Media Madness: Why Megadeals Aren't Around the Corner

A look at the global players in an age of increasing diversification.
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Given the changes among media and entertainment companies these days, it's tough to tell the players without a program.

Forthwith, here's a handy-dandy chart to guide you through the businesses of the eight most influential publicly traded media companies:

Time Warner

(TWX)

,

Viacom

(VIA) - Get Report

(including

CBS

(CBS) - Get Report

, which Viacom has agreed to buy),

Disney

(DIS) - Get Report

,

Sony

, the

NBC

unit of

General Electric

(GE) - Get Report

,

Seagram

(VO) - Get Report

,

Fox

(FOX) - Get Report

(which constitutes almost all the U.S. operations of

News Corp.

(NWS) - Get Report

) and the runt of the litter,

USA Networks

(USAI) - Get Report

.

The elite eight aren't necessarily the biggest -- measured by market capitalization both

Liberty Media Group

(LMG.A)

and

Clear Channel Communications

(CCU) - Get Report

belong on this list. But Liberty is essentially a mutual fund with stakes in other media companies, not an operating company, while Clear Channel is pretty much confined to radio stations and outdoor advertising. In contrast, the eight diversified monsters reach across television, radio, theme parks, the movies and the Internet. They are the heart of popular culture in the U.S., and by extension the world.

In looking at the chart, a couple of facts pop out.

First off, there's a big gap between the top three -- Viacom, Disney and Time Warner -- and the rest. Overall, Sony is huge, but its music and movie divisions are relatively small, compared with its consumer electronic business. NBC and Seagram are both strong in sectors but not across the board. And Fox has spent billions to build its cable channels without much success.

The chart's second lesson is that despite the big gap between the first and second tier, and despite all the speculation that the CBS/Viacom deal will spur a new merger wave, any mega-deal will run into plenty of obstacles. The big three already extend into practically every sector of the business. Even the second-tier companies have substantial overlap. Sony, Fox and Seagram all own movie studios, and Sony and Seagram both own music companies. With only five big music companies worldwide and six studios, political pressure against any combination would be strong.

The most obvious takeover target is NBC, of course. The Peacock fits well with Seagram, USA Networks, Sony and maybe even Time Warner, despite potential regulatory problems stemming from NBC's overlap with Time Warner's cable systems. But GE enjoys the power network ownership brings; NBC executives say GE Chairman Jack Welch takes a personal interest in almost every show NBC runs. GE would demand a premium price for NBC, and even then it may not want to give up the Peacock entirely.

Other possible takeover bait: Clear Channel and

AMFM

(AFM)

, which along with CBS are the giants of the resurgent U.S. radio business. But radio is popular with investors these days, and neither company would come cheap.

In the record business,

EMI

is available and would fit neatly with Fox or Disney. But like the movie industry, music is hit-driven and only marginally profitable. And the merger of Viacom and CBS, which together control every important cable music channel and many of the most powerful radio stations nationwide, will only make the record business more complicated.

Seagram and USA Networks could also merge. They'd fit well, and Seagram already owns almost half of USA. But USA Chairman Barry Diller wants to be his own master, and the Bronfman family, which controls Seagram, apparently is unwilling to entrust its fortune to Diller, a man whose greatest achievement this decade is

WWF Raw

. So while more mega-mergers aren't out of the question, smaller deals are more likely, as each of the majors attempts to shore up its flanks.