Megamergers force giants to forge broader alliances

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NEW YORK — Consolidation was on the minds of panelists at the Front Row as Sony’s Howard Stringer, USA Nets’ Barry Diller and Viacom’s Mel Karmazin discussed the new biz behemoths. Cooperation was also on the table as the trio unveiled new attitudes toward teamwork……

At “Truth or Dare: Candid Views on the Entertainment Industry,” moderated by Variety VP/editor-in-chief Peter Bart, the execs Tuesday prayed to the merger gods that Rupert Murdoch doesn’t end up buying DirecTV and focused ton their own companies and the strategies of others in today’s rapidly evolving media landscape.

Viacom prexy/chief operating officer Karmazin said the conglom needs to be more international — 85% of its revenues come from the U.S. USA Networks CEO Diller is waiting for the day electronic retailing, interactivity and entertainment collide. And Sony Corp. of America chairman-CEO Stringer said the Japanese giant is still figuring out ways to meld its hardware and software. “I can feel it happening. It’s only a question of whether it beats me into retirement or not,” Stringer said.

Sony, he added, will focus on “convergence” rather than be “distracted by multiple acquisitions” that have seen his major competitors grow rapidly in size and scale.

For Karmazin, bigger is better — as long as it’s Viacom. “I’m sort of not looking forward to the morning when I wake up and see that deal (News Corp.-DirecTV) has happened. My hope is that it gets derailed.”

The AOL-Time Warner deal was no picnic for rivals either — that one ruined Karmazin’s breakfast. It hasn’t changed the way Viacom does business, he said; however, it gives Time Warner a solid Internet strategy, which Viacom — and others — haven’t been developing as aggressively.

AOL Time Warner “is the 800-pound gorilla. It’s the iceberg in our shipping lane. You’ve got to figure out a way to deal with AOL. You can’t go around it,” said Stringer.

Karmazin sees another spate of deals on the way if, as expected, regulators ease up one rule banning cross-ownership of TV stations and newspapers in the same market and another one that forbids one company from owning cable systems and TV stations in the same market.

If the latter reg falls by the wayside, he pointed out, half jokingly, there would be nothing stopping Viacom from buying AOL Time Warner.

The FCC is also likely to boost the current 35% cap on national television ownership, ushering in a wave of station deals. Karmazin dismissed complaints about consolidation, noting that not one of the big showbiz congloms has the dominance that Microsoft does in its markets.

As companies continue to combine, technology — such as broadband, digital and video on demand — moves ahead, but always more slowly than expected. “Don’t forget, color TV took 10 years. Everything takes 10 years. People say it will take five, and optimists say three,” Stringer noted, adding that he thought broadband was on the way in 1995.

USA Networks, while smaller in scope than most major media conglomerates, is still a relatively young company, Diller noted, that has grown annual revenue from $41 million to $5 billion in five years.

“Our take on the world is that direct selling and entertainment and interactivity” will all join forces to make USA a major player over the next couple of years. Diller, for one, sees a plus in News Corp.’s hookup with DirecTV since that would likely hasten the deployment of digital set-top boxes and push forward the brand of interactivity that the parent of Home Shopping Network and a host of other assets already does so well.

Diller also seconded comments made by Vivendi Universal chair Jean-Marie Messier earlier in the day that the two execs, whose companies are intertwined, share a similar world view.

“Messier said his growth is dependent on USA’s growth … with Seagram, there were different agendas and there was some conflict,” Diller acknowledged. But with Vivendi, he said, a major USA shareholder, the agendas are fully aligned. That means more opportunity to do big deals, he said, but stressed that USA isn’t holding its breath for that “transforming acquisition” (read: NBC) that Wall Street and the entertainment industry perpetually anticipate.

As Sony dominates our TV sets and PlayStations, Viacom pipes in programming for its outlets from Nickelodeon to MTV to CBS, Diller speeds home shoppers’ packages and concert tickets anywhere, anytime, AOL dominates Internet and Murdoch rings the globe with satellites, one thing all these companies agree upon is that they have to deal with each other more and more.

Viacom and News Corp.’s Fox are currently discussing a four- or five-year station affiliation deal for Viacom’s UPN network as well as a possible broader partnership that would mark the rare instant in which two major entertainment giants shared decision-making or programming on one TV network.

“I have to deal with Mel. I have to sell him programming. The same is true with AOL Time Warner. We used to sit around and take pot shots at each other at these conferences. You can’t do that anymore,” Stringer said.

“Yes, you can,” insisted Diller.

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