Mass Media Merger Mania

Article excerpt

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. …