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Media Concentration and Digitalisation – the European Perspective

Media companies are facing new challenges: digitalisation, IP-TV and online services are disintegrating regionally and temporally-bound use of media; the audience are turning into "users”. Whoever wants to keep up with these trends has to make media available on all channels and start thinking about new financing models. Steffen Grimberg describes what effects this has on the European media market.

Digitalisation is often seen as a cure-all for previous insufficiencies, above all in the electronic media system. Scarcity of channels in the analogue frequency spectrum for radio and television is replaced by programme multiplexes of several hundred channels each.

Digitalisation also changes television: IP-TV replaces analog TV.
Photo: Photocase

Digitalisation gives regional reception wings – at a far higher standard than the analogue transistor radios or portable TV devices ever could: Mobile TV may still yet be a hobby for few people in Europe, but a glance at Asia is sufficient for us to make at least a general forecast of what is to come. Digital Messenger and Web services continue to blur the differences between the classic "old" media. The range of media offers is being individualised, following in the wake of media consumption individualisation. As well as journalism services, an endless series of semi-professional or completely private offers are appearing, which can be received via the internet by all those possessing the necessary technical equipment – where previously only the classic mass media and in particular radio could go. The present debate about the "quality rating” on the Blogosphere serves as an appropriate and sometimes also daunting example.

And yet digitalisation allows other borders to blur, too. In Germany, "Telekoms”, which for decades have been traditionally only offered by telephone services, are forcing their way into Mobile TV via mobile telephony, including mobile surfing on the Internet. The businesses behind this innovation, who in many European countries are meanwhile privatised former state monopolists, are far more powerful than any traditional house of media thanks to their stock exchange capitalisation. The cable television companies, on the other hand, have long finished being mere service providers who transport a TV channel for a certain broadcasting company, but now rather offer a "triple play” consisting of TV / radio, telephone and high-speed Internet. In future, this development will produce completely different revenue models in today's classic media industries. And the printed press, too, whose technology is to a certain extent stretched to its limits, is attempting to keep track of the times by offering online strategies with audio and video streams which extend their previous range of offers by far.

At present, these new revenue models have only attracted a few representative entrepreneurs and financiers in the field of media. The situation is the same with the investment requirement within the scope of digitalisation – from restructuring previous analogue broadcasting or cable stations up to financing additional offers in the wonderful new digital world: private equity companies urgently seeking lucrative investment possibilities, or international concerns wishing to diversify into the media market over and above their core area of business. The old rules of the game became inapplicable some time ago, according to which different languages and cultural characteristics were able to severely limit, if not completely block, the international multi-utilisation of media content. At the TV profession congress at the Cologne Conference in autumn 2007, experts were of the opinion that around two thirds of the non-fictional TV material such as talk and casting shows, cooking and life-improvement formats developing in the so-called field of "factual programming” were concepts that could be used internationally.

This new form of medial globalisation goes hand in hand with a danger of further media concentrations, above all at a European level. Here, media usage habits – in spite of the continuation of specific country and cultural characteristics – have led to widespread conformity over the past decades. The RTL group belonging to the Bertelsmann concern, with its 42 TV and 32 radio programmes in ten European countries already made sense in the analogue era. The connected vertical penetration of the market using inherent production companies (Ufa) or companies for rights trading and advertising time sales (IP Deutschland) is not an invention from the digital era. Bertelsmann also holds – as otherwise in Europe only the Anglo-American media Tsar Rupert Murdoch does – the market horizontally via participations in press publishing companies (Gruner + Jahr), and in the music (SonyBMG) and sales businesses (Direct Group), as well as in very general services (Avarto). Now others, too, attracted by the supposed bright future prospects of richly flowing digital dividends, wish to till a generous area in the field of media– or to plough directly into its depths. "The process of digitalisation will lead to a further significant advance in concentration formation in the field of media”; this conclusion has been formed on the basis of a trial initiated by the European Journalist's Federation "Media Power in Europe”. Large, financially stable companies automatically have the advantage due to the continuing high investment requirements. "Once a strong basis of operations has been created, it will become even more difficult for smaller rivals to reach as large an audience as possible".

Concentration tendencies on the European TV market

Above all in the European TV market, clear concentration tendencies have already appeared, both with German participation. The RTL group belonging to the Bertelsmann concern is present in the large classic television nations of the "old” EU area – in France, the Netherlands, Great Britain, and Germany – and has expanded widely since the middle of the 1990's in the direction of east and south-east Europe (Poland, Hungary, Croatia, and Russia). It is at the same time one of the largest programme producers worldwide (more than 10,000 hours per year) and the worldwide largest TV rights trader outside the USA (programme rights stock: 19,000 hours). The merger of the German ProSiebenSat.1 broadcasting station group with the formerly Scandinavian SBS Group in summer 2007 has led to the creation of a second Europe-wide TV concern. The alliance, which will in future operate under the name of ProSieben, is active in 13 countries within Europe – with the main points of focus in Scandinavia, Germany, the Netherlands and also east Europe. Unlike the RTL group, however, this concern has no comparable position in the production market.

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