As media titans clash, consumers speak up

For two days last week, millions of satellite-television viewers temporarily lost access to Nickelodeon's hugely popular SpongeBob SquarePants cartoon, among other programs. Add to that loss the prospect of missing out on CBS's broadcast of college basketball's March Madness, the championship tournament that begins Thursday, and you had the makings of a consumer revolt.

In fact, the consumer outcry was credited by some media executives with forcing combatants EchoStar Communications and Viacom back to the table, after failing to settle a rate dispute before their contract expired early last week. EchoStar runs the satellite Dish Network; Viacom's holdings include Nickelodeon and CBS.

That a clash between media titans could darken TV screens in American homes clearly motivated viewers to show their ire, just as it did in 1999 when ABC and Time Warner butted heads over fees and interrupted ABC programming to 3.5 million customers. Industry observers - while differing on the long-term effect of media convergence - generally agree that cable and satellite customers could actually see less of this disruptive crossfire as players in the television-distribution business move toward consolidation. But some also predict fewer choices and a decline in program quality.

"To a large degree, these kinds of periodic disputes ... are sporadic food fights," says Andrew Schwartzman, president of the Media Access Project, a nonprofit organization based in Washington. "These are just people pushing their contract negotiations," he says, at a time when some local laws meant to keep cable and satellite companies competitive on program access face heavy lobbying for changes - and as the Federal Communications Commission relaxes some restrictions on ownership and reach.

Others attach more significance to the battle. The EchoStar/Viacom spat represented "a fight between a broadcaster who doesn't have distribution and a distributor who has no programming," says Mark Cooper, director of research at the Consumer Federation of America. "But if you look out at the rest of the [media] world, you'll discover that those are the disappearing breed."

Mr. Cooper cites the purchase of Direct TV by Rupert Murdoch's News Corp last year as one example of the combination of content and distribution that is gathering speed. And Time Warner, he points out, owns both broadcast and a significant number of cable systems. Comcast, of course, continues its overtures to acquire Disney as a content source.

"We're almost done," says Cooper. "Everyone anticipated you were going to have big content providers on one side and big distributors on the other, and they very quickly moved to vertically integrate."

Consumers could end up paying a premium, he adds, for limited choice and subpar programming. Industry-watchers have for years imagined the ugly emergence of four or five major distributors and four or five major programmers, he says. "[But] we're looking now at a total of four or five completely vertically integrated entities, so there's very little choice, and the homogeneity we get [comes from] the fact that they're chasing the lowest common denominator. There's no threat out there; the sources of independent programming are gone."

"The relationship between increased concentration and the program market is undoubtedly adverse," agrees Mr. Schwartzman. "[The rise of] larger companies with more negotiating clout undoubtedly results in increased prices."

Still, consolidation may not be all bad news for consumers, says Everette Dennis, professor of media management at Fordham University in New York. He cites the potential for increased service options, more channels, and new interactive technologies.

Professor Dennis also notes a broad tendency to reduce the debate to ideology, with a "public-interest view, which always says bigness is bad, diversity is good" pitted against the free-market business argument that bigger enterprises in a range of industries can serve consumers well.

"Many of the big conglomerate deals in recent years have not gone well, and we don't know what kind of synergies will actually work," Dennis says. "In general, though, convergence is working in many places."