Among giants, gorilla warfare cools

FROM WEEKLY
“Congloms Converge,” Variety headlined its coverage of its convivial confab in Gotham for investor and media types last week.

Besides that buzzword “convergence,” cooperation and consolidation were also watchwords as the media chieftains confronted one another on the various Front Row panels.

Rupert Murdoch’s long-running courtship of DirecTV was on everyone’s lips, with all of his fellow moguls — with the singular exception of Barry Diller — fervently hoping the deal won’t go through, while Murdoch himself expressed an equally ardent wish that it would, at least in his lifetime.

On March 1, two days after the conference, it seemed that the naysayers may get their wish: Speculation mounted on Wall Street that the merger talks are stalled, perhaps permanently.

‘Iceberg’ watch

At the Feb. 27 Front Row, the other constant topic of conversation was what Sony’s Howard Stringer termed “the iceberg in our shipping lane” — AOL Time Warner, which was conspicuous by its absence. (Chief operating officer Bob Pittman was given an invite, but elected to give the event a pass.)

Most references to this newly merged titan were tinged with jealousy. That merger remains the paradigm for the marriage of platform and content, despite Murdoch’s professed lack of belief in its potential synergies.

Given the mainly financial community audience, most panelists prudently focused on the various ways in which technology is adding ever more distribution windows for that content.

Analysts love hearing about such paraphernalia as hand-held devices, set-top boxes and satellite dishes. They have a much lower tolerance for any discussion of the admittedly messy process by which films and TV programs get made.

Yet it is those creative products that cause consumers to fill their homes, offices and cars with all manner of delivery systems, and it is the continuing ability to produce a steady stream of enjoyable, or at least watchable, programming that is the foundation of every diversified media company. And when that programming proves to have some lasting value, something called a library results.

Convergence divergence

When it comes to “convergence,” each speaker seemed to have a somewhat different model in mind.

For Sony, the goal is some sort of seamless integration of software and hardware, which Stringer was honest enough to admit might not occur before he reached Sony’s mandatory retirement age.

For Barry Diller, whose USA Networks has its origins in home shopping, it takes the rather bizarre form of a marriage between software and ready-to-wear. (Perhaps his own recent marriage to one of the reigning divas of dressmaking has influenced his corporate strategy.) I hope he won’t mind my pointing out that most of the founders of the film industry went into showbiz in order to get out of the schmatte business.

Meanwhile, Jean-Marie Messier, Barry Diller’s corporate stepfather, kicked off the conference by, happily, focusing on the content Vivendi Universal offers. Claiming that he is relatively indifferent to the means by which that content is delivered, he modestly staked out “music, movies, games, education and sports” as areas in which his company is seeking “worldwide leadership.”

Well, he’s already got it in music, and Universal is also clearly on a roll in its film activities. I’ll take his word that the rest will follow. For now, chapeau to him for putting the emphasis in the right place.

Mel Karmazin, Viacom’s president and COO, took a markedly different approach. He expressed the hope that the FCC would relax its 35% cap on how big any single O&O can get.

Well, forgive me, Mel, but if the FCC under Bush and Powell proves any more accommodating than it was under Clinton and Kennard, the very concept of competition in broadcasting will disappear. Yeah, yeah, I know that the networks and their affils face fractionating audiences and declining shares — of market, I mean.

However, as Credit Suisse First Boston’s media expert Laura Martin pointed out, this inconvenient fact hasn’t kept the broadcasters from steadily raising blurb rates. (Laura was far too polite to point out that it has also shown no dampening effect on industry executive compensation.)

Market monolith

Karmazin’s mindset was perhaps best revealed by his airy dismissal of those cranks who cry “excessive consolidation.” He helpfully pointed out that none of the showbiz congloms has anywhere near the market share enjoyed by Microsoft.

Last I noticed, no governmental body had granted Bill Gates licenses to control key portions of the public airwaves. Indeed, a governmental body — a federal court — had convicted Microsoft of numerous anti-trust violations, making it perhaps not the ideal analogy.

Merging with your competitors or acquiring control of a method of distribution may be all the rage. But could I suggest an alternative strategy: produce a superior product and use it to build your market share.

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