed a special ability to manage debt at a higher level than most
companies (,ershon& '((-).
The problem with News Corp1s debt financing& however& reached crisis proportions in
'((' when the company was carrying an estimated debt of I).C billion. The problem was
compounded by the significant cash drains from Eo> Television and the ;4ky; +;4
service. #ll this came at a time when the media industries (in general) were e>periencing
a worldwide economic recession. urdoch was finally able to restructure the company1s
debt after several long and difficult meetings with some '9< investors. 0e nearly lost the
company. urdoch was able to obtain the necessary financing but not before the
divestment of some important assets and an agreement to significantly pare down the
company1s debt load. !n summari=ing urdoch1s business activities and propensity for
debt& the 2conomist maga=ine wrote& GNobody e>ploited the booming media industry in
the late '()/1s better than r. 8upert urdoch1s News CorporationQand few borrowed
more money to do itH (Gurdoch1s Fingdom&H '((/& p. <.).
%ro'iling the AO Time -arner Merger
On @anuary '/& .///& #OA& the largest !nternet service provider in the 5nited 4tates&
announced that it would purchase Time Warner !nc. for I'<. billion. What was par%
ticularly uni?ue about the deal was that #OA& with one fifth of the revenue and 'JB of
the workforce of Time Warner& was planning to purchase the largest TNC in the world.
4uch was the nature of !nternet economics that allowed Wall 4treet to assign a monetary
value to #OA well in e>cess of its actual value. What is clear& however& is that #OA
president 4teve Case recogni=ed that his company was ultimately in a vulnerable
position. 4ooner or later& Wall 4treet would come to reali=e that #OA was an overvalued
company with little in the way of substantive assets.
#t the time& #OA had no ma7or deals with cable companies for delivery. Cable modems
were 7ust beginning to emerge as the technology of choice for residential users wanting
high speed !nternet access. #OA was completely dependent on local telephone lines and
satellite delivery of its service* nor did #OA have any real content. #s a company& #OA
pursued what #ufderheide (.//.) describes as a Gwalled gardensH strategy& whereby& the
company attempted to turn users of the public !nternet into customers of a proprietary
environment. !n looking to the future& #OA needed something more than a well%
constructed first screen e>perience. Time Warner was well positioned in both media
content as well as high speed cable delivery. !n principle& an #OAPTime Warner combi%
nation would provide #OA with broadband distribution capability to Time Warner1s 'C
million cable households. #OA Time Warner cable subscribers would have faster !nternet
service as well as access to a wide variety of interactive and !nternet software products
(Eaulhaber& .//.).
The #OA Time Warner merger may well be remembered as one of the worst mergers in
5.4. corporate history. The first signs of trouble occurred in the aftermath of the dot%com
crash beginning in arch .///. #OA& like most other !nternet stocks& took an immediate
hit. #OA1s ad sales e>perienced a free fall and subscriber rates flattened out. ;y .//'&
#OA Time Warner stock was down -/B (G#OA& Kou1ve ,ot isery&H .//.). #OA1s
8obert 6ittman was assigned the task of overseeing the postmerger integration.
!n the weeks and months that followed& the economic downturn and subse?uent loss of
advertising had a strong& negative impact on #OA1s core business. #OA found itself
financially weaker than it was a year earlier because of rising debt and a falling share
price that left it without the financial means to pursue future deals. !n the end& Time
Warner C2O ,erald Aevin bet the future of the company on the so%called marriage of old
media and new media& leaving employees& investors& and consumers ?uestioning his
7udgment as well as having to sort through the unintended conse?uences of that action.
Why didn1t the board of directors at Time Warner !nc. ?uestion (or challenge) the strategy
in the first placeO #ccording to one senior #OA Time Warner official& G,erry had a firm
grip on the boardH (G#OA1s ;oard +igging !n&H .//.).
This deal was a big leap of faith& says a person who was at the meeting. Ket the board
7umped& assured by Time Warner C2O ,erry Aevin that convergence of new and old
media and the growth it would produce were real. (p. 9<)
!n the aftermath of the #OA Time Warner merger& the company1s new board of directors
has overseen a dramatic shake%up at the senior e>ecutive level& including Aevin1s
retirement from the company and 6ittman1s forced resignation in @uly .//. (GEailed
2ffort&H .//.). !n @anuary .//C& 4teve Case stepped down as Co%C2O claiming that he
did not want to be a further distraction to the company. !n their place& company directors
installed 8ichard 6arsonsas Chairmanand C2O and two long time Time Warner
e>ecutives as his co%chief operating officers. !n @anuary .//C& #OA Time Warner reported
a I(( billion loss from the previous year making it the highest recorded loss in 5.4.
corporate history. 6erhaps the most symbolic aspect of #OA Time Warner as a failed
business strategy was the decision in 4eptember .//C by the company1s board to change
the name #OA Time Warner back to its original form& Time Warner !nc.
TRANSNATIONA M!"IA AN" GO#A )OM%!TITION
,lobal competition has engendered a new competitive spirit that cuts across nationalities
and borders. # new form of economic +arwinism abounds& characteri=ed by a belief that
si=e and complementary strengths are crucial to business survival. #s today1s media and
telecommunication companies continue to grow and e>pand& the challenges of staying
globally competitive become increasingly difficult (+immick& .//C). The relentless pur%
suit of profits (and the fear of failure) have made companies around the world vigilant in
their attempts to right%si=e& reorgani=e& and reengineer their business operations. Thus& no
company& large or small& remains unaffected by the intense drive to increase profits and
decrease costs.
The "eregulation %arado0
!n principle& deregulation is supposed to foster competition and thereby open markets to
new service providers. The problem& however& is that complete and unfettered dereg%
ulation can sometimes create the very problem it was meant to solve* namely& a lack of
competition. 8esearchers like osco ('((/) call it the Gmythology of
telecommunications deregulation.H Other writers such as +emers ('((() refer to it as the
Ggreat parado> of capitalism.H This author simply calls it the deregulation parado>.
!nstead of fostering an open marketplace of new players and competitors& too much
consolidation can lead to fewer players and& hence& less competition (+emers& '(((*
,ershon& .///* osco& '((/). #s +emers points out3
The history of most industries in so%called free market economies is the history of the
growth of oligopolies& where a few large companies eventually come to dominate. The
first e>amples occurred during the late ')//s in the oil& steel and railroad industries . . .
#ntitrust laws eventually were used to break up many of these companies but
oligopolistic tendencies continue in these and most other industries. (p. ')
!n all areas of media and telecommunications& there has been a steady movement toward
economic consolidation. The e>ponential increase in group and cross%media ownership is
the direct result of media companies looking for ways to increase profits and achieve
greater internal efficiencies. The TNC of the .'st century is looking to position itself as
a full service provider of media and telecommunication products and services (see Table
'/.9). The same set of transnational media companies are prominent in each of the si>
categories listed.
CO86O8#T2 #N+ O8,#N!:#T!ON#A CON+5CT
The challenges and difficulties faced by today1s media and telecommunications
companies call into ?uestion some basic assumptions regarding deregulation and the
principle of self%regulation. This reality challenges several decades of conventional
wisdom about the efficiency of free markets (Futtner& .//.). The primary difficulty is
that market discipline deregulation and the low esteem placed on government regulation&
the 5.4. Congress would not permit regulatory agencies (i.e.& the ECC& 42C& and ETC) to
challenge the activities of corporate #merica (Crew $ Fleindorfer& .//.).
Today& falling markets and accounting scandals have tarnished the once iconic image of
the chief e>ecutive officer. The self%dealing that characteri=ed a handful of C2Os has
fostered public resentment and called into ?uestion a system that would allow senior level
e>ecutives to pursue high%risk strategies and personal enrichment schemes at the public1s
e>pense. #s Charran $ 5seem (.//.) point out& management decision%making& under
such circumstances& becomes an incremental descent into poor 7udgment.
)or&orate Governance
The role of a corporate board of directors is to provide independent oversight and
guidance to a C2O and his or her staff of senior e>ecutives. This can involve everything
from approving new strategic initiatives to reviewing C2O performance. Corporate
boards provide a level of professional oversight that embodies the principles of self
regulation. One of the important goals& of corporate governance should be to prevent
significant mistakes in corporate strategy and to ensure that when mistakes happen& they
can be corrected ?uickly (6ound& .//.). The problem occurs when a corporate board of
directors ignores its fiduciary responsibility to company stockholders and employees by
failing to challenge ?uestionable corporate strategy andLor by permitting unethical
business practices to occur. ore problematic& is when a corporate board loses its sense
of independence. !n recent years& many C2Os have tended to operate with corporate
boards that have proven highly compliant rather than ob7ective. This was the case with
the Walt +isney Company where ma7or investment groups critici=ed the company1s board
for failing to challenge (or hold accountable) the financial performance of the company
and its C2O& ichael 2isner. There are several contributing reasons that help to e>plain
why corporate governance systems sometime fail. They include3 (a) senior management
providing corporate boards with limited information* (b) the pursuit of sub%goals by
senior managers that are contrary to the best interests of the company or organi=ation* (c)
corporate cultures of intimidation where ?uestioning senior management is met with
unremitting resistance and the possibility of 7ob loss* and (d) corporate board members
who provide consulting services and are& thereby& beholden to senior management
(onks $ inow& '((<* 4iebens& .//.). !n the worst case scenario& failures in corporate
governance can lead to what Cohan (.//.) describes as a diffusion of authority& where
neither company nor person is fully aware of or takes responsibility for the actions of
senior management.
The -alt "isney )om&any and )or&orate Governance
2vents surrounding Walt +isney Corporation call into ?uestion the rights of investors and
the obligations of a corporate board of directors to provide responsible corporate
oversight. Throughout the decade of the '()/s and well into the '((/s& +isney1s ichael
2isner was a highly respected C2O. 4tarting in '()9& he had managed to take an
otherwise under%managed company and transform it into one the most highly successful
media companies in the world. Eor the first ) years& ichael 2isner and 6resident Erank
Wells were praised for their e>ecutive leadership and marketing savvy. !n #pril '((9&
Wells was killed in a helicopter skiing accident in Nevada. 0is death left 2isner with a
personal loss and a difficult void to fill.
One possible choice to fill that vacancy was @effrey Fat=enberg& then head of +isney
4tudios. !n 4eptember '((9& after a long and difficult power struggle& Fat=enberg re%
signed his position and left the company in a highly visible and emotionally charged
departure. 0e later sued +isney for moneys owed him& and eventually reached an out%of
court settlement of I.J/ million. Over the ne>t few years& things would go from bad to
worse as the company1s financial performance did not improve. !n '((.& the Walt +isney
Company unveiled its 2uro +isneyland theme park (later re%named +isneyland 6aris).
The park was beautifully designed but proved to be a huge financial drain on the
company. !n '((J& the Walt +isney Company ac?uired CapLCities #;C for I'( billion.
4hortly thereafter& ratings at the newly ac?uired #;C television network plummeted.
,ate admissions at the company theme parks were falling& and the company1s overall
financial performance lagged behind several of its peer TNCs. The one bright spot was
the financial performance of its cable sports subsidiary& 246N.
That same year& 2isner hired his long%time friend& ichael 4. Ovit=& as president& and
agreed to pay him a I'9/ million severance package '9 months later when things didn1t
work out. The Walt +isney Company was later sued in .//9 and .//J by a group of
investors who felt that the company had been derelict in its financial handling of assets.
Testimony during the trial has included a number of depositions revealing several
embarrassing facts& including I. million given to r. Ovit= for office renovation*
I-<&9'C for limousines and rental cars* and I<&'// for a home R%ray machine. #ccording
to an internal financial audit& r. Ovit= spent I9)&C/J of the company1s money for a
home screening room and I<&J// for Christmas tips.
Throughout 2isner1s tenure at Walt +isney& the company1s board of directors has been
routinely critici=ed for its lack of independence. !n both '((( and .///& ;usiness Week
named the +isney board of directors the worst board in #merica (GThe ;est and Worst
Corporate ;oards&H .///). !n ay .//C& while deciding whether a shareholder lawsuit
challenging the I'9/ million payout to ichael Ovit= should go forward& +elaware
Chancellor William Chandler noted several governance failures by the +isney board&
including3
'. #llowing C2O ichael 2isner to unilaterally make the decision to hire Ovit=& who was
a close personal friend of 2isner. They did not get involved in the details or consider r.
Ovit=1s fitness for the position.
.. Eailing to e>ercise proper oversight of the process by which Ovit= was both hired and
later terminated& including the I'9/ million severance package (!n The Walt +isney
Company +erivative Aitigation& ).J #..d .-J& .)( (+el. Ch. .//C)
According to U)A a+ %ro'essor, Ste&hen #ain(ridge1
The facts suggest that 2isner hired his buddy Ovit=& fell out with Ovit= and wanted him
gone& cut very lucrative deals for his friend Ovit= both on the way in and on the way out&
all the while railroading the deals past a complacent and compliant board. The story that
emerges is one of cronyism and backroom deals in which preservation of face was put
ahead of the corporation1s best interests (G+isney& Ovit=1s Compensation&H .//9).
The aforementioned problems were further e>acerbated in .//9 when 2isner unilaterally
turned down a IJ9 billion offer to ac?uire +isney by Comcast& !nc. Einally& under
2isner1s leadership& the +isney company has also estranged its relationship with 4teven
@obs1s 6i>ar #nimation 4tudio officials* producers of Toy 4tory& Einding Nemo onsters&
!nc. and The !ncredibles. !n .//9& the computer%animation giant elected not to renew its
contact with +isney When its distribution deal e>pires in .//J.
The ?uestion should therefore be asked3 Why was +isney1s corporate board of directors
so negligent in performing its dutiesO The answer& in part& has to do with what Collins
(.//') describes as the problem of charismatic leadership and strong personalities. #s
Collins points out& highly successful C2Os are sometimes used to getting their way. To
that end& 2isner was very adept at selecting board members who would prove compliant&
including various friends and ac?uaintances. #ccording to ;usiness Week3
+isney1s sagging fortunes have turned up the pressure on C2O 2isner& who has tried to
soothe critics by making several governance changes . . . 2isner has steadfastly refused to
rid +isney1s board of his many friends and ac?uaintances. The board still includes
2isner1s attorney& his architect& the principal of an elementary school once attended by his
children& and the president of a university that received a I' million 2isner donation.
That1s why many view the changes as token gestures& rather than real reform (GThe ;est
and Worst Corporate ;oards&H .///).
ost of +isney1 outside directors board did not have direct access or get involved with
the company1s day%to%day business operations. They had little or no contact with
company employees other than during presentations at board meetings. When problems
did occur& most of the board members felt powerless or were so beholden to C2O 2isner&
that no one felt confident to come forward and raise the kinds of ?uestions that needed
asking concerning the company1s business practices and finances. !n response to the
;usiness Week article and outside investor lawsuit& the company did undergo some
reforms of its corporate governance structure. Ket& it becomes clear that 2isner managed
to turn those reforms to his own advantage. 8oy +isney was forced out by a mandatory
retirement provision and the only other persistent critic& 4tanley ,old& was kept off key
committee assignments because of his business dealings with the firm. ;oth men
subse?uently resigned from the +isney board and in a sign of protest created a Web site
called 4ave+isney.com. !n the final analysis& shareholder activism failed because it never
made a serious dent in the board1s complacency. 2isner was good at boardroom politics
and was able to use such reforms to further secure his own position.
The problems associated with 2isner1s leadership reached its culmination point in ay
.//9 at the company1s annual stockholders meeting in 6hiladelphia. Never before in
corporate #merica have shareholders e>pressed such an enormous loss of confidence in a
C2O. ;efore a highly vocal crowd of more than C/// investorsQsome wearing +isney
costumes and handing out anti 2isner pamphletsQthe company announced that 9CB of
the nearly two billion votes cast by investors withheld support for 2isner in his post as
+isney chairman (G+isney 4trips Chairmanship&H .//9). #ccording to Christiana Wood&
chief investment officer for the California 6ublic 2mployees 8etirement 4ystem& GThe
fact is& we have 7ust lost confidence in ichael 2isner.H (GNow its Time to 4ay
,oodbye&H .//9& pp. C'PC.). !n an effort to placate angry shareholders& the board voted
to keep 2isner in place as C2O while taking away his title as chairman of the board.
Eormer aine 4enator (and +isney board member) ,eorge itchell was appointed to the
position of chairman. The board was correct in recogni=ing the need to separate the two
top positions& including the decision to appoint a new chairman. That said& .9B the
company1s investors also withheld their support for itchell3 a clear indication that many
don1t think he1s the man for the 7ob either. !n .//9& 2isner agreed to relin?uish his
position as C2O in .//<& at the board1s urging.
SUGG!STIONS /OR /UTUR! R!S!AR)2
8esearch in the field of transnational media management has increased markedly during
the past decade. 4uch studies have tended to focus on strategic planning ?uestions as well
as market entry strategies (0ollifield& .//'). 5ntil recently& there were only a select
number of studies that looked at the TNC in terms of cross%cultural personnel manage%
ment& supply chain management& leadership& corporate conduct and governance issues&
etc. This is beginning to change. #s 0ollifield (.//') points out& M!t is necessaryN to begin
moving away from simply describing and discussing the global e>pansion of media
enterprises and toward an increased focus on developing models of organi=ational and
managerial behavior that are grounded in theory and can be used to e>plain and predict
the behavior of media enterprises in transnational markets. (p. '9.)
#s we look to the future& the study of transnational media management and strategic
decision making will change in light of two emerging trends. The first trend is the
growing importance of the second tier TNC that now provides an abundance of the
world1s media information and entertainment product. !n 2urope& #sia& and Aatin
#merica& the demand for new sources of programming has increased dramatically given
worldwide privati=ation trends and new media technologies. !n the past& the purchase of
5.4.%and TNC%made television and film products represented a less costly approach
than producing one1s own programs. Today& this is no longer the case.
!n 2urope alone& 5.4.%made television programs account for less than CB of primetime
programming and less than 'B worldwide (Chernin& .//C). #lthough the TNC is still a
ma7or player in the e>port of television and film products& several research studies have
noted the continued increase in regional production capability in both Aatin #merica
(#natola $ 8ogers& '()9) and #sia (Waterman $ 8ogers& '((9). !f given the choice&
most television consumers prefer programs that are nationally andLor locally produced.
4traubhaar ('(('& .//C) refers to this as the principle of cultural pro>imity* that is& a
desire for cultural products that reflect a person1s own language& culture& history& and
values. Aanguage is often the most important criteria in a host nation1s decision to import
foreigntelevisionprogramming(Wildman$4iwek&'())).!n#ustria&fore>ample&almost '.B
of the country1s television imports come from neighboring ,ermany. 4imilarly& ;elgium
and 4wit=erland are both ma7or importers of Erench programming (Fevin& .//C). The
principle of cultural pro>imity holds e?ually true in Aatin #merica. The +ominican
8epublic imports a large percentage of its television programs from e>icobased
Televisa& a ma7or producer for the Aatin #merican market.
The second important trend is the demassification of media and entertainment product
made possible by the !nternet and advanced recording and storage technologies. Eor
marketers& the steady shift from mass to micromarketing is being driven by a combination
of technological change as well as strategic opportunity. !ncreasingly& consumers now
have the ability to compile& edit& and customi=e the media they use. This does not bode
well for traditional mass media and the companies who own them (Napoli& .//'). Erom a
marketing standpoint& the value of broadcasting (and large circulation newspapers) are no
longer seen as the primary or best means of advertising to smaller niche audiences.
!nstead& more and more companies are using the !nternet to create Web e>periences for a
younger generation of users. #s Chan%Olmsted (.///) points out& the !nternet1s
interactive capability changes the basic relationship between the individual and media&
challenging marketers to shift their emphasis from persuasion to relationship building.
G#s communication channels continue to proliferate and fragment& successful media
firms will have to focus on consumers& rather than on systems of distribution or types of
media contentH (p. ''.). One indication of this trend was a comment made by Coca Cola
6resident& 4teven @. 0eyer& when he declared that Coke was moving away from broadcast
television as Gthe anchor mediumH toward more direct e>perience%driven marketing
(0eyer& .//C). #t the same time& the !nternet offers complementary opportunities for
business organi=ations to e>tend their brand as is the case with personali=ed marketing
and online shopping. 6erhaps most important& the !nternet dramatically changes the
traditional business supply chain by allowing information to flow in all directions&
thereby enabling faster communication and improved e>change efficiency (6orter& .//').
Eor researchers& understanding the underlying strategy and full impact of the !nternet and
micromarketing is still very much in the beginning stages.
Einally& a few research ?uestions researchers should consider in conducting future studies
focused on this area of in?uiry include3
S To what e>tent do geographical location and cultural differences affect the ability of
TNCs to implement strategy on a local levelO
S To what e>tent does intelligent networking affect supply chain management in the
production and distribution of media products and services by TNCsO
S +uring the past decade& researchers like 4traubhaar have shown that audiences prefer
locally produced television and film products. 0ow do we gauge the growing
importance of the second%tier media companies in satisfying the wants and needs of
local audiencesO To what e>tent can we e>pect increased partnership agreements
between TNCs and such second%tier media companiesO
The demassification of media and entertainment products& made possible by the
!nternet and advanced recording and storage technologies& will likely change the
business of TNC marketing and production. What are some of the likely new
marketing and production strategies TNCs can be e>pected to employ in the years
aheadO 0ow will these new business strategies affect the profitability and operational
efficiencyof TNCsO
S #s mentioned earlier& TNCs are not as global as they would seemingly appear. Eor
companies like Diacom and Time Warner who do a disproportionate share of their
business in North #merica& there will be increased pressure to become more global in
scope. 8esearchers may want to consider some of the important emerging markets
for the future and what it means from a strategy standpoint. 8esearchers should also
evaluate the impact of increased globali=ation of this type on the overall business
strategy of TNCs.