100 LEADING MEDIA COMPANIES: TIME WARNER REMAINS U.S. LARGEST MEDIA COMPANY AS INDUSTRY CONSOLIDATES UNDER HEAVY ACQUISITION, MERGER ACTIVITY

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The nation's 100 Leading Media Companies resemble those finely expressed M.C. Escher drawings that are as much a puzzle as they are visual renderings of puzzling ideas.

His birds melt into fish, tadpoles into toads, much as mergers and acquisitions (and new technologies) are moving these companies into new media areas and into seemingly unrelated industries, like retailing.

Since early 1997 there have been 22 media deals at a price of $1 billion or more each, all involving the 100 players.

Acquisitions have eliminated nine companies from the last Advertising Age list published a year ago, all consumed by 100 Media occupants present in this year's 19th annual 100 Leading Media Cos. report. And three on this year's list are about to be sold: No. 83 LIN Television Corp. to No. 53 Chancellor Media Corp., No. 76 American Radio Systems Corp. to No. 5 CBS Corp., and No. 3 Tele-Communications Inc. to AT&T Corp.

Amid this media shuffle acquisition-quiet Time Warner emerges at the top of the Ad Age list with $13.3 billion in revenue from media in 1997, up 12%, nearly double the $6.9 billion volume of runner-up Walt Disney Co.

CABLE TOPS ALL MEDIA REVS

The list extends to No. 100 Telemundo Group at $197.6 million. Ranked companies have an aggregate media revenue total of $126.3 billion, up 13.8%. The 100 Media's cable properties outpull all mediums in revenue at $38.2 billion, up 16.7%, followed by newspapers ($30.6 billion, up 9.5%), TV ($23.6 billion, up 6.5%), magazines $18.6 billion, up 6.9%, and radio ($4.5 billion, up 62.6%). "Other" media, a catchall for mainly direct-broadcast satellite, online services and out of home, claims revenue of $10.8 billion, up 35.7%.

Only media revenue is counted among these multi-faceted companies, a methodology that casts media as largely a distribution system supported by advertising (see methodology Page S-9).

The robust stock market has encouraged acquisition by stock, which has generated a spate of public filings and initial public offerings among private companies seeking additional capital sources (their own stock) to cut media deals. Five 100 Media companies have gone public: No. 38 Ziff-Davis Publishing Co., No. 61 CMP Media, No. 63 Univision Communications, No. 77 Journal Register Co. and No. 92 Petersen Cos.

Three media divisions of other 100 Media companies were launched as IPOs in the past year: Cox Radio, Hearst-Argyle Television and Penton Publishing, a division of No. 98 Pittway Corp. International Data Group, No. 37, is preparing a spinoff of IDG Books Worldwide as a public venture.

There is a downside to all this. No. 91 Young Broadcasting may seek a buyer because it has been stymied in attempts to expand its 12-TV station group through acquisition. One of the culprits: Under-performing stock.

MEDIA METAMORPHOSIS

News Corp. is the epitome of Escheresque change. Acquisitions in '97 of former 100 Media companies, Heritage Media Corp. and International Family Entertainment, expanded its existing FSI and cable programming operations; a pending sale of TV Guide to United Video Satellite Group will send it into the emerging TV/PC industry; an IPO later this year of Fox Group (20th Century Fox, Fox Television and Los Angeles Dodgers) will generate an estimated $2.5 billion in cash and new stock to continue the acquisition cycleAcquisitions reshape media cos.

News Corp. Chairman Rupert Murdoch is believed to want a sizable piece of No. 27 Primestar, the DBS service owned by five cable companies. Primestar would deliver North America to News Corp.'s satellite operations that currently cover the rest of the globe.

Cablevision Systems, No. 19, sees part of its future as a retailer, buying 40 New York area Nobody Beats The Wiz stores in February. The company says the stores will give Cablevision customers a place to experience "the feel, the touch" of the digital future. Cablevision thus joins No. 39 Discovery Communications (Discovery, Nature Co. and Scientific Revolution stores) as a retailer.

EVOLVING THROUGH DIVERSIFYING

USA Networks, No. 34, has evolved from a home-shopping network (HSN) with owned-and-operated stations (Silver King station group) to a diversified media company with cable network (USA and Sci-Fi) and programming units (Universal Television Group), two segments gained from Seagram Co. in a cash-stock deal.

CBS Corp. packed its Westinghouse Electric Corp. shadow by selling off the Westinghouse industrial segment and broadening its media portfolio beyond TV and radio. It gained an out-of-home unit (TDI Worldwide) in the acquisition of former 100 Media company, Infinity Broadcasting Corp., as '97 opened, and three quarters later got a cable presence in The Nashville Network and Country Music Television, bought from former 100 Media company, Gaylord Entertainment Co.

Clear Channel Communications, No. 31, a TV and radio company, bought Eller Media Corp. (a national out-of-home company with 51,000-plus billboards) in April, 1997, to add one more conduit on which clients and its own media operations can advertise their products and services in a given market. Then in the fourth quarter it added 525 more billboards and 46 radio stations in a deal with Paxon Communications.

Most 100 Media companies use acquisitions to boost the size of existing media segments and bring savings through economies of scale.

ENLARGING THOSE MEDIA PODS

America Online, No. 13, kept its focus trained on Internet services, buying CompuServe, No. 48 on last year's list, from H&R Block.

No. 30, McClatchy Co., always a newspaper company, stayed that way in acquiring Cowles Media Co., a former 100 Media company. It kept Cowles' Minneapolis Star-Tribune but spun off Cowles' magazines to No. 28 Primedia and books to Sun Microsystems.

By contrast, cable segment divestitures fit future plans of two largely newspaper companies. Chronicle Publishing Co., No. 66, sold its cable to TCI in March, and E.W. Scripps, No. 26, ceased being a multiple system operator to concentrate on newspapers, broadcast and cable networks.

TELCOM ACT INFLUENCE

The Telecommunications Act of 1996 raised ownership caps on TV and radio stations on both national and local levels, preparing the way for an acquisition frenzy, particularly in radio. Capstar Broadcasting Partners, No. 51, bought SFX Broadcasting, a 100 Media company last year; Chancellor merged with Evergreen Media Corp., also a 100 Media last year; and CBS Corp., after purchasing Infinity at the turn of '97, bought No. 76 American Radio Systems Corp. in June '98.

Higher caps have led to the formation of multiple-station clusters under single ownership, some of this through asset swaps that simulate cable-clustering: Chancellor has built 11 "superduopolies" of four or five FM stations each. Seven are in the nation's 12 largest radio markets.

PUZZLING TV PUZZLE

The Act has led to Byzantine dealmaking. Take KIRO-TV, the Seattle CBS affiliate. It went through three ownership changes in the blink of an eye. The scenario, involving two other Seattle stations, KING-TV (NBC) and KSTW-TV (UPN), began to unfold when No. 25 A. H. Belo Corp. bought multiple TV-station owner Providence Journal Co., parent of KING-TV, the highest-rated station in Seattle. But Belo already had a Seattle station, KIRO-TV. To comply with the Federal Communications Commission's regulations that restrict TV "duopolies" in a single market, Belo traded KIRO-TV for No. 13 Viacom's KMOV-TV (CBS), St. Louis.

Viacom, half owner with No. 69 BHC Communications of UPN, swapped KIRO-TV for No. 9 Cox Enterprise's KSTW-TV, a station Cox was purchasing from Gaylord.

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