VIEWPOINTS : IS BIGGER BETTER IN THE MEDIA BUSINESS? : Some Experts Question the Wisdom of Mega-Merger Trend

M any big U.S. media companies, acting on the assumption that only giant communications concerns will prosper in coming years amid growing international competition, have eagerly pursued acquisitions. Time Inc.’s $14-billion offer for Warner Communications--an effort being contested by acquisition-minded Paramount Communications--is only the latest of the big media merger proposals. But is bigger really better in the media business? Times researcher Melanie Pickett asked some experts for their opinions, and excerpts of their comments follow:

Katharine Graham, chairman and chief executive of the Washington Post Co., excerpted from a speech given to the San Francisco Advertising Club:

“I believe the importance of size . . . is over-inflated. . . . Labor-intensive industries, such as communications, are almost always disadvantaged to some degree as they get larger. Still, just because being big doesn’t necessarily make sense, it doesn’t mean that companies are not going to get even larger. The competitive urge to grow has never been stronger. The adrenaline is really pumping. Human nature has taken over: People want to be big because they want to be big. No evidence has ever surfaced that the dinosaurs, even on the brink of extinction, wanted to trade places with the cockroaches, who would endure for a billion years.

“I believe in rigorous management and providing high value to shareholders. But I don’t believe it should be--or has to be--at the expense of fulfilling our greater First Amendment responsibilities. . . . If these global companies want to take maximum advantage of their distribution channels, they may focus more on entertainment at the expense of news. News may even become more entertainment oriented. . . . I’m concerned that, as media companies grow in size, the desire to make money, achieve power and gratify ego will ultimately take precedence over the desire to produce a quality product and contribute to the public good, especially if the owners are professional managers far away. . . . I’m not against global companies. To some extent we’re one, too. But I don’t believe you have to be a global Goliath to survive in this age . . . no popular magazine, no network television affiliate, no dominant daily newspaper, nor even a local cable system has failed because it was too small.”

Ira Deutchman, a movie producer and director of Independent Features Project West, an association that promotes the interests of smaller film makers:

“There’s a number of different ways of attacking the movie business. Unfortunately, it has always been an expensive hobby. When the average price of movies is hitting the $15-million mark, and, in fact, many many movies are a lot more expensive than that, then being able to be in the position to take those kinds risks on a day-in, day-out basis puts you in a position where you can’t rise or fall on a single film. That’s the reason so many independents are going under. They’ve been taking these enormous risks without having the kind of cash flow to draw upon to be able to absorb losses in those areas. Therefore, the kind of consolidation that’s represented by all the new mergers and creating all these giant companies is, in point of fact, very good risk management. To be able to afford to be in this business for the long haul, that is absolutely necessary.

“Over time, it would seem to me that these large conglomerates are going to want to increase the number of films they make as well as their shots at $100-million films. And that’s when it’s possible that the right kind of management team at one of these conglomerates could create an atmosphere that could be incredibly good for independent film makers. . . . Independents have been good at finding good niche markets and I would assume those will start to emerge.”

Victor Navasky, editor of The Nation magazine:

“The bigger they are, the harder they fall. They’re just getting in more and more trouble, as illustrated by the tragic comedy that’s going on right now. It’s a combination of good, old-fashioned American greed and losing sight of why they went into the media business in the first place. Henry Luce didn’t go into that business to acquire other businesses. He went into it because he thought he had a way of putting out a magazine that could tell the truth in short form every week. Of course, it was his version of the truth. The people who came after lost sight of all that.

“I suspect that’s true in every business. In Hollywood, they thought they had a way of entertaining and making some money for doing that, but the vision of the founders and the occupation of the successors are very different things. Deregulation of the Reagan era is what opened the door to all these things. It would have been inconceivable to have these kinds of merger discussions, given cable and all the antitrust implications of it, in an era of tough antitrust enforcement . . . projections (are) that by the end of the century there will be a half dozen companies that will dominate the international communications, entertainment, information marketplace globally . . . (That) tends to homogenize the culture and doesn’t leave a sufficient place for people like the rest of us.”

Ben Bagdikian, author of “The Media Monopoly” and professor at the UC Berkeley Graduate School of Journalism:

“(The result of mergers is) going to be a loss for the public in a number of ways. The most important loss is a loss of diversity. There’s a loss of diversity of ownership but there’s also a loss in diversity in the content--there will be fewer choices. (Diversity) is important in the entertainment business because it socializes whole generations on what social values are, what a desirable personality and social being is. And what it does is narrow down those choices to those kinds of depictions . . . that make the most money the fastest for the biggest operators.

“The public loses in another way: To have media power is to have political power. And one of the things that has happened with the growth of giants in the media is that their mechanism for creating their dominant empires has been to use huge amounts of debt. And the tax laws have been written so it rewards that corporation that has dangerous amounts of debt and shifts the tax burden to smaller firms and to individuals. Any one of these chief executives or board chairmen who has one of these dominant media corporations can see the President of the United States almost any time he or she wants because every political person has to be concerned with these giant media companies. And they get respectful attention for the things they want. So our business regulations, our antitrust laws, our tax laws are very heavily influenced by the desires of these very large media companies. And that has a hidden, but very strong effect, on the rest of the public.”

John Morton, media analyst with Lynch, Jones & Ryan:

“Globalization is the new buzzword in the financial community. Whether they have to do that (merge), who knows? But probably there are some advantages for entertainment companies, companies that depend on programming of one kind or another, to being bigger. For the kinds of companies I follow, which are basically newspaper companies, it probably doesn’t make much sense. You don’t see any of the big newspaper companies getting excited about globalization and, in fact, in a couple of instances, have vowed not to. I’m not so sure whether going after global markets is the major motivation here. The major motivation is to make money and to accumulate assets.”

Dennis McAlpine, an analyst with Oppenheimer & Co.:

“Hell, no. They’ve done such a great PR job promoting this American flag draping. And if you look at it, there really aren’t that many synergies between a Time and a Warner. Somebody had a great field day sitting down and coming up with all these ideas of what they can do together. Case in point: Time and Warner say, ‘well, we can sell advertising across the media lines.’ The problem is, you have different media buyers. How are you going to do that? That requires almost a change in the structure of advertising. And I’m not sure they’re going to do that just for Time-Warner or Time-Paramount even. . . . Whoever comes out winning Time, and I think Time is going to somebody, is going to have a hell of a lot of debt and a completely different financial structure than they had going in. That doesn’t necessarily mean they’re unhealthy, but they are certainly changed.”