GERSHON.

THE TRANSNATIONAL MEDIA COPORATION . What it is?

A system of organization that represents a natural evolution beyond the multinational

corporation of the 60s and 70s. What distinguishes the TNMC from other TNC is that the
principal commodity is information and entertainment. They provide the ideological
environment that enables international free market trade to occur. They promote the use of
advanced media and information technology.

MYTHS

1)They don´t operate in almost or all markets of the world, but in preferred markets with an
obvious preference toward its home market. Bertelsmann “We consider ourselves an
American media company with German roots”. Just one smaller portion of their business is
generated in Asia. Germany, other European countries and USA are the important.

2)These companies are not monolithic in their approach to business. The business strategy and
corporate culture just reflect the person responsible for developing the organization. SONY. Its
founders, Ibuka and Morita. Sony is decidedly Japanese in its values: because of their
responsibility to Japan and to their employees they have to be successful in business in order
to fulfill the first two obligations. Senior managers identify themselves first as Japanese and
entrepreneurs (empresarios) second.

3) DECENTRALIZATION. Bertelsmann´s success can be attributed to their strategy of

decentralization of operations, instilled by Reinhard Mohn, its founder; creativity and
innovation at every level of corporation and commitment to being a valued corporate citizen
of the communities in wich Bertelsmann companies operate.

THE PURPOSE OF A GLOBAL MEDIA STRATEGY. Most major corporations become foreign direct
investors through a process of gradual evolution rather than by deliberate choice.

First of all, it establishes a foreign office to handle the sales and services of its products.

The office tends to be flexible and highly independent.

As the firm gains experience, the office get involved in other facets of international business,
such licensing (legislación) and manufacturing abroad.

Finally, the company begins to recognize the need for a more comprehensive global strategy.

1980s. WALT DISNEY. Businesss of children´s animated films and theme parks

NEWSCORP (parent company to Fox Broadcasting) was a newspaper publisher.

Today both companies are transnational in scope with a highly diverse set of products.

THE GLOBALIZATION OF MARKETS

Is being driven by powerful forces like: deregulation and privatization trends, technological
change, market integration and the fall of communism. Today, there is only one economic
system operating in the world: free market capitalism. Whereas communism provided a safety
net for inefficient business practices, capitalism regards only those who create innovative
products. The private sector is the primary engine of growth. The nation can maintain the
prices stable, so the government sixe has to be small. Free market opens up its banking and
telecommunication systems to private ownership and provides its citizens with access to a
variety of choices. It presupposes a willingness (Buena disposición) to open up domestic
market to foreign investment, but not all countries adhere to the rules. Japan is very protective
of its banks and France of its culture.

TYPES OF FOREIGN DIRECT INVESTMENT (FDI) refers to the ownership of a company in a

foreign country. Sometimes, this includes the control of assets. It is based on economic
efficiencies, not in national boundaries. As part of its commitment, the investing company will
transfer some of its managerial, financial and technical experience.

1) PROPRIERATY AND PHYSICAL ASSETS. Some TNCs invest abroad to obtaining specific
proprietary and physical assets. VIVENDI acquired SEAGRAM, home to Universal
Studios and Polygram Records, in 2001 instead of trying to enter the US market by
creating a new company. The purchase of SEAGRAM let Vivenvi to become a player in
music, film and leisure entertainment.
2) FOREIGN MARKET PENETRATION. Some TNCs invest abroad to enter a foreign market
(it may exist or to be developed) FROM THAT LOCATION. Sony employed this strategy
when it formed Sony Corporation of America in 1960 and in the next years, Sony
Switzerland, UK, Deutschland and France, markets in which Morita believed that Sony
products would be most accepted.
3) PRODUCTION AND DISTRIBUTION EFFICIENCIES. Dell Computer has centralized these
functions in Ireland to achieve significant cost savings because of their lower labor
costs, tax relief and technology infrastructure but with the same efficiency.
4) OVERCOMING REGULATORY BARRIERS TO ENTRY. Some TNCs invest abroad to enter
into a market that is heavily tariffed. For example, many countries around the world,
specially those of the European Community, have erected barriers to limit the import
of USA media products. The way to overcome these barriers is the promotion of
partnerships and the integration into the host´s economy by becoming national in
character.

EMPIRE BUILDING: FDI can sometimes be prompted for reasons that go beyond simple
business considerations. Success is measured in ways that go beyond straight profitability.
There is a combination of respect and competitiveness among Murdoch (NewsCorp), Sumner
Redstone (Viacom), Michael Eisner (Disney) and John Malone (Liberty Media). Some of them
started with nothing.

THE RISKS ASSOCIATED WITH FDI: The TNC is subject to the politics and business policies of
the host country, so FDI can occur only if the host country is perceived to be politically stable,
provides sufficient economic investment opportunities and has business regulations to be
considered reasonable in order to avoid wars, revolutions, coups, wage requirements or laws
concerning taxes, election of socialist or nationalist governments, hostile to private and foreign
companies.

TRANSNATIONAL MEDIA OWNERSHIP

The decade of the 1990s has witnessed an unprecedented number of international mergers
and acquisitions that has brought a new 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.

MERGERS: In a merger transaction, two companies are combined into one new company that
assumes the assets and the responsibilities. February 2000, Vodafone, British wireless
telephone carrier, announced that it would merge with Mannesmann, German
telecommunication company at a cost of 190 billion dollars, thus making it the largest
media/corporation merger to date. 42 millions of customers in more than 25 countries. This is
due to cellular phones have proliferated throughout Southeast Asia, Latin America and Europe,
where building cellular systems is cheaper and faster than reconstructing the traditional
telephone system.

ACQUISITIONS: Involves the purchase of one company by another for the purpose of adding or
enhancing the acquiring firm productive capacity, their assets in exchange for cash, securities
or both. For VIACOM (home to several cable networks like MTV, Nickelodeon), the purchase of
CBS (1999) for 37 billion represented an opportunity to obtain a well-established TV network
(it owns to Infinity Broadcasting, representing more than 1600 US radio stations).

STRATEGIC ALLIANCE: Is a business relationship in which two or more companies work to

achieve a collective advantage. It can vary ranging from a simple licensing agreement to the
actual combining of physical resources. A good example is Concert, a 10 billion joint venture
(empresa conjunta) between AT&T and British Telecommunications which offers European
telephone services.

These three ways are the most direct path to expand or diversify into a new product line
without having to undergo the problems associated with a new startup.

4 REASONS THAT HELP TO EXPLAIN WHY MERGERS AND ACQUISITIONS SOMETIMES FAIL

1) THE LACK OF COMPELLING (de peso, convincente) STRATEGIC RATIONALE. Both

companies go into the merger with unrealistic expectations of complementary
strengths and presumed synergies and the problems that prompted a merger
consideration become exacerbated once the merger is complete.
2) FAILURE TO PERFORM DUE DILIGENCE
3) BAD POSTMERGER PLANNING AND INTEGRATION FAILURES. If the companies don´t
combine divisions with similar products, the duplication can be a source of friction
rather than synergy, even more if their corporate culture is very different.
4) THE PROBLEM OF EXCESSIVE DEBT IN ORDER TO FINANCE the merger or acquisition,
some companies assume major amount of debt. Companies have to face their loan
obligations, selling of division to raise capital for example.
MEDIA AND GLOBAL FINANCE: The reputation and size of a TNC is the basis to raise capital in a
foreign market. The media and telecommunications industry is characterized by startup costs
and high risks. Banks, investment firms and other financial institutions will loan money, using
the borrowing firm´s assets to secure the loan. If the assets are not used as collateral (garantía,
aval o fianza), the lender may provide an unsecured loan at a higher interest rate. Short-term
loans are used to

Nesbitt: TNMC Economic, Socio-Cultural & Political Implications of a concentrated global media
industry

DEREGULATORY POLICIES: they were supposed to solve the lack of competition, but actually
they have contributed to the concentration. Companies have to face the fluctuating market, so
they increase their scope of activity to take advance of the economies of scale, their alliances,
acquisitions or agreements to reduce risk and eliminate competition. At the end, we have a
few giant firms producing similar media fare.

In an oligopolistic global media market, big companies compete with each other but under the
rules of a controlled market in which they are the major players. It is very difficult, if not
impossible, for new players to enter the market. The most serious consequence is the lack of
different messages, and ultimately, values.

NEWS, CONTENT. The displacement of the public sphere with entertainment

The pairing of business and marketing forces with the independent newsroom. The separation
between news and entertainment is eliminated in advantage of the commercial interests.
Journalists practice self-censorship by avoiding dull stories

THE NATURE OF THE MEDIA MARKET

Media industry can be based on the dynamics of supply and demand like other industries?

Dual product market: selling two types of products. To two different types of buyers. One type
is the media product (newspapers and tv programs) and the other is audiences or the access to
consumers whom are sold to advertisers. So, media business doesn´t operate in the same
manner than other markets.

SOCIO-CULTURAL INFLUENCES

Commercialism

The concentrated cross-ownership that characterizes the largest media corporations take
advantage of the synergy – by gaining benefits from the different holdings of the
conglomerate.

Informational and cultural diversity: pluralism

It has long been understood that people prefer local products as opposed to foreign, but global
media industries are not going to fail because of that. They have alliances with regional and
national markets to secure the distribution of the content. Those who accuse the GMC of
practicing cultural imperialism trough ignoring national cultures and are living in a outdated
world of ideological geopolitics. Cultural goods and content local are pursued, while risky
cultural products are left aside.

PUBLIC BROADCASTING

Only a decade ago, public service broadcasting dominated most points of Europe and many
points elsewhere. But now, the subsidies have been or are being cut and, as a result, public
broadcasters have turned to commercial forces. This has lead many people to question the
purpose (objeto) of the public funding (financiación).

Many assume that the declination of public broadcasting has been brought about by
technological innovation, which has resulted in increasing numbers of channels and
programming alternatives, affecting public broadcasting audience numbers. Actually, public
television staples, such as children educational, nature and do it yourself programs are now
part of the cable universe, each one with its own channel

BUT, TECHNOLOGICAL INNOVATION IS NOT the cause of public broadcasting declination. It is

the result of political decision. Technology doesn´t dictate that commercialism must govern. It
is the neoliberal political climate that assumes that the profit-seeking is the most efficient
democratic regulatory mechanism. Maybe for this reason, the public broadcasting is more
important than ever.

POLITICAL INFLUENCE

The global media lobby

Commercial broadcasters are considered among the most powerful lobby in Washington. The
top 25 media groups having spent over 82 million dollars in lobbying between 1999 and 2002.
The European Parliament media lobby has been described as ferocious because of their ability
to influence the European Commission to postpone proposals for directives or harmonizing
national laws on media ownerships. However, corporate media lobbies are not so strongly only
due to the fact that they contribute great sums of money to political parties. Their great power
lies in their ability of deciding what the public will be presented with in the course of public
debate.

POLICY ISSUES

In Europe, discussions about an approach to media regulation have been going on. The
question is if strict competition rules should be implemented or if anti-monopoly legislation
should be alleviated.

INTERGOVERNMENTAL FORUMS such as UNESCO, the World Intellectual Property

Organization and The International Telecommunication Union. They were weakened as major
players began to prefer forums that are more conductive to their interests. This is the case of
the WORLD TRADE ORGANIZATION, lobbied by the GMC to implement the sanctions against
nations which try to support their own culture, limit foreign ownership of media system, the
ratio of foreign to local audiovisual content or subsidize local production.

CONCLUSIONS
The consequences of the economic globalization have led to great tension between the
philosophy of communication rights and the philosophy of free trade all around the world. It is
necessary a media reform but fragmenting, depoliticized audiences makes the resistance
against politics and media interest difficult. Anyway, it seems that the waves of mergers and
acquisitions that have characterized the global market for nearly two decades are going to
continue. Some names will disappear, corporate logos will changes…but not the paradox of
capitalism.