Jihad vs. McWorld

by Benjamin Barber

  The process that leads to conglomeration seems natural enough: carriers want to control and profit from what they carry; cultural creators want to control and profit from the entities (stations and networks) that carry what they create; software purveyors want to control and profit from the hardware on which their wares are purveyed. Everyone wants a piece of the creative core, where the “content” that drives everything else is manufactured. Why be a pipe for someone else’s music, when you can own composer and composition alike? But the consequences are to obliterate the conceptual distinctions by which the key elements of this section were sorted out—films, television, books, and theme parks—as government looks passively on. “The idea,” reports Newsweek, “is to get a piece of every pie in the business. Sony now brings you Mariah Carey on your Sony Walkman, Wheel of Fortune on your Trinitron and Sleepless in Seattle in its Loews theaters with Sony sound systems.”3 Or, as Alex J. Mandl (chief executive officer of AT&T’s Communications Services Group) says in explaining AT&T’s $12.6 billion projected buyout of McCaw Cellular Communications Inc. (it didn’t quite come to pass), “we’d like to see the AT&T brand on a national basis. We can offer end-to-end service.”4 The key to it all remains the informational/creative core, the software. In the terse words of Sumner Redstone, “software is the name of the game.”5

  The vertical integration of media is a relatively new phenomenon. Bagdikian’s careful record-keeping suggests that most newspapers and magazines remained independent from the end of World War II into the 1970s. The early mergers occurred within sectors, creating newspaper empires, book conglomerates, and movie studio mergers—an unwelcome intrusion of monopoly but one that respected the boundaries separating different kinds of information and entertainment and that studiously avoided the durable-goods production domains on which spectators and consumers depended. As recently as the 1970s there were hundreds of independent newspaper, magazine, and book publishers each with their own print niche, scores of independent film production studios (and viable film industries in several dozen countries around the world), three big networks along with a large number of independent stations, one nationwide phone company responsible for universal phone service and nothing else, and dozens of hardware companies that produced the durable goods through which the public received the competing soft goods of all the entertainment and information producers—TVs, phone wire, cassette recorders, tuners, computers, and so on.

  Yet at the beginning of the eighties, partly in response to the more general merger mania but primarily as a result of ambitious and visionary media empire builders like Robert Maxwell and Rupert Murdoch—their vision was possessive, their ambition absolute—boundaries of every kind were crossed. Mimicking Gulf & Western’s precedent-setting takeover of Paramount back in 1966 for $125 million, Murdoch’s News Corporation, Matsushita, and Sony targeted entertainment companies not simply as another vehicle of diversification but as a way into the ruling house of McWorld’s emerging civilization. By the middle of the 1990s relatively new companies like the Home Shopping Network, Viacom, and Blockbuster Video were engaged in rivalry and reciprocal takeovers and were positioning themselves as the dominant entertainment/selling conglomerates of the new millennium.

  This takeover mania began in the early 1980s, with quite literally hundreds of media mergers and buyouts, of which I have listed only a representative sample on the accompanying table of media mergers.

  While everyone chatters about synergy, the arrows all point one way: nearly all of the mergers targeted companies controlling creative product, without which neither the hardware manufacturers nor the delivery system owners had anything to show or deliver. Margo L. Vignola, a media analyst at Salomon Brothers, smartly noticed that it was a “paucity of creative talent and product available and an enormous amount of technology chasing it” that ultimately fueled the mania for acquisitions and mergers. Surveying the war between Viacom and QVC for Paramount, she concludes “companies like the regional Bells and cable providers are hobbled by the fact that they don’t have product, and a company that has very mixed results like Paramount becomes the jewel of Madonna. Everyone wants it.”6

  MEDIA MERGERS

  See for yourself: although many of the deals are mergers rather than takeovers, in almost every case the target is a company that controls creative product for McWorld—a movie studio, a film library, a video distributor, or a broadcast network or cable company. And these represent only a select number of the largest deals. Each of the companies in play already was involved in smaller acquisitions and mergers, which accounts for the variety of entities owned by what is technically a movie studio like Paramount. Paramount is a veritable festival of McWorld’s goods and products. Back in 1989 when it tried to prevent Time’s merger with Warner Communications via a $10.7 billion hostile bid for Time, it already had added to its extensive film and video properties the publisher Simon & Schuster (itself a publishing conglomerate including Prentice-Hall), as well as Madison Square Garden along with the basketball and hockey teams that play there (the Knicks and Rangers now spun off by new owner Viacom to still another infotainment company, Chuck Dolan’s Cablevision Systems, with financial backing from ITT). Time, Inc., on which Paramount was mounting an unsuccessful raid, meanwhile controlled along with its traditional magazines (including Life, People, Sports Illustrated, Fortune, and Money), the Home Box Office cable network, Cinemax, the American Television and Communication Corporation cable operating company, Time-Life Books, and Little, Brown and Company. By the time Paramount was in play at the end of 1993, by then itself the target of a bidding battle between friendly (and ultimately victorious) suitor Viacom and unfriendly raider QVC, its properties also included the Trans-Lux Theater Corporation, USA network, Famous Music Corporation, the Miss Universe organization, and Paramount Theme Parks. No conglomerate is complete without its signature theme parks.

  In the midst of its trials with Viacom and QVC, Paramount stopped to acquire still another major publisher—Macmillan Publishing Co., Inc.—and to contemplate a deal with Chris-Craft to start a fifth television network (Fox’s being the fourth). Paramount’s holdings are mirrored by the properties owned by its half-score of competitors, including Time Warner, Sony-Columbia, Matsushita-MCA, Murdoch’s News Corporation, S. I. Newhouse’s Advance Publications/Newhouse Broadcasting, and Capital Cities/ABC. Throw in the remaining independents (MGM/United Artists under the temporary financial tutelage of Crédit Lyonnais, and Disney, the last of the true independents) along with the seven regional Bells and their new cable and foreign acquisitions who are pursuing soft-product production companies themselves, and a handful of strictly publishing giants like Bertelsmann (which recently acquired Bantam Books and RCA Records along with a New York City skyscraper), Dow Jones and the New York Times Company, as well as computer chip and software powers like Intel and Microsoft, and there are still only about two dozen companies dominating nearly every pixel of the vast infotainment telesector. We will talk a great deal about free markets and their virtues and vices in the last part of the book, but there is not much of a free market in the infotainment telesector. The absence of government regulation has not and apparently will not produce anything like true competition or real diversity of product and ownership. Here, as in so many other sectors, deregulation in the name of competition has meant conglomeration and monopoly in practice.

  The complicated, interlocking corporate structures of these companies cannot eclipse the powerful light cast by the handful of luminous personalities who have followed Cecil B. DeMille and Sam Goldwyn up Hollywood’s Mt. Olympus. Michael Eisner, Ted Turner, Rupert Murdoch, Sumner Redstone, Barry Diller, Martin S. Davis, David Geffen, George Lucas, Michael Ovitz, Bill Gates, Jeffrey Katzenberg, H. Wayne Huizenga, John C. Malone, and Steven Spielberg currently stand at the summit, far above the uncertain corporate tides. They are (changing metaphors) sharks in a Gulf (& Western, now Paramount) Stream who dream of a world they alone imagine and image.7 The alliances shift, the tid
es sweep in, but the players do not change: disappointed by Eisner, Katzenberg has joined Geffen and Spielberg; having digested Paramount, Redstone looks to dine with Huizenga; maltreated by Davis, Diller joins with Murdoch, only to cut himself loose and eventually go after Davis’s Paramount.

  The story of this last figure, QVC’s Barry Diller, can stand as a symbol of the new media monopolies’ predatory politics, which, though they may serve shareholders’ interests in the short run (apparently the only public interest for which the courts have any concern), serve neither competition, nor choice, nor creativity, nor the public good in the short or long term. Barry Diller has been a force in Hollywood for many years, and in the early eighties, after an apprenticeship in film production, ended up at Paramount, quickly rising to a production post where he was a mentor to young producers like Scott Rudin. Tensions with Martin Davis, head of Paramount then and now, led to Diller’s ouster. Diller went on to Fox where he established the Fox Television Network and prospered until Fox was purchased by Rupert Murdoch in 1992. Though invited to stay, Diller wanted a financial stake in Fox that Murdoch would not give him, so he moved on and into what many observers thought would be a career-ending cul de sac—QVC, the home-shopping network. QVC had stumbled on to one of McWorld’s simplest and profoundest truths earlier than most players: television is consumption and commercials constitute its most popular programming. Let consumers buy what they watch, and you have united television and mall-dom—McWorld’s two most powerful domains. As MTV and the newer and highly popular and profitable half-hour and one-hour infomercials demonstrate, the public scarcely can tell where commercial programming ends and programmed commercials begin. And, to the extent they can tell the difference, viewers may actually prefer the latter to the former. For Diller, QVC not only embodied the corporate philosophy of the bottom line that was driving mergers, it gave him a platform from which to create his own empire. When Sumner Redstone made a friendly offer to buy Paramount in the summer of 1993, Barry Diller saw an opportunity to parlay his emblematic company into genuine Hollyworld power and at the same time to even accounts with Martin Davis, his earlier nemesis at Paramount. Personal ambition enhanced by communications synergy yielded a still higher synergy that, with the help of court decisions critical of Paramount’s favoritism toward Viacom, nearly enabled Barry Diller to complete the unfriendly deal that would have let him annex the last major independent studio save Disney.

  In Hollywood, where no man is an island and every takeover demands at least a corporate archipelago, Diller had help. Viacom’s Redstone was lining up financial support to the tune of $600 million from Blockbuster Video under H. Wayne Huizenga (with whom he eventually merged and who was already in control of Republic Pictures and Spelling Entertainment as well as three Miami sports franchises); and $1.2 billion from NYNEX, which had just struck another synergistic deal with the Tomem Corporation in Japan to develop cable and interactive television there—the Baby Bells were looking for product to pump through their telephone wires and cellular systems. So Diller called on Cox Enterprises and S. I. Newhouse’s Advance Publications (which controls twenty-six newspapers, a cable system, and Random House, Inc., inter alia) for an initial pledge of $500 million each. Diller also was moved, if a little reluctantly, to rely on John C. Malone, one of the richest men in America and the acknowledged “King of Cable,” a controlling force in the country’s largest cable system, Tele-Communications (itself later involved in a gargantuan plan to merge with Bell Atlantic for $33 billion, although that deal may fall through), and in Liberty Media, a television programmer that owns Black Entertainment Television and the Family Channel and is itself a 22.5 percent owner of QVC. With Time Warner (which has a 25 percent share), Malone’s Tele-Communications (with a 23 percent share) also controls the Turner Broadcasting System, which was forced to turn to outside funding when Turner’s own burgeoning acquisitions outran his pocketbook. QVC, as the hostile would-be buyer of Paramount, is itself then owned not only by Barry Diller himself (12.6 percent) but also by John C. Malone (via Malone’s Liberty Media, which owns 22.2 percent of QVC), and Brian Robert’s Comcast Cable, which owns another 12.5 percent. Time Warner, which with Malone’s Tele-Communications owns Turner Broadcasting, controls another 9 percent. Nothing is quite as it seems. Everybody owns a piece of somebody and nobody is really on the outside. As with the shopping malls, the outside is all on the inside.

  The details of the linkages and relationships are not the point here. A year from now, the mergers and alliances will have again shifted and some successful owners will be some other corporations’ prey. The players will not have changed, however, only the line score on their current game. There will still be a great many interlocking corporate structures shifting precariously on uncertain turf. Among the interstices of those structures just a few powerful individuals will continue to circulate—and only a tiny handful of them will be critical players on either the management or the creative side. Malone is a monied manager (“billionaire flunkey,” as he terms himself in his new role as Bell Atlantic vice chairman), Diller is a putative creative genius.8 In the bidding war between QVC and Viacom, Diller and Malone were bested and Sumner Redstone and Martin Davis have a temporary advantage. But in the process, the compass of players has narrowed again, and the interest that the public at large has in full access to the information highway, in maximum variety of fare and cultural diversity, and in real freedom of choice and expression, has in each case been further diminished.

  The victory of the dollar over every other conceivable interest, public or private, entails not just a crass commercialism in the place where quality information and diversified entertainment should be, but also a monopoly antipathetic to democratic society and free civilization, if not also to capitalism itself. That “creative geniuses” like Spielberg, Katzenberg, and Geffen join up gives their rivals nightmares, but will not necessarily enhance competition—or even creativity, though observers will once again celebrate synergy. Yet how can an Edgar Bronfman (Seagram) take on a Matsushita/MCA/ Universal Pictures without creating his own megamonopoly? Whatever else McWorld’s mergers may serve in the vital infotainment telesector, they serve neither culture nor liberty nor democracy.

  This lugubrious conclusion brings us back to the same questions raised in the previous section by the impact of economic markets generally in McWorld. Spectators can vote with their dollars as well as with their private viewing and purchasing prejudices, but who speaks in the Hollyworld domain of McWorld for the public? Is there a global equivalent of even so weak an institution as the F.C.C.? If theme parks are now talking about “privatizing government,” and taking over many of the functions of a state, is there a way for citizens to do the opposite and “publicize private markets,” compelling them to be accountable, and demanding from them at least some degree of public-interestedness? Which institutions can exert countervailing pressures on malls or theme parks or media monopolies in the name of quality or diversity or community?

  The nations that have tried a modest dose of regulation in recent years are regarded as mercantilist bogeys, and find themselves under duress from free traders and market zealots to let go—in the ancient phrase, laisser-faire. There are few democratic governments around today, certainly not in America or England, that display much taste for regulation or control in the name of the public weal. Governments have become the targets of alienated and disaffected clients and are not likely to be regarded as the instruments by which citizens can tame wild capitalism for some time. Markets have emerged triumphant from a war against the nation-state and the public interests they represent that has been waged at least since Adam Smith. Kenichi Ohmae of Japan, Herbert Henzler of West Germany, and Fred Gluck of the United States—three competitors in search of consensus—agreed back in 1990 on a “Declaration of Interdependence Toward the World in 2005.” Its paramount innovation was a call for the role of central governments to “change, so as to: allow individuals access to the best and cheapest goods a
nd services from anywhere in the world; help corporations provide stable and rewarding jobs anywhere in the world regardless of the corporation’s national identity; coordinate activities with other governments to minimize conflicts arising from narrow interest; avoid abrupt changes in economic and social fundamentals.”9 Abrupt changes like democratization? Narrow interest like national environmental or employment policies? The declaration calls on the nation-state to participate in its own liquidation. In many regions of the Western world, the state seems to be obliging, with the complicity of outraged women and men who clearly prefer their rights as clients and consumers to their responsibilities and freedoms as citizens.