Sometimes the strongest move available to two runners-up is to stop competing with each other. Consolidation is rarely sold as a survival strategy, but that is often what it is.

On January 24, 2006, CBS Corporation and Warner Bros. announced plans to form a new broadcast network. Warner Brothers and CBS Corp. said the network, called CW, would replace the WB and UPN networks in the fall, with each company owning 50 percent. Both networks were to cease operations in September and run their own schedules independently until then. The same day, Tribune Company said it had agreed to affiliate 16 of its television stations with The CW, including stations in New York City, Los Angeles and Chicago.

Why would two rivals fold their networks into one?

Because each was fighting the same uphill battle alone. UPN and the WB had struggled to attract viewers from the four established networks since they were launched in the mid-1990s. Two small players chasing a similar audience split the same advertisers, the same programming budgets and the same scarce hits. Merging them does not create new viewers. It removes a competitor that was never the real threat.

Officials of Warner and CBS said prime-time programming would target the profitable 18-34 age group. Distribution mattered as much as the shows: Tribune said stations in seven of the country's Top 10 television markets would affiliate with the new network.

What does a merger like this actually buy?

Reach, and fewer duplicated costs. James Goss, an analyst with Barrington Research, put the staffing effect plainly: "but there will be one person where there used to be two". That line is the uncomfortable part of every consolidation, and also its logic.

The usual story about competition assumes more players means more choice. Sometimes it means two half-built things, each too small to finish the job. The harder strategic question is not who the biggest rival is, but which rival is really a twin.

Sources

  • Decision Making
  • Systems Thinking

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