Media Mogul Meltdown
The media wars are heating up. Not the competitive wars between media companies, but the wars within, as economic pressures and outside scrutiny lead to agitation and drops in morale and stock prices. A number of high-profile moguls who not long ago seemed to be strutting so securely on the world stage are on the defensive or in retreat:
-- Mighty Microsoft's Bill Gates has been suffering the indignity of defending himself in court, claiming one day that Windows may have to close because of unreasonable demand by state regulators, the next revealing that software modifications sought by a number of state governments to insure fairer competition is already available to well-heeled users. His testimony was smooth this time, but as the New York Times noted, "There was little evidence that Mr. Gates was prepared to take responsibility for his company's misdeeds."
-- In Atlanta, CNN anchors are openly discussing on-air the hit their stock options took when AOL Time Warner announced the largest ever U.S. quarterly net loss, $54.2 billion. Ironically, Time Warner's traditional media divisions, which may have suckered AOL into buying up or biting off more than it could chew, were doing well.
AOL's losses have been dismissed as mere "accounting" changes, a view that most of the media -- those who do not look too closely or do the math -- accept as proper.
In an analysis in the New York Post of the "black hole" at AOL Time Warner, Chris Byron says the merger has knocked off 60 percent of the value of the combined company's stock. He dissects "confusing books and records, 'fogged-up' financials, 'baffling trending schedules' that 'even its financial spokesmen can't explain.'"
Fully a quarter of company revenues are needed, he says, to pay for the company's overhead.
"In fact, the merger has wiped out more than $160 billion in market cap so another $100 billion can still be written off," he adds. (See New York Post.com for Monday, April 29)
-- In the UK, BBC closes its commercial division, ITN puts its digital channel on the block and Reuters announced news losses that sent its share price plummeting.
-- In Germany, Leo Kirsch is being reduced to a (highly paid) consultant to businesses he once led as his media empire is shredded.
-- In France, riot police are dispatched to contain demonstrators outside Vivendi Universal's annual meeting in Paris, following CEO Jean-Marie Messier's firing of popular Pierre Lescure, head of the Canal Plus TV division.
Reported the Guardian: "Staff from Canal Plus, the pay TV arm of Vivendi, confronted riot police outside the Paris meeting, protesting over the recent firing of their chief executive. 'Messier has to go. That's why we're here,' said shareholder Yves Viet, a businessman. Other protesters wore T-shirts reading 'Messier super liar,' and shareholders joined in chants of 'Messier resign.'"
Now it turns out fraud was practiced at the annual meeting and a criminal investigation has been opened. So far, this company has lost 70 percent of its stock value since its merger with Universal. A shareholder resolution give executives more stock options was defeated.
As it happens, I was with Messier at the World Economic Forum (WEF) just a few months back when Bono praised him as an enlightened media leader. I talked to him about his commitment to cultural diversity, which made him in my eyes at the time a mogul with a social conscience.
What gives? How is it possible that the masters of the universe who run these companies are now thought to be running them into the ground?
Again, the Guardian on Messier: "A year ago, Mr. Messier was held as the paradigm for the new corporate France. He had turned a sleepy utility into a world-class media group. The company ranked as the third most respected entertainment firm in the world in Forbes magazine earlier this year, ahead of the better-established Disney and Rupert Murdoch's News Corporation. Today Mr. Messier is variously described as a traitor, an egomaniac or, more dispassionately, simply running a company that has lost its way."
Which One is It?
Traitor? Egomaniac? A traitor? Strong words, true, but behind them are stronger feelings, explained the Wall Street Journal: "France has this idea that it still possesses something unique: its culture," says Philippe Moreau Defarges, a senior fellow at the French Institute for International Relations.
So Messier is a traitor because he puts commerce ahead of culture and capital before consciousness, becoming, in this view, a Trojan horse for globalization, which the French see as Americanization.
Again, the Journal gets it even if Messier didn't: "As Mr. Messier has sought to increasingly Americanize Vivendi Universal SA over the past year, Mr. Lescure, beloved by his employees and by French artists, [and fired by Messier, causing the turmoil], was viewed as the guarantor of Canal Plus's French identity. Canal Plus is the biggest investor in the French film industry and is a media icon in France. With Mr. Lescure gone, many in France now worry that French culture is under attack."
And so Messier was messed with. He is just one of the moguls who seems to be on the defensive. Of course, business factors are also involved in these disputes: questionable investments, poor strategies, overly optimistic acquisitions and the like. At the WEF, the Vivendi chief was an outspoken advocate of bigger is better, which means more mergers and accelerated consolidation.
Clearly, he hadn't expected a revolt in his own ranks, from employees, shareholders and the public at large. It came dressed up as a defense of French culture, not simply a disagreement over business practices, targeted against the only media exec who had been speaking out for cultural diversity.
In the world of big media, decisions are customarily made from the top down. Democratic input and dissent are rarely welcome. Nonetheless, most of these moguls do have constraints on them, dictated by market pressures that they and their companies have stoked.
By promising unrealistic earnings or making unreasonable cuts, they find themselves unable to hit the financial targets they projected. In order to do new deals and attract investors, they have to signal an ever upward trajectory of growth and profitability.
When the economy slumps and the ad market goes soft, they may resort to all sorts of accounting tricks and shady practices to put the best spin on their prospects. But when the day of reckoning comes, when it comes down to hard numbers rather than mushy PR and corporate hype, many of them can no longer duck and hide.
I don't know of any media executives convicted of shady dealings but we see where hard-core market capitalism gets us (Enron)- is that the same agenda we want driving our media?
Behind the scenes are the angry investors who press for the "value" (i.e., profitability) they have been promised, forcing upheavals in the boardrooms and raised eyebrows at the deals executives carve out for themselves. In many instances the companies are not viable in part because of the inflated salaries and perks executives carve out for themselves.
An Economic Policy Institute Study released last week showed that the gap between America's rich and poor is getting steadily wider. This is true in the media world as elsewhere, yet the subject rates only episodic coverage.
The last thing media execs want is a focus on how much money they make. That none of this is illegal does not mean that executive compensation, media business practices and market logic should not be scrutinized.
Behind all of this is a system that can be mean and totally irrational, controlled by big money and big egos, the manipulators who only see media in terms of money not mission, as a means of serving their bottom lines and business agendas, and not the public needs or the democratic foundation society nominally rests on.
Too Late For Conscience
What's fascinating is how some of these moguls realize, perhaps too late in their working lives, what the real problem is. Take Gerald Levin, outgoing chair of AOL Time Warner.
He was the genius who made the AOL Time Warner merger happen and is leaving the game with no personal financial concerns. (Actually, he is walking away, to write poetry, he says, with a million-dollar consulting deal as part of his parachute.) When he ruled the roost. I wrote about his excesses (see News Dissector July 5, 2000). Now, he is beginning to sound like me.
In his final days in his suite up on the 29th floor at 75 Rockefeller Plaza, as he was watching his company founder and the industry he led splinter, he offered some parting prophecies, almost like President Eisenhower's warning about the growing power and threat of the military industrial complex.
In a speech to the International Radio and Television Society, Levin spoke not about equities but ethics, not about dollars but diversity.
"'Morality,' said Levin, 'makes shareholders nervous. The notion of maximizing profits is and must remain the priority. But moral concerns are not a priority of business in the minds of some. I profoundly disagree,' he emphasized ... Levin believes that 'companies have a soul,' and must take responsibility for both their workers and for the world, as well as for their shareholders." Nowhere, he concluded, "is the moral need more pronounced than in the media world."
I read these words and ask why don't these guys ever take stands like this when they are still in charge with access to big bucks?
But at least he is saying it now.
Chairman Levin -- welcome to my world.
Danny Schechter, executive editor of MediaChannel.org, writes a daily weblog offering his assessment of current news and cultural developments.