The merger agreement between Time Inc. and Warner Communications has some film executives wondering whether a combination of the two entertainment giants would put new pressure on struggling independent film companies. Of particular concern is the prospect of joint ownership of the Warner Bros. studio and the Time-owned HBO cable network, which has been a major source of revenue for movie producers.
“Now that HBO is part of Warner Bros., does it become part of an overall conspiracy to kill off the independents?” asked a veteran movie producer who requested he not be identified.
That producer specifically wondered whether HBO, if it were associated with a major studio, would continue to cultivate smaller competitors such as Kings Road Entertainment by entering deals to fund slates of pictures, as it has done in the past. Other Hollywood insiders wondered if Warner would receive more favorable treatment than other studios from HBO. “It’s hard to imagine HBO’s deals with Warner really being at arm’s length,” said one talent agent.
However, even entertainment executives who expressed concern over the merger suggested that huge entertainment conglomerates such as a Time-Warner combination would still need the help of independent film makers.
“In the short term, as these corporations get larger and larger, you wonder if there’s going to be any room at all for independent product. But, longer term, they’ll have to depend on the independents to fuel these big machines they’re building,” said Ira Deutschman, a former marketing executive with Cinecom International and a board member of the Independent Features Project West, an association that promotes the interests of smaller film makers.
Deutschman and others have argued that big companies, particularly in the entertainment industry, often lose their creative punch as they grow.
“Warner’s not suddenly going to make 60 movies a year just because they have more money, and I’m sure HBO is going to keep making deals just the way they always did,” said Alan Ladd Jr., chairman of newly formed Pathe Entertainment Inc., which is co-owned by Italian entrepreneur Giancarlo Parretti.
More of the Same
Some industry leaders noted that the merger merely accentuates a consolidation that has been under way among media and entertainment companies for several years. But they did not predict that it would force other major studios to seek merger partners.
“Is this going to put pressure on us to grow? No. Larger is sometimes better and sometimes not,” Walt Disney Co. Chairman and chief executive officer Michael Eisner said Saturday.
Asked whether he saw a potential competitive problem in Warner’s new association with HBO, however, Eisner indicated some concern.
"(Warner Bros. chairman) Bob Daly has been the most articulate statesman we’ve had in the movie business. I hope this (merger) doesn’t mute his ability to keep an open marketplace for our products,” he said.
Disney had $3.44 billion in revenues last year, and has interests in movie and TV production, broadcasting, theme parks, cable television and recorded music.
Other Big Players
Other large entertainment conglomerates include MCA Inc., which owns Universal Pictures; Gulf & Western Inc., which owns Paramount Pictures; Coca-Cola Inc., which holds a major stake in Columbia Pictures Entertainment, and News Corp. Ltd., which owns Fox Inc.
One top film executive said the prospective price of Orion Pictures and MGM/UA Communications, studios not currently owned by entertainment conglomerates, is likely to increase because of the Time-Warner merger. “These companies are going to be worth a lot more money now,” he said.
The merger appears to highlight one advantage cable networks have over big broadcasting networks such as ABC, NBC and CBS. Under government regulations, some of which are set to expire in 1991, broadcast networks are prohibited from producing and owning their own programs--a restriction that does not apply to cable networks such as HBO or Viacom International Inc.'s Showtime and the Movie Channel services.
Patricia Madsen, a spokeswoman for Capital Cities/ABC Inc., declined to say whether her company saw any implications in the merger for the major television networks.