Global convergence

The global economy is in the midst of a significant mergers and acquisitions wave. The pressure to consolidate in order to retain competitiveness is clearly being felt in a number of industries, while more liberal foreign investment regimes across the world are providing potential acquirers far more options as they try and find the right mix of capabilities, capacities and market presence. The media industry is no exception, judging from the recent flurry of takeover attempts. Mr Rupert Murdoch, of the Star, Fox and Sky networks, made a bid for the Dow Jones group (the Wall Street Journal and the newswire), while Thomson, a financial news and information services conglomerate, announced a bid for Reuters, a major real-time service provider. Closer home, there are various consolidation strategies visible, with groups seeking to straddle the entire range of print, electronic and web channels and, further, to integrate backwards from channels to content creation, particularly entertainment.

What is driving this process? Somewhat ironically, it is the rapidly increasing segmentation amongst media consumers. Partly because of the Internet, but also driven by other factors, finding a large enough group of consumers, who want pretty much the same content in the same package to justify a specialised media business model, which can exploit scale economies, is becoming increasingly difficult. The challenge, therefore, is of "mass customisation"; developing an infinitely greater variety of content and packaging within the boundaries of global trends and technological capabilities. Global coverage and technological dynamism both require large investments and, therefore, tend to reinforce oligopolistic tendencies within the industry. Convergence and consolidation are essentially two sides of the same coin.

As compelling as this logic is, though, bringing multiple activities within a common organisational umbrella has always been subject to huge risks. Success in any particular media business is determined by adherence to very specific processes, which have evolved in the context of that business. There are, of course, opportunities for synergy and leverage across the media, but whether these are sufficient to offset the inevitable inefficiencies that creep in when distinct processes are integrated is the question.

That is a question that shareholders can decide on, but there is also an unavoidable regulatory dimension to media consolidation. Virtually all countries have some restrictions on ownership, but these are mostly based on obsolete assumptions about both technology and the nature of the market. With disappearing national boundaries and constantly evolving technology, can regulators ever keep pace? Or is the industry now in a situation in which self-regulation is the only viable solution? And, how can regulatory standards take into account a range of cultural and political sensibilities, when the pressure is to universalise content?

The ultimate test of media effectiveness is, of course, whether consumers ""individual or organisational""have access to information, analysis and views that they believe to be relevant to their needs. To the extent, then, that consolidation across both geographies and channels is driven by the need to efficiently meet evolving patterns of demand, it is not a trend that needs to be resisted. However, there is always a thin dividing line between efficiency gains and market dominance. As the media consolidates aggressively, it is perhaps not too early to start thinking of governance frameworks that accommodate both the benefits and the risks.