His statements simply underscored the consolidation trend in the media industry where those four conglomerates-AOL Time Warner, Viacom, News Corp. and Walt Disney Co.-are increasingly setting the trends and running the show. Each has a broadcast network and multiple cable channels.
And what of the independent cable content providers? Will the apparent advantages the large companies have in distribution and promotion of their content and ad sales allow the indies to continue to compete?
Full disclosure: The term "independent" with regard to cable channels is much more of a misnomer than it once was. Most are at least partly owned by large media companies. For example, E! is majority owned by Comcast Corp. and Disney; Discovery majority owned by Cox Communications, Liberty Media and Advance Newhouse; and A&E split among Hearst Corp., Disney and NBC-but they do operate mostly independently.
Executives at the independents say they believe the scale Mr. Diller said he was seeking via the merger of the USA and Sci-Fi Channel cable networks with Vivendi may be overrated. They concede there are advantages to being an MTV within a Viacom or a TNT within an AOL Time Warner, but add that they have advantages of their own and by no means feel their ultimate fate will have to be an outright purchase by one of the Big 4.
mining the niche
That, however, is not a unanimous opinion. "You can point to examples of cable networks that have done phenomenally well as stand-alone entities like Court TV-it's very well-managed, has a very specific niche, has done a phenomenal job in terms of distribution, ratings and advertising. But would it have done better or could it do better in the future as part of a bigger umbrella? Yeah, I think it can," says Merrill Lynch & Co. analyst Jessica Reif Cohen.
On the flip side, an advantage for indies is they provide competition for mega-companies, says Judith McHale, president-chief operating officer at Discovery Communications. Cable operators and advertisers "like us being in the marketplace," according to Ms. McHale, speaking in a recent conference call. Discovery is perhaps the pre-eminent independent with a fleet of channels, retail stores and other platforms.
On the ad sales front, Ms. McHale says Discovery has worked hard to offer, albeit on a smaller scale, the multiplatform, one-stop-shop sales opportunities that a Viacom or AOL Time Warner can dangle before advertisers. "Given the breadth of networks that we offer ... and the cross-platform opportunities we offer advertisers with our stores and our Internet properties, I'm actually feeling very comfortable with our ability to compete in this arena," she says.
Discovery was reported to have had merger talks with General Electric Co.'s NBC last year, but Ms. McHale says: "The company's not for sale and never has been, and that is precisely because the growth picture is so strong."
E! Networks President-CEO Mindy Herman says her two networks, E! and Style, are attractive enough on their own to allow the company to compete effectively for ad dollars.
"From the advertising perspective, right now being separate or independent from the large media companies is as much of a plus as a minus," she says. "I think it's too soon to tell whether in the long term that will change. E! is focused on a niche ...When you're dealing with very large media companies across a lot of platforms, they might not be able to be quite as nimble as we are."
Josh Sapan, president-CEO of Rainbow Media Holdings, which is part of Cablevision Systems Corp., said in a statement: "In terms of advertising, Rainbow's biggest strengths are our agility and the targeted nature of our audiences. When we work with a client to put together a customized effort, we do it with maximum attention from our senior staff in marketing, programming and ad sales."
Bill Burke, president of The Weather Channel Cos.-maybe the truest independent among cable's ad-supported top tier since parent company Landmark Communications is privately held-echoes the idea that a backlash against consolidation could help the smaller outfits, particularly if customer service is done right.
"As these huge conglomerates sit down with each other, I do think that buyers are being potentially steered into deals that might not be the most attractive," Mr. Burke says. "They might by buying platforms that they didn't want to buy otherwise, but it seemed like the best way to do business. Versus [such], we come with very clean offerings."
building off strong base
On the distribution front, independents such as the Discovery fleet, E!, The Weather Channel and Rainbow's American Movie Classics have been able to persuade enough cable operators to carry them that they have built up a large distribution base despite not being affiliated directly with one of the Big 4. However, the barriers to new cable outlets achieving such success are significant.
"You could be seeing in the future more and more channels [owned] by four or five established channel providers, and it becoming increasingly difficult ... [to launch] a small true independent the way Bob Johnson started BET,"says E!'s Ms. Herman.
Of course, as with any business, all is not completely rosy. Smaller media companies have to work harder to promote themselves since they don't have the cross-promotion options that say a Viacom might provide a big VH1 show-Viacom could plug such a show on its broadcast networks CBS and UPN, the MTV cable networks, radio stations, and even billboards.
"We can't rely on the relentless frequency that a major media company has that its in-house outlets can deliver; we have to do creative that's more potentially breakthrough," Ms. Herman says. E! recently turned to director Robert Altman to do a series of promo spots along that path.