Media Giants Splitting Themselves

Downsizing could be a ruse.  More and more media companies are splitting as business spin-offs became widespread.

Spin-offs and More Spin-offs

Liberty Media of John Malone announced on September 3 that it will establish a publicly traded company from the stocks of its Liberty Entertainment unit.  The move follows the path taken by other media companies that spin off a new business out of their existing enterprise.  

Time Warner, IAC Interactive Corp., and EW Scripps have already spun their businesses to create a new public company.  Cablevision, a giant cable operator, would soon join the bandwagon as its executives announced in August that it will sell or spin off some its assets to boosts share prices.

Media moguls might be changing their attitudes after building enormous empires over several decades.  

Reaching for the Internet

However, media conglomerates may just be downsizing their non-core businesses to gain more leverage on the growing new technology markets like Web television and digital media.  Peter Kreisky of Kreisky Media Consultancy said that media bosses normally don’t want to sit still. According to Kreisky, it is important for media executive to achieve continues growth. He added that media moguls have come to realize that their assumptions and business orientations during their start-up were no longer valid today.  Kreisky said the advances in high speed Internet connection sent media enterprises to scramble for assets that could give them an edge in the broadband shuffle.

Media empires however need to downsize before they could proceed with a new expansion.  Most media organizations have numerous incompatible business units that have become very unwieldy to manage.  Splitting the base assets of the empires could provide investors a clearer picture of performance.

The spin-offs are premised on the idea that Wall Street could build up the stock prices of these empires thus giving its executives to more leverage for future acquisitions.  This is also true for the spun-off businesses where earnings from stocks have improved their cash positions.

The Diller Example

A clear example was shown by veteran media mogul Diller.  His company is now swimming in $1.3 billion in hard cash.  Diller said that his company will focus on acquiring assets that are more in tune with their current line of businesses.  He said that the market does not want to see agglomeration nowadays.  For Diller, their initiatives could be further investments in their own business or to acquire businesses that they are familiar with.

Other media organizations are following suit but they see spin-offs as another way to extend their reach on the market.  TV network giants have started putting up other businesses such as recording and music studios, cable programming, Internet stations, and Web media retail stores.  Other networks on the other hand are strongly cashing in on cable TV and Internet based programming.