The Last of the Independents : Entertainment: Four of the six major Hollywood studios are part of conglomerates. How long Paramount and Disney can hold out is being debated.

Suddenly, Paramount looks like an anthill and Disney resembles Mickey Mouse.

The two remaining “independent” Hollywood studios are now dwarfed in size by the Japanese parents of Columbia and MCA. How long they will remain such is the subject of debate among investors and analysts.

Of the six so-called major Hollywood studios, three are now subsidiaries of foreign corporations: Columbia, Universal and 20th Century Fox. Warner Bros. is seen by many to be in a separate class because it is owned by the sprawling media giant Time Warner Inc.

Now pressure from the inexorable push of global media conglomerates has made the two remaining independent studios extremely vulnerable to a takeover or merger, some analysts believe.

The vulnerability is fueled by potential changes in government regulations that would allow networks to earn profits from TV program reruns. Under a 20-year ban, the networks have been prohibited from earning TV rerun profits, a little-known but highly lucrative part of the studio business.

Moreover, networks are barred from selling most TV programs in overseas markets--while there is no prohibition on foreign-owned companies selling programs in the United States.

“There is no doubt in my mind that, come January, General Electric is going to be jumping up and down yelling, ‘How can we not allow American companies to compete?’ ” said Mario Gabelli, a New York money manager with substantial holdings in both MCA and Paramount. General Electric owns the NBC network.

Wall Street has been anxiously waiting for a studio and a network to test the limits of government regulations by announcing a merger agreement even before a new set of rules has been fashioned.

Not a week goes by without whispers that CBS will be sold to Disney or that General Electric might buy Paramount and pair the studio with NBC.

But executives close to CBS Inc. Chief Executive Laurence A. Tisch do not see any sign that he wants to unload the network, despite his typically gloomy outlook. And some senior NBC officials note that the network’s earnings are declining and will continue to do so for the foreseeable future. This only dampens GE’s appetite to expand its entertainment interests, they say.

Still, if a merger or acquisition deal isn’t made between a studio and network, that does not preclude other options.

For much of the 1980s, Paramount Communications sold off many parts of the company--then known as Gulf & Western--so that all that is left is a core business in entertainment and media. The studio has made no secret of its desire for a dramatic corporate development--last year it failed in a hostile takeover attempt of Time Inc.--and is in no mood to sit still while similar companies “globalize” around it.

The MCA-Matshushita deal “will add self-imposed pressure” on Paramount to buy or merge with another company, predicts Raymond Katz, an analyst with Shearson Lehman Hutton in New York. Chief Executive Martin S. Davis knows “it’s a consolidating world.”

But stock market handicappers are no longer brazenly predicting that each of the networks will merge with a studio once the so-called financial interest and syndication rules are revised. A new cautionary note is being struck because signals out of Washington suggest that a compromise, rather than a wholesale repeal of the rules, may be reached.

“That will make it more difficult for the next round of mega-mergers,” noted Jessica Reiff, an analyst at First Boston in New York. “Instead, we may see more joint ventures.” She points to Paramount’s 49% purchase of Zenith Productions, a London-based TV production company.

Gabelli believes that Paramount has its eye on a handful of American media companies such as McGraw-Hill, Western Publishing or the United Artists theater chain that it could readily combine with to augment one of its core businesses--TV stations, books and magazines or theater circuits. “There are four to five medium-size deals within its framework,” he reasons.

Jay Nelson, an analyst at Brown Bros. Harriman in New York, believes that joint ventures are more likely than all-out mergers among studios and networks. He notes that ABC could set up a joint mini-studio venture with a Paramount or Disney to produce and distribute TV programs.

“There could be things short of a merger,” he said. Nelson points out that network managements are more conservative than their counterparts at the studios. “They like operations that come in near or on budget, and that is not Hollywood.”

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The Studios Estimated 1990 revenue of the major studios and their corporate parents, inbillions of dollars News Corp. (2oth Century Fox): $6.6 Time Warner: $11.3 Sony (Columbia Pictures): $27.1 Walt Disney: $5.7 Paramount: $3.7 Matsushita (MCA/Universal): $51 Total Revenue: $105.4 billion Note: MGM-Pathe revenue not available (believed to be less than $1 billion). Source: Value Line; Paramount estimate for fiscal year ended Oct. 30; News Corp. figure is reported revenue for fiscal year ended June 30