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VIEWPOINTS : IS BIGGER BETTER IN THE MEDIA BUSINESS? : Some Experts Question the Wisdom of Mega-Merger Trend

June 25, 1989

M any big U.S. media companies, acting on the assumption that only giant communications concerns will prosper in coming years amid growing international competition, have eagerly pursued acquisitions. Time Inc.'s $14-billion offer for Warner Communications--an effort being contested by acquisition-minded Paramount Communications--is only the latest of the big media merger proposals. But is bigger really better in the media business? Times researcher Melanie Pickett asked some experts for their opinions, and excerpts of their comments follow:

Katharine Graham, chairman and chief executive of the Washington Post Co., excerpted from a speech given to the San Francisco Advertising Club:

"I believe the importance of size . . . is over-inflated. . . . Labor-intensive industries, such as communications, are almost always disadvantaged to some degree as they get larger. Still, just because being big doesn't necessarily make sense, it doesn't mean that companies are not going to get even larger. The competitive urge to grow has never been stronger. The adrenaline is really pumping. Human nature has taken over: People want to be big because they want to be big. No evidence has ever surfaced that the dinosaurs, even on the brink of extinction, wanted to trade places with the cockroaches, who would endure for a billion years.

"I believe in rigorous management and providing high value to shareholders. But I don't believe it should be--or has to be--at the expense of fulfilling our greater First Amendment responsibilities. . . . If these global companies want to take maximum advantage of their distribution channels, they may focus more on entertainment at the expense of news. News may even become more entertainment oriented. . . . I'm concerned that, as media companies grow in size, the desire to make money, achieve power and gratify ego will ultimately take precedence over the desire to produce a quality product and contribute to the public good, especially if the owners are professional managers far away. . . . I'm not against global companies. To some extent we're one, too. But I don't believe you have to be a global Goliath to survive in this age . . . no popular magazine, no network television affiliate, no dominant daily newspaper, nor even a local cable system has failed because it was too small."

Ira Deutchman, a movie producer and director of Independent Features Project West, an association that promotes the interests of smaller film makers:

"There's a number of different ways of attacking the movie business. Unfortunately, it has always been an expensive hobby. When the average price of movies is hitting the $15-million mark, and, in fact, many many movies are a lot more expensive than that, then being able to be in the position to take those kinds risks on a day-in, day-out basis puts you in a position where you can't rise or fall on a single film. That's the reason so many independents are going under. They've been taking these enormous risks without having the kind of cash flow to draw upon to be able to absorb losses in those areas. Therefore, the kind of consolidation that's represented by all the new mergers and creating all these giant companies is, in point of fact, very good risk management. To be able to afford to be in this business for the long haul, that is absolutely necessary.

"Over time, it would seem to me that these large conglomerates are going to want to increase the number of films they make as well as their shots at $100-million films. And that's when it's possible that the right kind of management team at one of these conglomerates could create an atmosphere that could be incredibly good for independent film makers. . . . Independents have been good at finding good niche markets and I would assume those will start to emerge."

Victor Navasky, editor of The Nation magazine:

"The bigger they are, the harder they fall. They're just getting in more and more trouble, as illustrated by the tragic comedy that's going on right now. It's a combination of good, old-fashioned American greed and losing sight of why they went into the media business in the first place. Henry Luce didn't go into that business to acquire other businesses. He went into it because he thought he had a way of putting out a magazine that could tell the truth in short form every week. Of course, it was his version of the truth. The people who came after lost sight of all that.

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