Whatever happened to synergy? MLB as media product.(Major League Baseball)

The years 2003 and 2004 were years of divestiture. In a reversal of the trend since the mid-1990s, the news focused on the unlinking of media and sports ownership. In a short period of time, Major League Baseball owners approved Frank McCourt as the new majority owner of the Los Angeles Dodgers after he purchased the team from News Corp. (i.e., Rupert Murdoch). In 2003 the Walt Disney Company, one of News Corp.'s primary rivals in the global media business, sold the reigning world champion Anaheim Angels to Arturo Moreno. Time Warner put the Atlanta Braves on the seller's block and cut the team's payroll to attract a buyer. (1)

This new "trend" away from the joint ownership of media and sports is not limited to baseball. Time Warner, for example, has sold the Atlanta Hawks (NBA) and Thrashers (NHL). Disney, currently fighting a hostile takeover by the Comcast cable television giant, is attempting to sell the Mighty Ducks of Anaheim (NHL). Even in the nation's largest and most lucrative media market, YankeeNets, the brainchild of George Steinbrenner (and another source of millions of dollars of revenue for the Yankees), has sold the New Jersey Nets to a Brooklyn developer. (2)

In this article we will offer an analysis of these recent moves. Why has there been a reversal of what seemed a logical trend: the joint media/sports ownership? Does this signal a return to the individual ownership mythologized by the mainstream media and most baseball fans? Or do these deals reflect new kinds of relationships between corporate media and sports franchises? Whatever the reasons for the recent divestures, how will they affect the operation of teams and their relationships with the changing media landscape?

THE LOGIC OF VERTICAL INTEGRATION

Vertical integration (VI) is one of the oldest operational goals in capitalist economics. VI essentially is the control of all levels of the supply chain from ownership to consumer. For media corporations this means the control of (1) production, (2) distribution, and (3) exhibition (P-D-E). Despite the conventional wisdom of the current multinational corporations that VI is necessary for companies to "compete," until quite recently vertical integration was regarded as something to be avoided because of its negative effects on the consumer. (3)

For decades the U.S. government based many of its policies on the assumption that a vertically integrated market structure is bad for the public because of its anticompetitive nature. The control of each element of the P-D-E chain leads to a market structure with high barriers to entry for new competitors. The negative implications of VI have been the rationale for antitrust actions against many corporate schemes. In the 1948 Paramount decision, motion picture studios had to divest their ownership of theaters. (4) In the 1960s the Justice Department refused to allow International Telephone and Telegraph (ITT) to acquire ABC. (5) Today such decisions look like ancient history as vertical integration is often seen as necessary for large corporations to compete in a global marketplace. The rhetoric of corporate consolidation has replaced "the public interest" as the mantra for government "regulators."

Professional sports leagues and their member teams were exempt from many antitrust regulations, even before the market mania of the last twenty to twenty-five years. MLB has had an explicit exemption from most antitrust concerns since 1922. (6) The Sports Broadcasting Act of 1961 granted an antitrust exemption for all the professional leagues in developing policies on television and radio. (7) These longstanding exemptions and the new tolerance of vertical integration encouraged sports leagues, a legalized cartel, and media firms, a semilegalized cartel, to make a series of deals to enhance their relationships.