The annual retreat for media bigwigs, investors and technology gurus in Sun Valley, Idaho, is known as a place for CEOs to take the family...

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The annual retreat for media bigwigs, investors and technology gurus in Sun Valley, Idaho, is known as a place for CEOs to take the family on vacation and talk about business deals.

Which is just what Allen & Co., a well-connected investment bank that traces its roots to the 1920s, had in mind when it started putting on this high-powered conference in 1983.

With so many heads of major media companies in attendance, the annual conference, whose events are closed to reporters, is seen as a breeding ground for potential merger deals.

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Walt Disney Co.’s landmark acquisition of Capital Cities/ABC in 1996 famously began with conversations struck up at Sun Valley.

But as they head into this year’s weeklong meeting, which begins today, media CEOs face a much tougher business environment than many have seen in the past.

Advertising is growing sluggishly, and the Internet and commercial-skipping devices like the digital video recorder are challenging traditional media business models.

Plus, Wall Street has largely soured on giant media conglomerates, so much so that one of the biggest stories in the media world so far this year is that Viacom is breaking up into two units in hopes of regaining favor among investors.

Other media companies are also slimming down.

Cablevision Systems, a New York-area cable-TV provider, is spinning off a business unit containing three cable networks and Madison Square Garden. Radio industry leader Clear Channel Communications is spinning off its live entertainment division.

It’s not necessarily that doing deals is a bad thing. It’s just there’s not as much enthusiasm for big media companies being big just for the sake of scale.

“The main issue is not consolidation but conglomeratization,” says Jim Rutherfurd, executive vice president at Veronis Suhler Stevenson, a media private-equity firm.

“There’s a lot of sense in combining like media, for example magazines or TV stations,” Rutherfurd said.

“Where things went … too far is when companies were acquiring too many kinds of businesses under one roof,” he said.

Viacom hopes to fix that problem and reverse a long slump in its stock price, which is down 10 percent so far this year.

It will split into a “growth” company anchored by its MTV Networks group, and a “value” company centered on CBS.

The split will essentially undo Viacom’s acquisition of CBS, which was announced in 1999. At the time, bigger was viewed as better, with Disney buying ABC and Time Warner later agreeing to be acquired by America Online.

Now, the Big Media Theory isn’t what it used to be.

“It’s always been a tradeoff,” says consultant Peter Kreisky. “Do you create more value with scale, or with focus? And the jury is clearly out in terms of the advantages of scale.”

Even if they’re not talking about big deals, the media honchos at Sun Valley still have plenty of big issues to discuss over golf games and skeet matches.

Finding new ways to reach consumers through developing technologies like cellphone screens is a major topic, and so is the widening impact on media consumption by personal storage devices like TiVo video recorders.

Another big topic is sure to be a pair of Supreme Court rulings last week that handed big victories to media companies.

In one case, the court ruled that media owners can go after file-sharing companies for copyright infringement.

In another, the court said cable companies did not have to share their lines with rival Internet access providers.

The monster growth of Apple Computer’s iPod and similar digital listening devices will be a major topic, as well as the implications it has for the future of traditional radio companies.

Apple CEO Steve Jobs is expected to attend, as is Clear Channel Chairman Lowry Mays.

The eclectic group of guests this year includes regulars such as Berkshire Hathaway founder Warren Buffett and Microsoft Chairman Bill Gates, as well as relative newcomers like Google founders Sergey Brin and Larry Page.

Allen & Co. participated in Google’s IPO last year.

Comcast chief Brian Roberts won’t attend because of a scheduling conflict, but other media bigwigs are expected to turn up, including Time Warner CEO Dick Parsons, Rupert Murdoch and his son Lachlan, and outgoing Disney CEO Michael Eisner.