Authors’ Protest of Amazon Shows That Bigger Isn’t Always Better in Business

Corporations and Creativity Dont Mix
Lily Padula for Variety

When some 900 authors last week delivered a call to arms against Internet giant Amazon, the subtext of their message went beyond a dispute about rights and numbers. It also signaled a growing discomfort over control of intellectual property in the hands of fewer and fewer people.

I am old enough to remember a time when books were published by publishers and movies were made by studios (that’s all they did) and here’s the dirty little secret: The product was better, and so were the margins.

Today, the corporate giants that own these industries complain that the movie business is too volatile, books and magazines too cyclical, TV series too risky and newspapers too depressed — indeed the whole damn creative community is too demanding and difficult to deal with.

All of which raises this question: What are these multinationals doing in these businesses to begin with? Why should the broad landscape of intellectual property be controlled by entities obsessed with share value, not artistic value?

The upshot is that writers are at war with their publishers and distributors, newspapers are being spun off into oblivion, and the movie studios are scheduling, at last count, some 30 comicbook superhero movies, effectively abandoning other genres. None of us are naive enough to believe intellectual property should be intellectual, but aren’t these companies getting carried away with their obsession to be risk averse?

I point this out only because the race for consolidation continues to accelerate, burying movies, magazines, books and music under still more layers of corporate number-crunchers. Wall Street has a vested interest in making this happen.

The Wall Street Journal last week reported the despair and frustration felt by arbitragers and hedge funds when megadeals like Fox-Time Warner or Sprint and T-Mobile were abandoned. The bankers’ stake in bundling things together is stronger than creatives’ stake in keeping things separate.

At present, six companies control 90% of the media consumed by Americans, compared with 50 companies some 30 years ago. A Fox-Warners combination would have resulted in a 40% market share for the surviving studio.

The writers’ revolt against Amazon, emblazoned in a full page ad in the New York Times and signed by the likes of Stephen King and John Grisham, demanded that Amazon stop using writers as hostages in its negotiations for a better deal with huge publishing house Hachette.

Amazon doesn’t covet a war with creatives; Jeff Bezos wants to create intellectual property as well as distribute it. He even bought the Washington Post at a time when companies like Gannett and Time Warner were spinning off newspapers. And when accused of building an oligopoly, he points out that, if the Comcast-Time Warner deal is approved, Brian Roberts’ company will own up to 40% of the nation’s broadband Internet connections (and as high as 60%, depending on how broadband is defined).

Even with the cancellation (or postponement) of the Fox-Time Warner takeover, the pressure across the corporate landscape is to pump up profits and share prices, irrespective of the potential damage. “Time Warner management must now sell investors on its growth plans to show why it ignored Fox’s interest,” declared Michael Nathanson of Moffett Nathanson Research. Hence, even HBO, whose revenues jumped 17% to $1.4 billion last year, must now scratch around for new revenue sources, and Warner Bros., while famously consistent, cannot afford another fall at the box office, as it experienced this summer.

In corporate America, bigger is always better, at least in the world of arbitragers and hedge fund mavens.