Bart: Like 7th grade boys staring in the mirror, corporate CEOs these days keep asking themselves, “Am I big enough?” What scares them is the prospect of becoming a takeover target, and there’s been a rush of takeover talk lately —Rupert Murdoch’s bid for Time Warner being the most dramatic. Size means safety in the corporate universe and Time Warner became vulnerable by ridding itself of Time Inc., AOL and Time Warner Cable — the latter becoming a target for Comcast. With giants like Google, Apple and Amazon looming, CEOs are scared they can’t measure up, but the folks who should really be frightened are the creatives and their audiences. Bigness means giant fees for bankers and profits for shareholders, but the impact of the monoliths is easy to read — a universe of corporate plodding, tentpoles and sequels.
Fleming: A friend who wasn’t born in this country recently told me about a business venture he was spearheading. He said it sounds corny, but he was excited about being part of the American dream. Building something, and creating jobs and putting people to work. The American dream seems to mean something else on Wall Street and in the corporate stratosphere. Why build new businesses when it is easier to pair giant existing businesses, and then deliver a blizzard of pink slips to eliminate the overlap? Microsoft just announced plans to cut 18,000 jobs, to consolidate its acquisition of Nokia assets. I don’t see any way that a Fox and Time Warner marriage strengthens Hollywood or creates more quality movie and TV content, but it’s inevitable more people will be unemployed. Sony responded to a lousy summer 2013 by laying off all these support people—none of whom made big money, who lived paycheck to paycheck and worked there as long as 30 years. These were easy sacrifices to placate the Daniel Loebs of the world. Maybe my view is naïve and idealistic, but I find it disturbing, this proposed merger and all the marriages that will surely follow. Does anything good happen with these mergers, except creating more fiscal pressure on executives to shave costs, and further marginalize a creative business?
Bart: It’s easy to paint corporations as ‘heavies’ but let’s get real: There are often advantages to having rich corporate parents. In my early days at Paramount I was alarmed by the run of losses — the biggest losers were movies that had been personally green lit by Charles Bluhdorn, the conglomerator who then owned Paramount. When I stated my concern to Bluhdorn, he became apoplectic. “You studio people are too worried about this stuff,” he shouted. ‘I can make it disappear.” The next week he acquired a company that, while well known, had become a mere corporate shell. Ownership of Paramount’s worst movies were promptly transferred to this company and were off Paramount’s books. The studio could basically start clean. Mind you, the SEC didn’t approve of Bluhdorn’s tactics, but Big Daddy had made his point.
Fleming: These bankers and Wall Street guys are the same ones who thought it was a good idea to bundle shaky mortgages; their greed collapsed the economy. I have been doing this long enough to recall when my TV colleagues at Daily Variety were obsessed with Fin-Syn, the Financial Interest And Syndication Rules designed to prevent networks from owning the programs they broadcast. Whether it’s talent agencies or networks, nobody’s watching the store anymore. Fox just consolidated its studio and network operations, and nobody batted an eye. It’s all but accepted practice that at networks, shows produced by the home studio take priority. This diminishes competition. Thankfully, there are at least 53 outlets for programming for creatives to take their shows. Amazon was a gentle giant as it cornered the market on book distribution. Brick-and-mortar stores like Borders folded, and look at the way Amazon thugs it up with Hachette and its imprints Grand Central, Hyperion and Little Brown. Fighting over e-book pricing, Amazon imposed artificial shipping delays on Hachette product, the way New Jersey governor Chris Christie allegedly shut down access lanes to the GW Bridge because the Fort Lee mayor declined to endorse the guv in his re-election campaign. These big guys always say don’t worry, things will be okay, until they get their hands around your throat. Then they squeeze until the government tells them to stop.
Bart: I don’t want to sound cynical about corporate politics, but it seems fair to ask this dumb question: Who truly benefits from giant acquisitions? The mega deals serve bankers well; their fees are enormous. Corporate CEOs benefit: Jeffrey Bewkes’ bonus may reach $90 million thanks to the performance of Time Warner shares (Bewkes likes to sell more than buy). Giant deals serve Rupert Murdoch well, but at age 83 he counts his largesse in terms of power, not dollars. In the end, the ultimate generator of capital is content, but the creators of content don’t benefit from mega deals. The fate of New Line serves as an apt metaphor. New Line once was an indie company with a true voice. Now, several years post its Warner Bros. takeover, it’s just a small cog in a big studio — one that focuses mainly on raunchy comedy. The entity that once gave us Se7en now delivers Tammy.
Fleming: The Fox-Time Warner news, and the expectation this will lead to other mega-mergers, also got me thinking about Bob Shaye and Michael Lynne’s New Line, and about Ted Turner. We’ve seen with DreamWorks how hard it is to build a formidable studio from the ground up, but I remember when Ted Turner practically leveraged himself into the ground to get broadcast rights to the MGM library. His vision paid off; he launched successful movie channels, and the 24-hour news channel in CNN and turned Atlanta into a media hub. This guy built stuff. Where is that spirit today? I’m sorry, but siphoning fees for lawyers and bankers isn’t building anything tangible. Warner Bros, with cash cow HBO and so many other businesses, is by no means a distressed asset in need of rescue. It is one of the healthiest businesses in Hollywood. Last time the same guys messed with a no-brainer merger, they flushed the value of their stock options down the AOL toilet.