The Expanding Entertainment Universe

The $19 billion Walt Disney-Capital Cities/ABC deal shows once again that entertainment has replaced the defense and auto industries as the driving force of the U.S. economy. Proof? Run the numbers: Entertainment is the No.1 American export (bigger than aircraft), new-job generator (bigger than health care), and technology driver (the hottest software is developed for Jurassic Park, not Star Wars missile defense). The surge in entertainment is clearly a positive force for growth.

But is the new Entertainment Economy threatening? After all, consolidation--especially the vertical kind exemplified by the Disney-Cap Cities/ABC combo--has in the past led to monopoly markets, restricted consumer choice, and higher prices. With Cap Cities, Disney will be the first media company to control distribution channels in broadcast, cable, film, and telephone (through joint ventures with three regional Bells). Are we seeing a concentration of media ownership that will deprive the public of choice? Will independent producers be squeezed out? Will a few global entertainment conglomerates force a bland, Mickey Mouse kind of homogeneous culture down the throats of billions of people around the globe?

No, no, and probably not. Technology is the economic Cuisinart of the '90s, chopping, mashing, and mixing once-discrete industries into new configurations for the consumer's edification. The Information Revolution may be sending certain corporations hurtling toward one another in search of synergy, but at the same time it is expanding the total economic universe within which all media companies play. The market for entertainment and information is growing much faster than the industry is consolidating.

The deconstruction of old market segments by technology is quickly being followed by new combinations. Time Inc. went from being a magazine publisher to a cable operator and TV programmer, merged with Warner Communications Inc. to make and distribute movies, and now owns a telephone system. Publishing, cable distribution, TV programming, film, and the phone business are becoming one distribution system.

Is that bad? Not that anyone can yet demonstrate. Technology, if anything, has so far been a force for decentralization and growth. Dozens of new cable channels are springing up, as well as new TV networks. Hundreds of new companies are turning out educational CD-ROMs, interactive games, and special effects for films. Check out the new Silicon Alley in downtown Manhattan, where a new interactive industry is being built. Or sit through the credits of any new movie, where new categories of jobs, such as computer animation and digital graphics, are joining best boy and gaffer.

Washington policymakers would do well to keep government out of the way of all this technological change. Government has no business making preemptive moves against possible monopolies before an industry even develops. No one can anticipate the creation of monopolistic situations in the throes of technological turmoil. In fact, the best role for Washington to play is to deregulate old monopolies as fast as possible. Opening both the local phone and cable TV markets to real competition would do everyone a real service. If, in the future, one corporation winds up controlling every source of entertainment and information in a community, as the House telecom bill allows, then regulators might step in and demand more local competition.

The growing entertainment economy is a big plus for the U.S. It plays to the nation's strengths of creativity, technology, speed, and mass marketing. So far, the entertainment lead has translated into global competitiveness, growth, and jobs. Better to have Mickey and Goofy driving the world economy than the dogs of war.

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