Vivendi’s recently announced decision to sell Universal Studios and its other media assets to NBC should improve the quality of television programming, according to Christopher Yoo, a media law expert at Vanderbilt University.
According to Yoo, "Combining program production facilities and network distribution under the same corporate umbrella may allow for better coordination and real cost savings." Yoo likens the merger to the displacement of mom-and-pop stores by Wal-Mart. "National coordination allows Wal-Mart to offer a better range of products to a wider range of people at better prices than could smaller enterprises. Change can be painful, but it is also an inevitable part of progress." Yoo further predicts, "This merger is more likely to succeed than AOL’s 2000 acquisition of Time Warner, which was based on the unproven idea of combining traditional media with the Internet."
Yoo recognizes that the merger is likely to revive warnings about the dangers of big media, but he says such concerns are overblown. "Big media is easy to demonize, but a look at recent history reveals just how exaggerated such doom-and-gloom predictions can be. The same concerns were raised when Disney acquired ABC and when Viacom bought CBS. The loudest complaints arose when AOL merged with Time Warner. Far from turning them into media juggernauts, those mergers saddled those companies with uncertain earnings and languishing stock prices. Vivendi itself represents a prime example of the problem. A few years ago, it was a utility company with no entertainment holdings. It acquired other companies until it was the world’s second-largest media giant. The synergies between Vivendi’s entertainment businesses never appeared, and now the company is left to dismantle itself. Bigger is not always better."
Yoo believes that government regulators should permit the NBC-Universal merger to go through regardless of whether it thinks the merger will eventually succeed. "In this technologically dynamic world, no one knows what will work and what won’t. The only thing we know for sure is that change is inevitable. We should give companies the freedom to experiment with new ways of doing business even though we know a substantial number of the things they try won’t pan out. The only reason for the government to block the merger is if it were likely to harm consumers and such harms are unlikely given the proliferation of television channels and media outlets." Editor’s note: Yoo is one of the nation’s leading authorities on law and technology. He looks at how technological innovation and cutting-edge theories of economics are transforming telecommunications and electronic media regulation.
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