After gorging on mergers in the last decade, the media business is suffering from a case of indigestion.
Witness the resignation of AOL Time Warner Inc. Chairman Steve Case after failing for two years to mesh his combined Internet and entertainment behemoths. Or the ongoing turmoil at Vivendi Universal.
So why, then, is the industry pressing federal officials for a regulatory bicarbonate that would seem to increase the bloat?
The likely answer: Most companies' real goals are far more narrowly targeted than their broad request for new freedoms might suggest.
Three media giants -- Viacom Inc., News Corp. and General Electric Co.'s NBC -- petitioned the Federal Communications Commission this month for a sweeping removal of obstacles to yet another round of growth.
Just last week, FCC Chairman Michael K. Powell sought to downplay the prospect of a complete overhaul of the nation's broadcast regulatory structure. But major changes are still possible -- a scenario that disturbs critics, who wonder why the big guys should get any bigger.
They already see AOL Time Warner bleeding red ink, Walt Disney Co. fumbling with its acquisition of the ABC network and France's Vivendi Universal mulling over the sale of entertainment and telecommunications assets it recently bought.
"These companies have a compulsion to merge and converge even though we've had these big debacles," said Victoria Riskin, president of the Writers Guild of America, West.
Added Kathy Garmezy, director of government affairs for the Directors Guild of America: "There's a real question about whether bigger is really better. What's the upside?"
If questions about past failure seem fair in a debate about restrictions on new growth, company representatives nonetheless say they are beside the point. "One has nothing to do with the other at all," said Andrew Butcher, spokesman for Fox parent News Corp. "It's totally irrelevant."
Companies say requested changes wouldn't so much create the next colossus as permit the kind of targeted deals that have worked smoothly in the past, such as combining groups of TV stations for greater reach and efficiency.
Issues on the table include the loosening of restrictions on how many TV stations can be owned in local markets, permitting broadcast chains to blanket the entire country and increasing the reach of cable companies.
Such changes, say company advocates, would make it easier for broadcasters to compete in a world awash in offerings from cable TV, the Internet and satellite technologies. Opponents say the changes would reduce consumer choice in an industry already constrained by the last round of bad matches brokered by Wall Street's eager dealmakers.
"You can't generalize about media transactions, which are done for a variety of reasons and have a variety of outcomes," Viacom spokesman Carl Folta said. "The Viacom-CBS merger has been very successful, but CBS nevertheless is still encumbered by outmoded regulations."
Shaun Sheehan, lobbyist for Tribune Co., added: "It's not about mega-mergers like AOL Time Warner. Allowing broadcasters to get bigger is a way to keep a robust system out there." (Tribune, parent of the Los Angeles Times, has been one of the most active companies pushing for changes in regulations.)
Some close observers doubt that regulators will care whether mergers have worked, choosing instead to let investors decide which combinations are smart and which aren't.
Regulators "are deaf and dumb to the issue of execution," said Frank Biondi, former chief executive of two media giants, Viacom and Universal Studios Inc. (now part of Vivendi).
Past media mergers are a "target-rich environment" these days, said Legg Mason analyst and former FCC chief of staff Blair Levin. But, he added, evaluating whether deals make business sense is not a commission mandate.
"There are those who say the FCC would have done everyone a favor by turning down AOL Time Warner," Levin said. "But it's not an evaluator of business brilliance."
Robert J. Broadwater, managing director of media investment banking firm Veronis Suhler Stevenson, said media deals have worked best when they have had clear goals. Thus, Thomson Corp.'s decision to sell its newspaper business to focus on electronic publishing made more sense than Time Warner's decision to join AOL in a grandiose new-media play.
"You have to be careful not to confuse size with focus. Vivendi went around and bought everything imaginable. It's hard to manage a big diversified company in a bunch of different industries," Broadwater said.
Last year, a Sanford C. Bernstein & Co. study of media mergers, both good and bad, found that the success stories were those in which businesses were added to similar ones, for instance by joining TV station operations.
"CBS and Viacom went quite smoothly. They were basically in the same business and filled in the blanks," said analyst Tom Wolzien, the study's author.
Nonetheless, said Wolzien, it would be a mistake to completely dismiss concerns of those worried about the ability of companies to carry out big deals.
"You're not operating in the public interest if you're screwing up," he said.