As All the Buzz Fizzled, Corporate Synergy Died

The language of media commerce is rather like very young champagne--engaging and fizzy but ultimately insubstantial.

Buzz words, like bubbles, rise jauntily from the ferment of ambition and salesmanship only to burst, one after the other.

“Synergy” is the latest such casualty. For several years past, the prospect of achieving it was the rationale used by chief executives such as Bertelsmann’s Thomas Middelhoff, AOL Time Warner Inc.’s Robert W. Pittman and Vivendi Universal’s Jean-Marie Messier to relentlessly aggregate publishing houses, film studios, broadcasting outlets, music companies and various online enterprises into sprawling media conglomerates. The theory was that when each firm reached an unspecified critical mass, it would become synergetic--a whole whose value was more than the sum of its parts.

In fact, all three companies turned out to be worth considerably less. As a consequence, all three CEOs now are out of their respective executive suites.

Their failure is the subject of a publishing boomlet: Three American houses--HarperCollins, Crown and Knopf--currently have purchased books on the AOL Time Warner fiasco. (Coincidentally, the latter two are divisions of Random House, Bertelsmann’s largest U.S. property.) Messier, meanwhile, continues to flout French cultural traditions and is spending his August holiday writing a memoir of his rise and fall. It is due out in September under the self-effacing title “How I Was Betrayed.”

All of this raises interesting questions among media analysts. For example: Were the synergetic media conglomerates destroyed by the impatience of short-sighted investors? And, more important, what impact will the firms’ retrenchment have on the book publishers they accumulated?

“Partly, what has occurred does represent a failure of patience,” said Martin Kaplan, who directs USC’s Norman Lear Center and is associate dean of the university’s Annenberg School for Communication. “But it’s also proof that, sometimes, certain things have to be allowed to arise organically from circumstances. You can’t create synergies with a business plan, especially in a creative field, like filmmaking or publishing, where you’re essentially bottling lightning.

“The history of media is replete with examples of partnerships that virtually formed themselves when the moment was ripe: movie studios co-financing each other’s films; a book published by one company becoming another company’s hit movie. But you don’t have to create new brick-and-mortar institutions to achieve those sorts of synergies,” said Kaplan, whose center studies, among other things, the “convergence of entertainment, commerce and society.”

Peter Osnos is publisher and chief executive of Public Affairs Press, one of the growing number of successful independent publishing houses. But from 1991 to 1996, he ran the Times Books division of Random House, and much of what Osnos now believes will transpire has a familiar feel.

“In the case of Middelhoff and Messier, you have two new-style European entrepreneurs who thought they could conquer the international media, which now is the most glamorous part of international business,” Osnos said. “Neither succeeded, and both of their enterprises are going to be downsized--all but broken up. I think it’s important to remember that this sort of thing has happened before. It wasn’t that long ago that the Japanese had their moment in Hollywood and got their hands slapped badly. Even Sony, though it’s currently having a terrific year for films, was practically brought to its knees when it bought a studio and found itself in real trouble. And, at the time, Sony was practically an international synonym for quality and success.”

As far as book publishing goes, Osnos believes “the most immediate consequence is that Vivendi’s Houghton Mifflin is for sale and is going to be broken up and sold off in bits and pieces. Actually, its trade division could become a significant independent player, which would be nice for everybody, from a qualitative standpoint.

“For Random House, Bertelsmann’s shake-up probably is a very good thing. It will reinforce the old-school publishing traditions at Random House because Bertelsmann is a buy-and-hold outfit that gives its managers a great deal of autonomy. That means that because Random House is profitable, it probably is OK in its current configuration.

“In a way, it’s another case of back to the future,” Osnos said. “When S.I. Newhouse, who sold Random House to Bertelsmann, bought the company in 1980, the seller was RCA, which was then a media conglomerate in the process of falling apart. Actually, it doesn’t exist at all today except as a name on a record label.

“Some things, as they say, aren’t what they used to be and never were,” Osnos quipped.

But, when it comes to publishing, the Lear Center’s Kaplan believes, that’s just fine.

“Anytime you have more buyers in the creative marketplace, the consumer benefits,” he said. “The more places an author can go to sell their book, the better. The overarching problem with consolidation in the publishing business has always been that when there are too few buyers, diversity of viewpoint and expression declines and everyone--readers, writers and publishers--is hurt.

Work in Progress

Ed Cray has written biographies of George C. Marshall, “General of the Army,” and Earl Warren, “Chief Justice”:

“After five years, I am completing a biography of Woody Guthrie, which will contain a great deal of material that was not available when Joe Klein published his bio in 1980. This has been the most difficult of the three biographies I’ve written. In part, that’s because Guthrie was so complex a personality and, in part, because he fabricated so much of his personal history. Certainly, the ‘hobo’ Guthrie was far more sophisticated and well-read than he ever let on to any but a handful of his closest associates.

“Based on newly opened archives and more than 100 interviews with people who knew Guthrie, this book makes clear his very strong connections with Los Angeles. It was in Los Angeles that he got his start as a radio entertainer and as a songwriter. He lived in Glendale and Silver Lake from 1937 to 1940 and boasted he knew every mountain ravine from Pasadena to Griffith Park. When the first symptoms of Huntington’s disease drove him out of New York City, he fled to Topanga Canyon, where he bought land with the idea that was where he’d retire.”