Media Salesmanship or Snake Oil?
Nothing about the current fervor to fight corporate sleaze is more amusing than the notion that big media and entertainment will obey the Leahy Amendment. Attached to the Senate's accounting-reform bill and sponsored by Vermont Democrat Patrick Leahy, the provision establishes a new 10-year felony for any attempt to defraud shareholders through "scheme or artifice." Now, those are vague terms -- too murky, probably, for most business executives to wrap their minds around. But to a media magnate, they amount to a philosophy of management.
This is, after all, an industry in which perception has always mattered more than reality, in which the salesmanship has been more important than the contents of the snake oil, and which has produced a string of polished con artists, from Steve Ross to Jerry Levin. Speaking of AOL/Time Warner, take the example of fall guy Bob Pittman. The real reason that the onetime MTV and Six Flags showman was shoved out as COO last week is because he saw the company's future ad-revenue glass as half full when, in fact, it was leaking buckets. (As opposed to onetime politician-lawyer-banker Dick Parsons, still in place as CEO for seeing the glass as half-empty and admitting "I'm desperately in need of a strategy" to a group of Ivy League business students trying to figure out how to fix the media giant as its stock price was tanking in April.)
Yes, Pittman was in denial. But there has never been a successful mogul who wasn't. It's a job requirement. Remove the hucksterism from big media and entertainment, and what's left is celluloid and videotape. It's unimaginable what could happen if optimism were reinterpreted as artifice and the pitchmen ended up being punished.
But we can dream, can't we?
A reverie of platinum handcuffs, say, for that rich idiot Edgar Bronfman Jr., who just this January patted himself on the back for steering his patriarch's liquor empire into the entertainment business, then handing the reins of Seagram's/Universal to a French water-and-sewer company. "At the end of the day," he boasted to Forbes magazine, "I had to do what was right for shareholders." Yeah, they gave Edgar a big high-five when the stock dropped from $60.28 to $13.40 after Vivendi's Jean-Marie Messier messed up big time. Now it may be the authorities who'll decide whether Vivendi accounting, which shrunk Seagram's $6 billion mega-empire to a pittance, was just engaged in a bit of family fun, or in some real finagling.
Or a dream of a Pirates of the Caribbeanthemed jail for Disney chairman and CEO Michael Eisner and his henchman, president and COO Bob Iger, for slowly but surely bringing the Magic Kingdom's stock price back down to its post9/11 low. The twosome keep promising they'll fix foundering ABC prime time and California Adventure, but don't know how. They pretend to the press that losing the Pooh lawsuit isn't possible; then, after 11 years of litigation, Disney informed shareholders -- on May 15, in a quarterly 10Q filing with the SEC -- that an adverse judgment could mean damages totaling "as much as several hundred million dollars" or worse. And even though recently departed executive Steve Bornstein was Disney's designated fall guy for the dumped Go.com, Eisner should be on the hot seat for buying forerunner Infoseek in the first place, at the height of the Internet boom, â hyping how the portal was the Second Coming for Mickey and friends, then taking a second-quarter charge of $790 million in 2001.
Or of an exile to a Survivor deserted island filled with angry shareholders for Viacom No. 1 Sumner Redstone and No. 2 Mel Karmazin, who took home obscene $15 million paychecks in 2001 even though the company's stock price kept (and still is) falling. True, a special hell should be reserved for these head honchos, who hurled barbs at those mere mortals having the temerity to confront the duo at Viacom's May 23 stockholders' meeting. But Redstone especially, being the prince of self-promotion, should have to pay the biggest price, for destabilizing Viacom stock on Wall Street by privately badmouthing Karmazin to both The New York Times and The Wall Street Journal last January and once again roiling the successorship issue at Viacom.
Or of a cellmate like American Idol's Simon Cowell for Rupert Murdoch, because of his embrace of nepotism after his recent disclosure to the Financial Times that he will one day place his $64 billion News Corp. in the still questionably capable hands of his two sons -- at a time when eldest Lachlan, 30, is about to take the stand in an Australian courtroom to explain his role investing $320 million of the corporation's money in a now-collapsed telco. (Full disclosure: I am in a legal dispute with Disney and News Corp.)
So much blundering, so little bluntness. We still don't know what "restatements" the media conglomerates will have to make in their accounting before the SEC-ordered August 14 deadline, when every chief executive officer and chief financial officer at the nation's biggest companies has to swear under oath, in writing, that the numbers in their corporate financial reports are correct. Let the perp walk start here.