I Want Media - Top Media Stories of 2001




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Top Media Stories of 2001
I Want Media, 01/02/02

It was the year of one of the worst-ever advertising downturns, numerous magazine and dot-com closures, thousands of layoffs, and Sept. 11. Indeed, 2001 was a year of many challenges in media. Here, in no particular order, is I Want Media's roundup of 2001's top media stories.

AOL Time Warner
In January, the FCC approved America Online's acquisition of Time Warner for $112 billion in the largest merger in U.S. history, setting the stage for the creation of the world's largest media company. The other major media M&As that followed in 2001 (such as Vivendi-USA Networks) didn't come close to matching the immensity of the AOL-TW marriage. Jon Friedman, the media editor of CBS MarketWatch.com, told I Want Media that AOL TW is today's biggest media story because the giant company's actions will "impact the entire industry." Even though observers say ambitious targets aren't being met, and CEO Gerald Levin has already announced his plans to retire, the company's aggressive pursuits in convergence make AOL TW a true driving force in media. Its vast content and distribution holdings could very well influence how we receive information and communicate with one another, exert control over the the Internet's development, and may even shape global culture. And if AOL TW can't successfully fuse its new and old media divisions, who can?

FCC Chairman Michael Powell
President Bush-appointed Michael K. Powell became the new chairman of the Federal Communications Commission in January. Under Powell's leadership, the FCC is expected to loosen media ownership limits, resulting in a flood of mergers that could fundamentally change the U.S. media landscape. Media conglomerates welcome the opportunity to get bigger, insisting that current ownership rules are outdated and need to be revised to allow companies to better compete in today's evolving media marketplace. But critics charge that consolidation will lead to rising prices for cable TV and high-speed Internet access, an erosion of journalism quality, and a decrease in the diversity of media outlets, which could even endanger democracy. However, Powell has said: "People talk about diversity as one of the pre-eminent values of the media. What does diversity mean? Maybe it means catering to a more parochial interest that's not mass market. But less mass market is less valuable. You have fewer people to sell that interesting product to."

AT&T Comcast / EchoStar-DirecTV
AT&T's deal to merge its cable-TV business with Comcast will create the nation's largest cable company, with 22 million subscribers and cable lines in about 20 percent of U.S. homes in 41 states. Media companies are battling for supremacy of content delivery into the home, as they move closer to realizing a vision of creating a seamless, interconnected home network. Such a goal raises concerns that the "pipe owners" will exercise control over the content carried on their pipes. Similarly, EchoStar's proposed deal with Hughes Electronics for control of DirecTV will create a satellite TV behemoth with vast market power -- stirring fears that the giant company also will rule over the content it carries. On Dec. 31, a federal judge sided with Walt Disney Co. in a contract dispute with EchoStar by preventing the satellite TV provider from dropping Disney's ABC Family channel as it had threatened.

Jay Harris Resignation
Jay T. Harris resigned as publisher of the San Jose Mercury News in March, saying that budget cuts by parent company Knight Ridder could result in "significant and lasting harm" to the newspaper. Harris's resignation turned a spotlight on a growing conflict in the newspaper industry between corporate demand for profits and the pursuit of quality journalism. While nearly all newspaper publishers faced cost cuts, layoffs and a declining demand for advertising, Knight Ridder became something of a lightning rod for journalists who argued that Wall Street was ruining their profession.

Digital Video Recorders
SonicBlue's new Replay 4000 digital video recorder (DVR) lets users record TV programs and then automatically skip all the commercials, which media companies contend is an illegal menace to the economics of their business. TiVo, an earlier DVR, may be less threatening now that it is appealing to advertisers to use its services for research and marketing. Still, many DVRs and other such media "guides" could seriously undermine traditional media, according to a Forrester Research report: "Media companies in every sector face a collapse of their distribution control -- and distribution control is what maintains media industry profits. Industry troubles have only begun."

September 11
Except for the airline and travel industries, perhaps no business sector was hit harder by the Sept. 11 terrorist attacks than media. While news outlets earned praise for their coverage (and endured anthrax attacks), their parent companies lost hundreds of millions of dollars due to 'round-the-clock coverage costs and a loss of ad revenue from jittery advertisers. The attacks magnified the ad pain already felt throughout the industry, as a bad year was made "unimaginably worse."

Advertising Downturn
The ad industry in 2001 had its worst year since 1938, with ad expenditures shrinking by a reported 4.5 percent. Analysts at Merrill Lynch expect another decline in 2002, which would mark the first time since the Great Depression that ad spending dropped in consecutive years. Even before Sept. 11, global advertising was seen heading for its worst downturn in a decade, prompted by a decline in profitability among major advertisers and the bursting of the dot-com bubble. A continued slowdown could pressure media companies to make even more cost cuts.

Media Layoffs
Job cuts at media companies -- in editorial, ad sales, corporate and elsewhere -- picked up pace in 2001, as shown by I Want Media's exclusive tally. Most cutbacks were attributed to the poor economy and ad market, disappointing results at online units, restructurings in the aftermath of mergers, and the shutdown of media properties ranging from Mademoiselle to Drkoop.com.

Magazine Shutdowns
More than 100 magazines ceased publication in 2001. Among the casualties: Brill's Content, Classic American Home, George, Expedia Travels, Family Life, Individual Investor, Industry Standard, Mademoiselle, Maximum Golf, and Working Woman. Even before Sept. 11, the magazine industry faced many business woes, including the soft ad market, wholesaler consolidation and a rise in postal rates. NBC's move to lift TV's ban on liquor ads is expected to take more ad dollars from magazines. Sadly, many industry leaders are expecting magazine closures to continue.

Dot-Com Shutdowns
More than 500 dot-coms closed down in 2001, including e-commerce properties Contentville, MightyWords and iPublish.com, and content sites LocalBusiness.com, Work.com and UpsideToday.com. While the surge in traffic to news sites after Sept. 11 demonstrated that the Internet was a valid news medium, most of such Web services still don't see any signs of profitability. Despite pleas to get users to pay, charging for Web content continues to be a tough sell.

Media Companies Build New Headquarters
Several media conglomerates began (or completed) construction on new high-profile corporate headquarters. AOL Time Warner is building a colossal $1.7 billion tower on Columbus Circle in New York. Two blocks south, Hearst is erecting 36 stories atop its landmark six-story corporate offices. A few blocks west of Hearst, Random House is building a new skyscraper home. Further south in Times Square, the New York Times is planning a 52-story HQ that will cover an entire city block. USA Today publisher Gannett has moved into a "shimmering" new office complex in McLean, Va. Considering that media companies are in the midst of one of the worst-ever ad climates and laying off thousands of employees, the timing of the construction boom may seem odd. "Rome is definitely burning while these guys are building," Michael Wolff, New York Magazine's media columnist, told I Want Media. "This partly has to do with the fact that these real estate deals were begun in better times, but it also reflects the bigger-is-always-better, consolidate-or-die, fortress mentality of the media business. Each of these companies believes the bad is happening worse to someone else and that they will be the last man standing -- ideally in style."