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INFORMATION MARKET OBSERVATORY (IMO)


MERGERS & ACQUISITIONS IN THE ELECTRONIC INFORMATION INDUSTRY


Luxembourg, May 1994
IMO Working Paper 94/2 - FINAL

Contents


Highlights

This paper was made by Infonortics Ltd. (Calne, England) in the early part of 1994, on behalf of the Information Market Observatory. The initial data were assembled from preliminary reading, from press observers, and from searches of newspaper databases (on the Dialog service). After the initial data sample of approximately 100 mergers and acquisitions since 1992 had been tabulated, an analysis was made and the results compiled in the current paper.


1. Definitions and introduction

1.1 Definitions

When discussing an area as fuzzy and indeterminate as 'information', one has to start by being clear as to what the current definition includes. There has often been a propensity by commentators to imagine that the concept of 'the information industry' is as self-evident as, for example, 'the sugar beet industry', or even 'boots and shoes'. But the information industry occupies a large canvas; centred mid-canvas are areas such as financial data, news services and directory services; the edges of the canvas then begin to shade off into adjacent domains such as education, entertainment, computing, broadcasting and telecommunications.

Additionally, things are becoming more complicated as elements of information (data) become digital, and the comforting discrete concepts of a painting, a photograph, a page of text, a scene in a motion picture, a table of numeric data, a piece of music, a TV series, being essentially different, start to become less valid. Within a short time -- certainly less than just three decades -- one can foresee 'the interactive screen-wall' becoming the main medium of communication with the outside world. And on to the interactive screen wall we will summon written messages, images, moving images, and so on.

In this paper, the definition of 'electronic information industry' is broad and wide-ranging; this survey and sampling of mergers and acquisitions covers film studios, databases, computer software companies, publishing companies, telecommunication companies. Our interest in the end, however, is on informatiocontent, rather than on technology; we have therefore not dwelt long on data that relate, for example, purely to telecoms per se, purely to the computer industry per se, or purely to paper publishing per se.

On our survey list for electronic information, therefore, we find the following areas:

1.2 The five new ingredients of the future information world

Five significant new processes are at work shaping the information world of the beginning of the twenty-first century:

1.3 A changing world demands changes in corporate structures

When change is in the air, various signs start to become apparent in the business and corporate world:

Joint ventures and joint programmes is not the subject of the current paper; it is also an area fraught with complexity and ever-shifting alliances (a recent study of IBM reported that, by the end of 1992, this one company was involved in more than 20,000 business alliance relationships worldwide, including almost 400 equity investments and joint ventures. Although certainly less, it is probable that companies such as Philips, Apple and Microsoft can each list hundreds of current joint ventures, strategic alliances and joint projects).

Company start-ups is also not the subject of this paper; it is, however, interesting to look at the 2303 companies listed in European Multimedia Yearbook 94 -- companies going from 2001 (Two Thousand & One), to Zye Technology Ltd. -- and to find that most of the companies listed appear to be less than a few years old. Particularly in the United States (because of the different business and financial culture) but also in Europe, new companies mushroom into existence when an area begins to change. Via a process of seemingly natural selection, most of the new companies will fade away, merge with others, or be bought by others; but some will succeed and grow wealthy and large.

1.4 Changing corporate cultures

Finally, in these introductory remarks, we may leave a question mark over what form the successful companies and corporations of the twenty-first century may take.

As part of the intellectual baggage and inherited wisdom we carry with us from our past experience, Western culture has tended to equate corporate size, number of employees, gross turnover and number of years in business, with success and importance. Thus, the story of twentieth century business will also be a story peppered with Shell, with IBM, with Unilever, with Sony, with Ciba-Geigy, with AT&T, with Bertelsmann, with Renault, with Ford Motors, etc. In the past, companies succeeded, became big and important, and stayed big and important for decade after decade. (Many of their staff members would also work for the same company for decades, or for life).

In certain areas, of course, it is probable that large organisations will always retain dominance; it is difficult to think of globally successful small aircraft manufacturers or small petroleum companies, for example, simply because of the necessary scale of such operations. But, as much of the computer industry has signalled with increasing force since the era of the 1970s, many newer technology areas do offer the prospects for quick success and quick fame, as recent companies such as Apple, Microsoft, Lotus, Novell and Intel arrive, succeed, grow rapidly-- and could perhaps also decline in the face of newcomers with newer ideas and backed with sums of venture capital.

We should at least bear in mind that, increasingly, many new technology and information areas could well be dominated by a kaleidoscopic and ever-changing array of smaller companies, rather than continue to be dominated by a few giants. When life speeds up, giants have problems (as IBM, for one, has discovered).

1.5 Why companies buy other companies

There are many reasons companies buy each other, many reasons why companies sell. To summarise some of the main reasons; company may buy company Bbecause:

It is the first reason above that will concern us in this paper. Companies will often wish to acquire, via merger or via acquisition, expertise or elements of property that, embarked upon solo, could take a long time or significant resources to achieve. We may therefore conclude, to take a few diverse examples from the tables in this paper: On the other hand, some other take-overs in the main table are clearly examples of what may be termed 'mopping up the competition', as well as consolidation. Thus:

2. Mergers and acquisitions: the strategic context

2.1 The regulatory environment

The traditional national regulatory environments in the Western world were for long based on a number of principles:

The above regulatory environment applied, with regional and national differences, until recent times. The advent of digital, multimedia information has, however, here also blurred what used to be distinct boundaries that could easily be understood and justified. In Great Britain, cable companies are now allowed to offer telephone services in addition (although British Telecom is barred by the regulator from offering TV and video services until after 1998).

In the United States, change is in the air: Congressman Edward Markey, Chairman of the House Subcommittee on Telecommunications and Finance, has introduced (1994) a bill permitting telephone companies to provide video and cable television services. If passed, the bill effectively rescinds that segment of the 1984 Cable Act prohibiting telephone companies from this business.

The National Communications Competition and Information Infrastructure Act has (1994) been introduced in the House of Representatives. This proposed legislation would allow cable television companies to offer local telephone services and would require regional telephone companies to open their networks to new competitors and permit telephone companies to offer video programming. In addition, an Antitrust Reform Act has been introduced, allowing regional telecommunication operators to offer long-distance telephone services.

In the United States Senate, the Communications Act of 1994 addresses the RBOCs offering long distance telephone services. It would also remove prohibitions so that these firms could offer cable and cellular services across regions. The bill directs the Federal Communications Commission to review restrictions on the number of television stations a company can own.

Finally, Vice-President Al Gore recently proposed to abolish the "regulatory maze": "the Administration will support removal, over time, under appropriate conditions, of judicial and legislative restrictions on all types of telecommunications companies: cable, telephone, utilities, television and satellite . . . Our goal is not to design the market of the future. It is to provide the principles that shape that market . . . "

The current regulatory environment, in the Western world, may be characterised as one of pragmatic erosion of previously rigid structures. What the rules were, is clear; the fact that the rules will either change radically, or vanish all together, is also clear. When this will happen, in national environments, is not clear.

In the European Union, it is clear that many of the old rules and regulations governing or regulating many commercial activities will either have to go, or to change radically. In free market areas, this is happening more easily than in areas in which national governments traditionally were active: running airlines, supervising radio and television stations, operating telecommunication services. The current national television world is governed not so much by rules and regulations concerning ownership; more by national governments who decide who should, and should not, be given an operating licence. Just by chance, no foreign companies are given national licences by European governments, although it is hard to find specific rules forbidding non-nationals from operating television stations (except in the United States, whose federal regulations prohibit non-Americans from ownership control of broadcasting stations in the United States. Even here, the rules can be circumnavigated, as Rupert Murdoch of News International demonstrated when he changed his nationality from Australian to American in order to be able to buy a US television network).

This, then, is a regulatory world that is also in flux. In the United States, the uncertainty as to what will, or will not, be allowed at the moment makes many proposed mergers or acquisitions uncertain (and contributed to the breakdown of the mergers of AT&T and McCaw Cellular, or Southwestern Bell and Cox Cable, and of Bell Atlantic and TeleCommunications). The point can also be made that the knowledge that the regulatory environment is changing has also acted as an added stimulus on organisations affected for them to consider mergers or acquisitions, on the grounds that if they do not grow and diversify, their competitors now might.

2.2 Player camps and their strategic orientations

Telecommunications and cable operators see quite clearly that a) the artificial division between who can carry what kind of data will soon be abolished b) that the future of information access is increasingly in networks and c) that the future networks are going to be global. One reason for the cluster of American cable and telecommunication operators running joint ventures in Britain is that Britain, with its liberal environment concerning what traffic cable operators can carry, offers a test lab for a combined voice / data / video environment.

Still subject to strict regulation, albeit in an environment that is liberalising a little more each year, telecommunication and cable operators are obliged to proceed via alliances, joint ventures and working consortia rather than via full acquisition of other companies or of each other.

Both telecommunication operators and cable operators are concerned with content with which to fill the global networks of the future. Thus, the activity round the owners of copyright in motion pictures.

The 'traditional' telecommunication operators (TOs) such as France Telecom, Deutsche Bundespost Telekom, AT&T, etc. grew up in a relatively stable world where, in return for their massive fixed investments in terrestrial copper wire networks and undersea cables, they were granted either monopolies or cartel positions. But even TOs were not spared the advance of technology; fibre optic cabling, cellular communications technology, satellite and broadcast links, all present alternative network scenarios. Not surprisingly, there is an element of defensive strategy on the part of the traditional TOs when it comes to newer forms of networking and, if they cannot have it banned or severely regulated by their national government or regulator, they would like to own it (where allowed).

Film, music and television are usually the hunted rather than the hunters, in the mergers and acquisition world. Rightly or wrongly, network operators and large media conglomerates have identified motion pictures, music and television programmes as forming the bulk of the valuable content that will make or break participants in the future multimedia world. Television transmission capacity, of course, is difficult territory since it is closely guarded and supervised by national governments; the opportunities for mergers and acquisitions -- and most particularly cross-border mergers and acquisitions -- are very limited here. Governments have traditionally attached far less importance to supervising film companies (and none at all to supervising music companies) so these latter two are free-trade areas.

Databases and information services is an area dominated financially by real-time and transactional services. Strategy here is to leverage one's existing expertise in order either to absorb or eliminate competition (Knight-Ridder and Data-Star), or to spread one's interest into adjacent market areas (Reuters and Vamp Health). An alternative strategy is to develop one's company and then to be bought by a Knight-Ridder, Reed/ Elsevier, Reuters, IHS or one of the other data conglomerates.

Somewhat in the image of the print publishing world, databases and information services attract conglomerates in a way that telecoms, television, computer hardware or software do not. Thus much of the large volume (though relatively small value) of merger and acquisition in this area concerns the conglomerates buying market share, buying entry into new markets, or buying market expertise.

Computer software and systems

Most activity in this area will centre upon either eliminating competitors or buying market share. Some of the more interesting strategies to observe, however, concern companies that desire to move into, or expand into, the area of multimedia software where expertise is not widely available and where it is concentrated into few companies.

2.3 The advertising conundrum

A problem area as companies merge and position themselves for the future information world concerns the future of advertising. Media advertising, as it became established in the twentieth century, was designed within well-understood parameters:

The first sour note in this well-ordered and well-understood world was struck when the video cassette recorder permitted time-shifting, and fast-winding over advertising matter in television programmes. Now, companies with revenue divisions heavily dependent upon advertising (such as many TV networks, and most magazines) face a major problem in transitioning to a networked, multimedia and interactive environment where, to a much greater extent than in the past, the media permit active rather than passive communication. And communicators are likely to wish to skip or eliminate much conventional and traditional advertising.

An examination of this area is beyond the scope of this current paper on mergers and acquisitions, beyond drawing attention to it as a strategic factor and as a problem area of change for some companies. From the swirling changes of the Internet, however, are emerging signs that advertising can flourish, albeit in a new and changed form, even in an interactive network environment. It may well come down to old dogs needing to learn new tricks.

3. An analysis of acquisitions in the electronic information area

This analysis is made especially difficult by the very size and diversity of the information area, by the number of players, and by the sheer number of transactions. In a recent study, titled: Mergers and Acquisitions of European Information Technology Companies 1993, Broadview Associates detailed 895 merger and acquisition deals -- just in Europe, just in the IT area, just in 1993. Total value of all 895 deals was calculated to be $14.3 billion; the Information Services sector accounted for nearly half of all the deals, although average size ($11 million) was below that for Hardware ($17 million) and Telecom Services ($33 million). However, smaller transactions, defined as having a total value of less than $20 million, made up 778 of the 895 mergers or acquisitions (i.e. 87%). Broadview's study covers a much broader area than this paper including in its definition areas such as professional services and distribution (under information services), network and transmission services (under telecommunications) and office equipment, distribution, peripherals and components (under hardware). But the overlap of some areas with the current paper makes Broadview's findings of undoubted interest.

3.1 Telecommunications and cable operations

Joint ventures and alliances are the favourite vehicle in this area. In North America and Japan, telecommunication operators (TOs) and cable operators are subject to heavy regulation by central government, and there is limited scope for major take-overs. Three major American acquisitions in this area recently aborted, partly because of the difficult regulatory climate (Bell Atlantic's bid for Tele-Communications, Inc. for $33 billion; Southwestern Bell's bid for Cox Cable for $4.9 billion; and AT&T's bid for McCaw Cellular for $12.6 billion.) As detailed earlier, the 1984 Cable Act in the US prohibits telephone companies from operating cable franchises in their service areas, and prohibits cable operators from carrying switched telephone services in their franchise areas.

In America, the TOs are controlled by the Federal Communications Commission (FCC) and the courts; in Europe, most TOs are still government owned (or strongly government controlled). Formal regulation appears therefore less in Europe than in the United States, but European TOs are unlikely to be the target for major acquisitions, because of their State ownership, supervision or close control.

Table 1, below, summarises the main merger and acquisition activity in the general telecommunications area; in fact, there is little merger and acquisition activity here; practically all activity is in joint ventures as traditional TOs such as the Bell companies in the United States form alliances to expand their operations outside the USA, and to expand into adjacent delivery areas such as cable and cellular. In Europe, there are alliances such as that between France Telecom and Deutsche Bundespost Telekom, but a listing of alliances in the telecoms area -- some short-lived, some maybe longer-lived -- could well fill several volumes. We may, however, remark that Alcatel's $909 million purchase of STC Submarine systems (UK) from Northern Telecom (Canada) was designed to consolidate Alcatel's position as the only European supplier of submarine cables in competition with AT&T (US), Fujitsi (Japan) and Nec (Japan).

The dependence upon alliances and joint-ventures reflects the delicate regulatory positions of telecommunications. Unable in most cases to expand easily in their home markets -- either because of regulation or saturation -- TOs are driven to expand internationally (viz AT&T and the Regional Bell Operating Companies (RBOCs) above.)

Table 1: Mergers and acquisitions in the telecommunications and cable area

 Year   TARGET COMPANY             NATURE          ACQUIRER
  PRICE      COMMENTS       
1994 McLean Hunter (CDN) Publishing and Rogers n/a Rogers is Canada's cable TV Communications biggest cable (CDN) operator. Rogers is buying content. 1994 Telephone International Voice and SJT (F) n/a 40% stake. Media (TIM) (GB) audiotex services 1994 Associated Cellular comms Southwestern n/a Buying into Communications (US) Bell (US) competitive technology 1994 McCaw Cellular (US) cellular AT&T (US) $12.6 In course. telecoms billion Anti-competition hurdles; buying into competition. 1994 General Mobile mobile telecoms Vodafone (GB) n/a 33% stake (with Communications (GB) Compagnie Générale des Eaux). Mobile area is free market in UK. 1993 STC Cable (Northern Submarine Alcatel Alsthom $909 m Consolidating global Telecom) (GB/CDN) telecom cabling (F) market position 1993 Unisource Holding Telecoms Swiss PTT Telecom $205 m 33.3% share in international consortium. 1993 NobelTech (S) Telecom Celsius $200 m equipment Industries (S) 1993 Nordic Tel (S) telecoms Pacific Telesis $153 m 51% share (US) 1993 NCR (US) computer AT&T n/a Buying competitor equipment & peripherals 1993 Air Call (GB) (Bell mobile telecoms Vodafone (GB) n/a Mobile area is free South) competition in UK. 1993 Matav (H) Telecoms US West (US) $875 m 30% stake as part of international consortium 1993 Cable Soft Network (J) Cable / Tele- n/a 18% stake; buying satellite Communications into competition. network (US) 1993 Iusacell (Mexico) Cellular comms. Bell Atlantic $1 42% stake. Expanding (US) billion outside the USA. 1993 Time Warner Cable TV & US West (US) $2.5 25% stake. TO buying Entertainment (US) Film billion into content. subsidiary of Time Warner 1993 Barphone (F) Supplier of AT&T (US) n/a US TO expanding PABXs outside its regulated market. 1993 MCI (US) telecoms British Telecom n/a 20% stake. TO (GB) expanding outside its national market. 1993 Sierra Network (US) games network AT&T (US) n/a 20% stake in Imagination Network consortium (online video games). TO acquiring stake in interaction. 1992 Centel (US) Cellular comms. US Sprint (US) n/a Buying into competition. 1992 Montgomery Cablevision Cable TV Southwestern n/a Buying into / Arlington Cable Bell (US) competition. Partners (US)

3.2 Film, music and television

It has become established wisdom that the Hollywood studios and companies with rights to films are desirable property. In the coming age of multimedia, the backlist of established films represents content that can be pumped over the entertainment networks, it is claimed.

The concept of 'content' is discussed in more detail below. Suffice to record in Table 2, below, the merger and acquisition activity in this area; and to remark that the fact that motion pictures were popular with the generations of the twentieth century, does not automatically indicate that their attraction will be ageless. There are signs that coming generations may not have attention spans capable of accommodating 2-3 hour non-interactive screen-based entertainment; this may reduce the potential value of the old motion pictures, as far as mass audiences will be concerned. There are also signs of rapid second thoughts by companies that are another element in aborting some on-going acquisitions (viz Bell Atlantic and Tele- Communications, and Southwestern Bell and Cox Cable).

The main activities in this area -- particularly in so far as financial sums are concerned -- revolve round the rights to films (viz. Viacom's massive $10 billion plus paid for Paramount, US West's $2.5 billion for a 25% stake in Time Warner Entertainment, and Time Warner's $1.4 billion for American Television and Communication's cable TV interests.)

Mergers and acquisitions in the public TV station area are muted; public TV network operation is heavily regulated by state licences, and cross-border acquisitions are unlikely to obtain approval. Those pursuing global TV interests -- such as Murdoch's News International, and Turner's CNN -- target the Pacific Rim, outside Japan, where the regulatory climate is easier and the competition less fierce. The mergers and acquisitions in the TV area listed below are all purely national changes of ownership (HTV and Flextech, LWT Holdings and Granada, Thames Television and S. Pearson, all being British companies in Britain).

Table 2: Mergers and acquisitions in the television, music and cinema area

 YEAR   TARGET COMPANY             NATURE           ACQUIRER          
  PRICE   COMMENTS                  
1994 Tele-Communications European Flextech (GB) n/a Flextech bought just Inc. (US) programming European programming interests 1994 HTV (GB) TV broadcasting Flextech (GB) n/a 20% stake. 1994 Paramount Film and Viacom (US) $10 + Cable operator buying Communications (US) entertainment billio content. n 1994 LWT Holdings (GB) Television Granada Group n/a Entertainment & (GB) leisure group buying into TV. 1993 Time Warner Cable TV & US West (US) $2.5 25% stake. TO buying Entertainment (US) Film billio into content. subsidiary of n Time Warner 1993 Motown Records (US) Music PolyGram (Europe) $300 m Buying market share. 1993 Hutchvision (US) TV broadcasting News Corp. (US) $500 m Media empire expands 1993 Thames Television (GB) TV broadcasting S. Pearson (GB) $150 m Publishing and leisure group expands into TV world 1993 Teleworld (NL) teletext / TV KPN (NL) n/a 50% stake 1992 Visnews (US) TV News agency Reuters (US) n/a News side of Reuter expands into video and TV 1992 American Television & Cable TV Time Warner (US) $1.4 Content owner expands Communications (US) billio into delivery n channels. 1992 Virgin Music (GB) Music Thorn EMI (GB) $840 m Music company buys market share. 1992 United Artists (US) Film studios Tele-Communicatio n/a Cable owner buys ns (US) content.

3.3 Databases and information services

Although prices paid are often not available in this area, they are normally small -- certainly not in the hundreds of millions of dollars as in some of the telecom and mainstream entertainment areas. And unlike both telecommunications and television, there is very little regulatory restriction in the database area (except when the area crosses the news domain, where many countries have ownership and cross-ownership restrictions).

In Table 3, company acquisitions over the past 30 months or so have been grouped together to show up any potential acquisition patterns.

Let us first remark on the size of the table; it forms almost exactly half of our total data. Secondly, it consists, in the main, of a large number of small transactions (fitting admirably the Broadview Associates' finding within its broader definition of the information technology industries that around 87% of all their merger and acquisition activities in the Information Sector were under $20 million). Largest single transaction identified in the table is the $417 Reed-Elsevier paid Macmillan for the Official Airline Guide; second largest was the $191 Primark Corporation paid to Dun & Bradstreet for the Datastream services.

We can then remark how Reuters' is pursuing a steady policy of acquisition in America (and how the company appears also to be considering strategic moves into the area of health care data). Information Handling Services also shows up as a company expanding via acquisition (and also displaying an interest in healthcare data and systems). Reuters' acquisition pattern is also interesting in that it is often cross-border; most acquisitions and mergers are still solidly same-country. Reuters, however, grew up in Europe (still its most important market), expanded in the Far East, and came only later to the USA where it is currently expanding hard -- and often using acquisition as a means so to do.

Also of interest, and a sign of the times, is the purchase by Murdoch's News International of the Delphi Internet Services (formerly General Videotext). News International grew big on newspapers and magazines, and then diversified into TV, satellite TV and motion pictures. The purchase of Delphi is the first time this large conglomerate has shown an interest in moving into the online networking domain.

Much of the rest is either 'impulse purchases' or 'sale of bankrupt stock', but we should note the pattern of purchases by Knight-Ridder, and also by Microsoft. Emphasis is on business and financial data and services, with consumer information and scientific and technical data attracting little merger and acquisition attention.

3.4 Computer software and systems

Table 4, below, shows merger and acquisition activity in this area; not surprisingly, the list is not a long one: in much of the world of computing and software, last year's hardware and last year's software are already merging into history. Companies whose business is based on older software and hardware have only limited values. Assets in this domain tend only to be of value when very new; market share fluctuates rapidly according to the competitive environment; success or failure are ephemeral, and often last only until the next product comes to the market. Companies such as IBM, Digital, Microsoft, Apple, Borland, Lotus etc. therefore tend to live on their wits and on their new products and new releases, rather than growing via mergers and acquisitions (although all the above companies are especially strong in strategic alliances and in joint ventures; as we have already seen, IBM had more than 20,000 such business alliances by mid-1992).

Probably of most interest in Table 4 is Microsoft's purchase of the Canadian software company Softimage for $130 million, confirming Microsoft's intention of moving into the imaging area (although with a bright young staff of 10,000, Microsoft does most of its own development and rarely seeks to buy in). Also of significance is the purchase by S. Pearson (which also owns the Financial Times Group) of the American company Software Toolworks for $462 million; this move has interested most observers, since the operations of Software Toolworks are above all in the multimedia area, an area where Pearson had little previous activity. By its purchase of Software Toolworks (and creation of a new division, Pearson New Entertainment Europe), Pearson has shown that the group is seriously interested in the multimedia world (Pearson also owns newspapers such as the Financial Times, Les Echos and around 100 regional newspapers, book publishing companies such as Longmans and Addison-Wesley, television companies and theme parks.)

The acquisition by the multimedia company Electronic Arts of Broderbund Software fell through just as this paper was being finished; no reason has yet become clear, but valuing software is a difficult area.

 

4. Content versus delivery channels

The European Publishers' Council (EPC) makes an entirely valid distinction between the ownership of the delivery systems, and the ownership of the content. The EPC further underlines the revolutionary nature of "the screen-based convergence of information, entertainment and consumer services."

However, two things are missing from the above observations: to delivery systems and content, we need to add software. Increasingly, information will be dominated by what Bill Gates of Microsoft has termed "Content-rich software". Data are no longer dumb, no longer passive; data in the future will exist in an interactive environment, so interactivity needs to be added to the EPC definition above.

The big conundrum concerning content is: what kind of content will be valid for the main information services of the future? Absent from the main table of mergers and acquisitions are signs of anyone from the rest of the electronic information world being particularly interested in traditional publishers. Traditional publishers often consider themselves to be a valuable source of content; upon examination, however, too much of this content turns out to be mainly of historical or archival interest, and too much of the content to consist merely of text. In many text domains, especially news, commentary, analysis and descriptive material, when the text is not a work of great art, it tends to be easily reproducible by any expert paid around $150 per 1,000 words; when text is a great work of art, it tends either to be ideally tailored for the print medium, or to be out of copyright.

In general, few publishers own extensive picture libraries, motion video libraries or sound archives; where they have used pictures, they very often do not have the electronic rights. Rare exceptions are companies such as Dorling Kindersley (in which Microsoft has since bought up the electronic rights to images), and some of the larger museums and galleries (where Microsoft is also active).

Nor, it must be said, has technology been friendly to those who have rights in content. The camcorder puts the ability to create cheap motion video in everyone's hands, as do modern cameras with colour photographs. Advanced cassette recorders and DAT recorders increasingly allow dedicated amateurs to make quite passable sound recordings. PC software allows a high standard of personal publishing via DTP; the PC is a major aid to text creation and processing via such techniques as cut-and-paste. The PC allows image manipulation, enhancement, merging and modification by skilled amateurs; networks such as the Internet allow subject specialists to converse globally, exchange ideas, drafts, designs or whatever.

Whereas, up to a couple of decades ago, content creation -- be it text, image, photo, motion video or sound -- demanded sophisticated and expensive equipment, with a high degree of acquired expertise and long training, technology has democratised and de-skilled content creation to a point where armies of skilled amateurs can take part on almost equal terms with professionals. One example of this is the growing number of photo libraries on CD-ROM, where the photos - often obtained via amateurs rather than from professionals - can be re-used free of all copyright restrictions.

This potential explosion in the ability to create content has probably come at the right time; observers expect content the be in short supply once screens demand an inexhaustible supply of graphics, games, motion video, sound and data. The famed promise of 500 or so TV channels within the next five years does lead to the important question of what is to appear on these channels, apart from old movies. We can expect a large number of content-oriented companies to start up to feed the insatiable new networks.

Backlist content centres on motion pictures, which are extremely expensive to re-create; this is one reason for the swarm of acquisition activity around the purchase of film studios. It is probable, however, that much other content can easily be re-created; indeed it may be better re-created, since past content was normally designed for passive reading or viewing, whereas future content will need increasingly to be designed for an interactive environment.

It is this factor of 'new content for new media' that is also leading some analysts to express doubts concerning the billions of dollars being spent on rights to motion pictures of the past; a new generation brought up on interactive games and interactive computing and armed with TV zappers just may not be ready to sit down for two and a half hours to watch some film set in the distant 1960s. It is unprovable; but there has to be a question mark even over the ultimate value of motion video content. Where text and image content are concerned, the question mark as to the value of much or most past content, is very large and very real.

5. Summary: acquisitions and mergers in the electronic information domain

There is no doubt that, particularly in the consumer / games / television / cable areas, a major revolution has begun in the area of electronic information. Anyone who was confident predicting the information scene in twenty -- or ten -- years time, would be foolish. Everyone talks of 'convergence', but no one can yet know exactly where this convergence will lead. Many, however, are conscious that the recent market for interactive computer games, currently estimated to be worth around $7 billion and growing, heralds the start of a more interactive world (and one can also cross-compare with the amazing financial success of karaoke systems). Integration of information, communication, transaction, entertainment and payment functionality will be key factors determining infrastructure developments.

On the whole, the picture that emerges is a healthy one. The electronic information domain contains a very large number of companies -- tens or hundreds of thousands, worldwide. With the exception of the area of telecommunication networks operating over fixed wire, the area is not amenable to monopoly or dominant position; the competition is too numerous, the markets too global.

Most of the companies in the electronic information area are small; in a fast-moving area, most companies will either not be successful or, if successful, will be acquired. But the entry fees in most of the area are low, so there is a constant renewal of fresh company blood; anyone with a good idea and some backing can start a potentially successful company in parts of the broad information area.

Even in fields that, historically, have seen dangers of dominant positions being established, newer technologies lower the entry charges and enable competition to arise. Thus in computing, an area dominated by a few large companies plus IBM up to the 1980s, the advent of the microprocessor, client-server architectures and massively parallel processing, have opened up the market to numerous new entrants. In telecommunications, where the old copper-wire highways established natural and seemingly inevitable monopolies, the newer technologies of cable, cellular communications and satellite communications have opened up alternative paths to networking. And publishing companies, for long the only realistic means of seeing one's ideas circulated worldwide, are facing the challenge of global networking linking desktop computers and permitting instant and constant exchange of data and ideas.

There is little danger of monopolies or dominant positions being established in the broad information area (as opposed to certain specific segments). The broad information area is too diffuse, too large and too amenable to new competition. This picture is confirmed by the approximately 100 acquisitions or mergers analysed.

Which is perhaps just as well, because the legal and regulatory environment in this broad area is highly selective; at a national level, there are often regulations concerning cross-ownership of news media (above all, television stations and newspapers); this often reflects the value attached to pluralism. At a national level, there are also often regulations or codes of practice concerning the established telecommunication media (and, especially in Europe), a regulatory environment designed to discourage competition from areas such as cable, satellite and cellular. In terms of global or international operations, however, regulation is fortunately minimal, which partly accounts for the remarkable strength, innovation and diversity of many companies in the information domain.

A key ingredient for successful leadership in the cauldron of the new information world is probably the encouragement, or tolerance, of diversity. Since we do not know where we are going to end up, change cannot be managed or directed. Societies that enable experimentation will lead; societies that try to resist change, or to channel change into pre-conceived paths, will probably become backward (in electronic information terms).

In practical terms, this means that over-regulation and over-management will stultify; creating a dynamic environment for experimentation and change, will unleash the new scenarios of the twenty-first century


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