Private equity is a problem for public media

PRIVATE EQUITY IS A PROBLEM FOR PUBLIC MEDIA
[SOURCE: Financial Times, AUTHOR: Eli Noam, Columbia University]
[Commentary] A second wave of media privatization is sweeping the world -- private equity firms are acquiring big media and communications companies. This trend has raised questions. Many private equity deals are fueled by a desire to flee closer regulation and disclosure requirements of public companies. This reduces the transparency of the economy, even as it may make some companies more efficient. There are additional considerations for media companies. On the positive side, private equity deals often lead to a break-up of media conglomerates to reduce debt that paid for the acquisition. Thus, Clear Channel, poster boy for media concentration, is selling off almost half of its 1,100 radio stations. On the negative side, the same cost-cutting has impacts on newsrooms, film budgets and re­search and development. Unlike start-up venture capital, this kind of private equity is basically conservative in its search for cash flows to meet debt payments and position the company for resale. It is also short-term orientated and unlikely to undertake big upgrades of communications infrastructure that have long-term benefits for the economy. All this raises questions about openness, transparency and control. In open societies large media holdings must be in the open. Direct regulation by government of media operations is undesirable. But disclosure is another matter. The role of media is to inform and shine light; their own structures cannot be secretive. Otherwise accountability becomes impossible, suspicions abound and the credibility of all media will suffer.
http://www.ft.com/cms/s/50ca3cb0-c01e-11db-995a-000b5df10621.html
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