With the two big potential mergers of media companies announced this week, it reveals an underlying weakness in an industry that has no answers.
Why the proposed mergers between XM Satellite Radio Holdings Inc. (XMSR) and Sirius Satellite Radio Inc. (SIRI), along with Warner Music Group Corp. (WMG) and Britain's EMI Group Plc.? A couple of reasons.
First, is to get the shareholders thinking there's some forward momentum, even if it's not really doing anything to increase value to them.
Probably more importantly, the environment is making it probable that both deals may pass regulatory hurdles because of the weakness that the entertainment 
industry is embroiled in.
The question then becomes: "How will this help in an increasingly fragmented marketplace?" How will making a company larger make it more competive?
The answer? It won't. What it will do is to give the illusion that there is growth over the short term. Unfortunately, that's the way the vast majority of investors look at their holdings.
One problem with this strategy is that there is very little in place that will increase revenue, whether or not these companies merge. They simply don't know what to do. It's a lot different than the potential for ad revenue that will eventually grow out of media companies offering movie and TV video content.
The problem with all of this is that they're defensive moves, not offensive ones aimed at the future growth of the companies.
As entertainment attorney Fred Goldring said "The promise has always been the great jukebox in the sky, neither of these industries has yet answered the call of the consumer."
He's right. And until they do, mergers will have no value other than saying that they've gotten bigger.
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