Mass Media Merger Mania   

It's unlikely all of the players will end up happy with the results.

It's been a crazy year, with media mergers seeming to happen on a daily basis.

Seagram, the giant Canadian liquor company, storms into Hollywood and buys MCA's Universal Studios. Disney acquires Capital Cities/ABC. Ted Turner links up with Time Warner to form the world's largest media company.

The spate of media mergers has one overriding goal: domination. Time Warner wants to attain for mass media what Microsoft has for computer software. No one wants to stay small.

But just because a corporation wants vast economic power and riches does not mean it will get them.

The wave of takeovers is possible because the Federal Communications Commission and the Justice Department have backed off. Disney has long wanted a network; only now is it possible for Michael Eisner to pounce.

Yet the mergers are not alike. They come in three forms.

First, outsiders want in: Manufacturing giant Westinghouse moves to take over CBS; Seagram grabs MCA. This continues a trend that started in the 1980s with General Electric taking NBC and the Japanese invading Hollywood.

Often (and surely this is the case with Westinghouse), the outsider makes a move because it is struggling and wants to reinvent itself. Westinghouse is saying, in effect, that borrowing $7.5 billion to buy CBS is a good risk, better than continuing to languish with current operations.

The odds are against outsiders. Corporations with no history of programming have difficulty making news and entertainment. In 1990, in a celebrated deal, Matsushita took over MCA, hoping to use its movies to sell VCRs. In five years that experiment produced only billions of dollars in red ink. All that fabled Japanese efficiency didn't help; Matsushita sold out in a fire sale when it turned out that making movies was a lot dicier than making toasters.

The second type of merger finds rich companies seeking more control of the avenues of distribution – what economists call "vertical integration." So Disney spends $19 billion for ABC to guarantee distribution of its wares. No problem hereafter for Disney shows getting a network showcase.

Vertical alliances also signal the rich seeking to protect what they have. But such alliances generate loathing from independents and can set off often fierce lobbying for regulatory relief.

Not surprisingly, the first thing Time Warner chief Gerald Levin and Ted Turner did after the press conference announcing their alliance was journey to Washington, D.C. Levin offered FCC commissioners a slick brochure detailing planned efforts to fight illiteracy and to promote workplace and programming diversity, in the hopes of heading off government interference.

But Levin and company also have to deal with the Federal Trade Commission and its new head, Robert Pitofsky, who plans a lengthy review of the mega-merger. Pitofsky does not like the amount of control over programming that Time Warner might exploit.

The final impetus behind media megadeals is the desire to diversify and spread corporate risk into many forms of media. So to this observer the biggest news of the past summer, overshadowed by the sexier transactions, was the takeover of Multimedia by Gannett. The newspaper giant, which also owns TV stations and is in the outdoor advertising business, suddenly became a major player in cable TV and a significant producer of syndicated television.

But mergers from diversified parts, built by egodriven entrepreneurs, often come apart; former CEOs tend to chafe at taking orders. Can Ted Turner really function as second-in-
command?

Yet with government regulation at a twentieth century nadir, mass media merger mania will continue as outsiders and insiders alike seek to position themselves for the largesse assumed to await just around the corner in a world of 500 high-definition video images.

Small cable companies such as The Family Channel are future takeover targets. Look for CBS to be sold again.

On the flip side, the stronger will try to get stronger. Rupert Murdoch has been quiet during the past six months, but he will respond with at least a couple of headline-grabbing takeovers of his own.

Can journalists fit happily into multinational conglomerates? So far, unspoken if shaky truces exist. But heed the response of Gerald Levin when asked by Business Week how he plans to run the new Time Warner-Turner colossus: "Anyone who isn't on the team is out."

When that next economic downturn comes and the next wave of decisions pitting news values against profit potential arises, will journalists be considered outsiders? When we find out, then we'll know the ultimate effects on news and entertainment consumers of the mergers of 1995. l