Kurt Andersen Walter Isaacson Andrew Schwartzman Christopher Byron Herb Stein Jack Shafer
8:13 a.m. Wednesday 10/23/96
Why does Chris Byron want to change the subject to Time Warner's alleged overleverage? How much impact, pernicious or otherwise, does a big company's debt load have on its magazines' or TV channels' or Internet services' capacity to tell interesting truths?
And as to big companies' supposedly inevitable homogenizing, denaturing impact on cultural expression, I keep thinking of all the remarkable counterexamples: Beavis and Butthead is a Viacom series and movie, Trainspotting is from Disney, Time Warner puts on Def Comedy Jam. These don't seem to me like the anodyne products of free-speech-suppressing, white-bread entertainment monopolies. Indeed, in such instances it's probably corporate giantism itself that's allowing fringe-y cultural oddities into middle-American living rooms; surely the proprietors of smaller companies would tend to be more self-censoringly squeamish, and more vulnerable to pressure from the wholesomeness lobby.
8:56 a.m. Wednesday 10/23/96
We seem in this discussion to be facing the reverse of the old dilemma: We're not seeing the trees for the forest. There are a few facts that seem evident to me:
1. There are more sources of information, opinion, and ideas now than there ever have been, and they're growing daily. A dozen cable-news and business channels. Radio and TV and cable talk shows of every stripe. Webzines and online info services, bulletin boards and discussion groups. New magazines for every interest or bias. Kurt's point is the most provocative: The danger may be not a LACK of radical diversity in our information sources, but that we may be losing the bonds and common ground that come from sharing common information sources.
2. Big media companies may be a mess financially, but they cannot censor ideas these days or stifle creativity. That's nigh impossible in the digital age.
3. The two most recent examples of contempt for editorial integrity are, in my opinion, Rupert Murdoch and Henry Kravis. One runs a conglomerate, the other a small company. I have yet to see the correlation, inverse or otherwise, between size and editorial integrity.
9:23 a.m. Wednesday 10/23/96
Professor Stein's friend from Columbia looks across the expanse of Manhattan Island, perhaps even all the way to New Jersey, and says that there's content out there for those who want to find it. If they don't have Time, let them eat Charlie Rose.
That elitism assumes a level of cultural literacy we've never attained, and one which certainly will not infect Generation X-minus-1. Looking at it from the other side of the Hudson, effective democracy will depend on the diversity of voices made available by the handful of major information aggregator/distributors. Concentration of control of the mass-media segment limits the information readily available to those who don't have the time, interest, or ability to dig for more. If it's OK with you to leave the decision making to a handful of politically sophisticated, largely self-interested activists, the conglomerates will be happy to supply the rest of us with cross-branded, cross-promoted products like Beauty and the Beast, Michael Jordan/Bugs Bunny Christmas movies, and Entertainment Tonight.
What happened to the fiber-optic, interactive, 500-channel video-on-demand services we used to read about? That's not the game plan anymore; with vertically integrated suppliers controlling both content and distribution, the model is looking more and more like a somewhat revved-up version of today's cable TV. More channels, but not more editorial diversity. As I have already argued, the Internet is likely to serve small audiences well, but it will not supplant traditional mass media. Micro journalism may be too expensive to be accessible to vast segments of the population and, if advertiser-supported, not directed at those who are too old, too young, or too poor to be demographically attractive.
9:42 a.m. Wednesday 10/23/96
This panel discussion is starting to get interesting--especially some observations by Mr. Kurt Andersen, who asks rhetorically, "Why does Chris Byron want to change the subject to Time Warner's alleged overleverage?"
There are two appropriate responses to this: First, Byron does not want to "change" the subject at all; Time Warner's overleverage is the subject--just as is the overleverage at Viacom, and News Corp., and Westinghouse. Secondly, this overleverage is not "alleged," it is real and universally agreed upon by the Wall Street investment community. That's why the stocks of all these companies stink.
That is especially the case with Time Warner, whose stock has been totally rejected by investors. They are now demanding (as Mr. Isaacson's own magazine, Time, is pointing out in print) that Mr. Levin begin shedding the debt he has piled onto the corporate balance sheet in his misguided search for synergy.
The panel's moderator, Mr. Herb Stein, asks in this context whether media conglomerates really are inefficient business structures--suggesting, it would seem, that he thinks they may not be so inefficient after all. He suggests, for example, that the efficiency gains of laid-off workers and the like may simply not have been "big enough to justify the prices paid and the debts incurred in these acquisitions."
But Mr. Stein, that's the whole point: You have an entire industry on Wall Street--the investment banking industry--that keeps bidding the prices of these deals into outer space, then raking off absolutely mind-blowing fees for providing the debt financings needed to pay the bill. This is a fee-driven business, pure and simple, and the investment bankers are in the driver's seat. That's what happened in the Time Inc.-Warner Communications merger; in the Paramount-Viacom merger; in the Westinghouse-CBS merger; and on and on and on. The deals are literally doomed in the birthing room to ruinous finances.
Just how destructive is the debt burden that has resulted from this process? Mr. Andersen would have you believe it is of marginal importance ... "pernicious or otherwise" being his words. But let's get real here. This debt burden is of huge importance, and everyone in the media knows it. In fact, the debt burden on the America media, which began with the junk-bond financing activities of Drexel Burnham & Co. back in the early 1980s, is why the whole industry is in the mess it is today.
Consider CBS. The hollowing out of the Tiffany Network began when Larry Tisch bought the place (as a "white knight" for his "friend" Bill Paley, remember that?) and started piling on debt and sucking out the cash. The entertainment division went into the toilet and so did the News operation, as on-scene staffing gave way to pool coverage, because it's cheaper. Meanwhile, the company's stock price keeled over, and a floundering and poorly managed industrial conglomerate (Westinghouse) was able to come along and buy the whole operation.
To pay for it, Westinghouse had to pile on at least $1 billion more in debt (on top of the $7.5 billion in liabilities it already had). But even that wasn't enough, so Westinghouse began eviscerating its own operation, selling off businesses and firing people left and right.
What good has come of all this? None! Workers have been shed, whole divisions and subsidiaries have been sold off or shut down, and guess what: Westinghouse today is losing more money than ever. This was a smart deal? Well, the investors don't think so, and those folks have to vote with their money every day of the week. At the start of 1996, Westinghouse's stock sold for a high of $21 per share; today it's changing hands at $18--a 14 percent decline in value during a period when the Dow Industrials have risen by 15 percent. Some deal!
You could tell almost exactly the same story for News Corp., which almost went bankrupt back at the start of the 1990s because of its debt. Rupert Murdoch escaped ruin by begging forgiveness from his creditors while selling off assets--including, it should be noted, New York magazine, which was bought by a bunch of debt-bedeviled castoffs from Macmillan who've proceeded to run it into the ground. On a personal note, I'll recall that I myself was working at the place when the new owners turned up, and I well remember the day when it was announced that to make everyone more efficient they were going to install time clocks in the newsroom! Can you die?
In any event, the new owners--KIII Publishing--eventually sold stock in their debt-manacled operation to the public. And want to guess how the stock has performed? Here's a hint: awful! The stock went public last November at $10.62 per share, and it's selling today for $10.50--a 1.1 percent decline during a period when the Dow Industrials have risen by 22 percent. Beginning to get the picture?
And while we're on the subject, let me ask the following: Since Mr. Andersen has made such a public spectacle of his recent firing as editor of New York by the KIII bunch--claiming as he does that they axed him because he wasn't publishing stories likable to the ultimate Mister Big in the operation, Henry Kravis--perhaps he'd like to tell the panel whether he thinks a bunch of debt-tortured businessmen with a slumping stock price are suitable people to be running the biggest and oldest city magazine in America. The answer should be interesting, because that is exactly the sort of crowd you ultimately wind up with in control of media assets when the balance-sheet leveraging game gets going.
And speaking of debt-tortured businessmen, what about Rupert Murdoch, the fellow who sold New York to these KIII people in the first place? When no one was looking, he started running up his balance-sheet debt all over again. Just the other day he filed papers with the SEC to borrow $1 billion to add to the $8 billion load he's already carrying. What does he need the money for? Amazingly enough, he told investors in Australia a few days ago that he doesn't really need it at all--he just wants it in case something buyable comes near him. As for the stock? It's in the toilet, where else?!
It's the same for Viacom, for Time Warner, for TCI ... you just name it. These companies haven't brought "efficiencies" to their operations, they've just gotten big and ugly and fundamentally unmanageable, even as the industry's leaders treat the most precious assets in the American democracy--the systems for gathering and distributing news and information to the public--as little more than baseball cards or marbles. It's sickening.
1:47 p.m. Wednesday 10/23/96
I will only interject a few comments into this lively debate.
1. Does anyone want to argue with Isaacson's proposition that, "There are more sources of information, opinion, and ideas now than there have ever been and they're growing daily."? That seems correct to me, but I am only a superficial observer, living in a media center, and there may be grounds for disagreeing with him. Of course, my conservative friends would say that there are more sources but they are all the same, all following the lead of the NewYorkTimesWashingtonPost that takes its lead from God knows where, maybe the Kennedy School at Harvard. There may be a sense in which the writers feel that they are all independent of their bosses and of each other but are really all following the same drummer. But that would not be a result of the existence of media conglomerates. (I am not accepting this idea. I think my conservative friends, like everyone else, like to portray themselves as victims. But I raise it if you want to say anything about it.)
2. Schwartzman takes offense at the "elitism" of my suggestion that the intelligent and eager citizen can find many sources of independent information. He is concerned about "limits [to] the information ... to those who don't have the time, interest, or ability to dig for more." That is a problem. The problem, it seems to me, is not the limited number of channels on the air, but the limited number of channels in the human mind. What to do about people who do not spend more than an hour a day absorbing information, excluding sports events and their own daily lives, I don't know. I doubt that the answer has to do with more independent media sources.
3. I have not seen Beavis and Butthead and/or Trainspotting, and I don't understand what they are supposed to exemplify. Are they examples of product of merit created without regard to their commercial possibilities? On this whole subject I might refer you to a panel we did a few weeks ago on " What Happened to the Great American Movie?" I believe there was much feeling on that panel that corporate bureaucracy and limitations on nationwide distribution were obstacles to the production of high-quality independent films. As I understood it, the point about bureaucracy was not confined to the bureaucracy of media conglomerates. That is, the same problems would have arisen if the studios had been controlled by automobile companies or pharmaceutical companies. That raises a general question. Are we talking about the problems caused by media conglomerates or about the problems caused by the presence of one media company within a larger conglomerate that might mainly deal with other things?
4. I would like to inquire further about the "overleveraging" issue that Byron discusses. Again, does it matter whether the overleveraging is incurred as a result of a multimedia deal? As I understand it, the problems Byron describes at CBS occurred after Tisch--who was, not up to then, in the media business--started piling on the debt. This suggests to me that the problem was overleveraging and not media-conglomerating.
I am still unclear about the connection between overleveraging and efficiency. I suppose that a company that has a heavy, pressing debt burden will find it important to cut costs. Whether that cost-cutting is a move to greater or lower efficiency is an open question in general, and in any specific case, and I don't get evidence from Byron to show that the result was lower efficiency. In large bureaucracies, like the federal government and some private institutions, a sudden need to cut costs may generate efficiency.
2:47 p.m. Wednesday 10/23/96
As a regular (and paid) reader of the Committee of Correspondence, I've noticed that usually by the Wednesday midpoint the moderator interrupts his colleagues' tangents by banging his fist to the table.
Not to beat Mr. Stein to the punch, but (BANG!) the subject is "Are Media Conglomerates Bad for Us?" And while I agree with Christopher Byron that media conglomerates are bad for themselves, nobody is making a convincing argument that media conglomerates are bad for the citizen.
In some markets, I'd argue that conglomeration has been a boon. In the American South, most newspapers and many broadcast outlets were owned by segregation-loving racists who made their prejudices felt in news and entertainment coverage. In many of these communities, the arrival of the Gannett Bland-O-Mizer was something akin to the advent of the Renaissance.
Has the conglomeration of book publishing harmed letters? (See the wretched titles on the best seller lists of 1946 for further reference.) Is TV worse than it was in 1956? (Please, no paeans to the Golden Age of Television.) Are magazines more or less daring than they were in 1966? Is radio more or less timid than in 1976? Are the movies worse than they were in 1936? Well, yes, as a matter of fact, as the Committee has already documented. But five out of six ain't bad--and I don't think conglomeration had anything to do with the decline of the cinema.
Corporate owners like Murdoch and Kravis and Perelman who meddle with content, let's agree, should be stripped to their skivvies, bound and staked in the Arizona desert, and have riled fire ants poured over them. But in other cases, I must admit, corporate meddling is desirable. Case in point: In its coverage of the World Series, Murdoch's Fox network is sparing us those nauseating shots of Jane Fonda and hubby Ted Turner, presumably because of Rupert's feud with Ted over cable access in Manhattan.
However contemptible the media moguls' conduct in recent months, let us note that their behavior and the truth value of their products borders on the professional compared to William Randolph Hearst and the other inventors of yellow journalism. Media is bigger today. It's also better.
Walter Isaacson Andrew Schwartzman Christopher Byron Herb Stein Jack Shafer
Andrew Schwartzman Christopher Byron Herb Stein Jack Shafer