Path is Clear

Letter to the Editor

To the Editor:

The smartest move in the bid for Vivendi’s entertainment assets would be for Kirk Krikorian of MGM to partner up with Clear Channel Communications for an all-inclusive bid including Universal Music.

Although executives in Paris insist that U music is officially off the table, I think if MGM and Clear Channel came back in the second round with an overall bid for the entire package, political pressures from French stock holders might be able to force the sale. MGM and Clear Channel could then divide up the assets as they saw fit.

Think about it: MGM is the only “independent” corporate player in a position to forge such a partnership. General Electric’s corporate culture just doesn’t work that way and they don’t want the whole package (and they’re a stock offer anyway), and Viacom is a direct competitor of Clear Channel and reportedly only wants U’s cable and TV production assets.

Edgar Bronfman and John Malone don’t have their head in the game that way, nor do I think the hodge-podge of independent financing they’ve put together would appeal to Clear Channel. MGM needs the synergy to stay competitive, and acquiring U’s TV production, film and cable outlets would be a major coup. The theme parks are also a nice little acquisition.

Clear Channel already controls the airwaves and — through subsid SFX — most of the major concert touring venues in the U.S. What better piece of the pie to add than the huge size (and artist roster) of U music?

Doesn’t it make good financial sense to fold a large label into the world’s biggest radio and touring company, and use those assets in synergistic, creative ways together to better control the industry and get more revenue out of the process — particularly since the expanding file-sharing community is rendering the traditional solo revenue stream of album sales more and more irrelevant?

The reductions in tax liabilities alone by combining all of those assets would be substantial (all revenues from an artist’s album sales, radio play and concert touring would all flow into Clear Channel). And Clear Channel has a good balance sheet to support such a move.

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