BOB GARFIELD: The announcement of NBC's merger with Universal Studios -- a transfer of assets from the disintegrating French conglomerate Vivendi to NBC parent General Electric -- was the latest blockbuster deal to redraw the map of Big Media. The news, however, did not seem to particularly rock Wall Street, Madison Avenue or Hollywood. Nor did the news generate a vast amount of news. Among those bemused by how routine this is all getting is Advertising Age Editor (and my boss in my other job) Scott Donaton. Mr. Donaton, sir, welcome back to OTM.
SCOTT DONATON: Thanks for having me back, Bob.
BOB GARFIELD: So this gigantic merger, and the press seemed to take it with kind of a, a yawn and a shrug. It barely broke out of the business pages. How could that be?
SCOTT DONATON: I think the press tried to get itself excited about it, but it was hard, because it's really a big "So what?" Really all NBC is doing and all Universal is doing are catching up to everyone else in the media business. It was a deal that kind of had to be done. NBC needed a studio. Universal Vivendi needed a savior for its entertainment properties. This is just a smart, strategic business deal.
BOB GARFIELD:So now all four major networks have movie studios attached to them. Now that it is a given in the TV business, does it suggest that networks are truly nervous and uncertain about their future as over the air broadcasters?
SCOTT DONATON: Well, clearly Bob, the television industry's undergoing immense change, and if you look at NBC, until this deal, they've been about 95 percent dependent on advertising revenue in their model, and after this deal, they'll be about 50 percent dependent on advertising revenue. So clearly, as television audiences fragment, as advertising-skipping devices such as TiVo reach critical mass, if you can diversify the businesses you're in, lessen your dependency on advertising and, and give yourself a new source of content for your network, it's a good thing.
BOB GARFIELD:Okay. So, first there was Disney-ABC, and then Fox-20th Century Fox, CBS and Paramount, and now NBC and Universal. Clearly, when one network makes an important strategic move, the others are soon to follow. What other domino has fallen out there that we can expect to set other dominoes a-falling in the TV business in the coming years?
SCOTT DONATON: I think now what you're seeing is, is this expansion of the number of cable properties owned by these companies -- you know, Viacom has an extensive, in addition to CBS, an extensive group of cable networks. And NBC, which had been very slow in getting into the cable business, is now suddenly in it in a much bigger way. ABC with ESPN, among other networks. So I think cable television is growing at a quicker pace than broadcast. The audiences are migrating to these specialty channels, and I think what you'll see is the independent cable networks that are still out there will probably start to get swallowed up by these broadcast behemoths.
BOB GARFIELD:And what about satellite television? News Corporation, which owns Fox Broadcasting, has all but cornered the market in direct broadcast satellites around the world. Do you expect these other gigantic media corporations to try to compete in the satellite business as well?
SCOTT DONATON: I don't think so. I think Murdoch is the only one right now that has defined that it's important to be in the distribution end of the business as well for television. This is a very European model of what they call vertical integration of owning the pipeline as well as the content, and I don't think most of these studios and networks feel that they need to be in the distribution end of the game.
BOB GARFIELD:Wasn't long ago that AOL Time Warner made big, big headlines because the whole media landscape was going to change. This doesn't mean that the whole media landscape isn't actually going to change, does it?
SCOTT DONATON: Well, you know, a couple of years ago there was this great fear that we'd consolidate into three or four or five companies, and therefore we would watch only three or four or five TV networks or have only three or four or five magazines, and the truth is that yes, we are down to a handful of giants that control almost every aspect of the business, but the consumer has more choice than ever. So, so the fears have kind of gone away with that.
BOB GARFIELD: Well, Scott, thank you very much.
SCOTT DONATON: Thank you, Bob.
BOB GARFIELD: Scott Donaton is editor of Advertising Age. He spoke to us from his office in New York. [RHAPSODY IN BLUE UP AND FADES UNDER]