What happens when moguls die?
This strikes me as a worthy question, because a group of moguls and their lawyers, apparently indifferent to the general sense of a collapsing media business, were petitioning the Federal Communications Commission last week to continue to dismantle all media-ownership rules. The moguls, it seems, are eager to proceed with the further combination of television, radio, newspaper, and cable companies. (The Wall Street Journal speculated that the petitioners were receiving a “warm reception” at the FCC.)
I bring this up not to repeat the self-evident and by now even hoary arguments against consolidation but to note the existence of parallel realities.
On the one hand, you have the mogul class that is continuing to lay the groundwork for a further paroxysm of media mergers and acquisitions. (There is even a sense, with this petition to the FCC, of a last mogul hurrahthe next consolidation will be the ultimate, career-capping one.)
But on the other hand, you have investors, who are shunning these companies, and managers, eagereven desperateto unhitch themselves from their troubled overlords. (In the space of a week, I have had conversations with impressively placed sources at Time Inc. who speculated on the disposition of the magazine group as well as similar conversations at Warner Bros. about “an eventual public life” for the studio; I also had a harrowing tête-à-tête with a division-level executive at another behemoth who, it seems to me, has been brought to the edge of a breakdown by consolidation and its attendant absurdities.) Indeed, it would be reasonable to characterize 2002 as the year most everyone in the media business came to question the ideas of consolidation and synergyeven to accept the likelihood that the great media combines would imminently be shaken apart.
This is, in other words, a generation gap.
There are the grandees of the business with ever-greater dreams of bigness as usual, and then a restive, younger media class using AOL Time Warner, Vivendi, and Disney as punch lines.
So what if, as an exercise, we kill off the consolidating generation? This is part of the analysis often performed by investors and business studentswhat happens if the top dog gets hit by a bus (not to speak of being eliminated by natural causes)? In other words, how dependent are these companies on the idiosyncratic forcefulness of their mogul leaders? And in what new direction do they evolve without them? Can they even exist without some brute ego holding them together?
Both AOL Time Warner and Vivendi are helpful here, because in 2002 they did off their leadersmoguls-in-chief Gerry Levin and Jean-Marie Messier.
These deaths were by palace revolt instead of accident or attrition, but they highlight the fundamental divide: The men who invented these companies are egomaniacs and fabulists; the men who are in line to take them over (or, in the case of Vivendi, suddenly drafted for the job) are managerial rationalists.
Which prompts the question, what does a rationalist do with an irrational enterprise?
This conundrum may account for the caught-in-the-headlights look of both Dick Parsons, now the CEO at AOL Time Warner, and Jean-René Fourtou, who is running Vivendi. In neither instance can you imagine these men creating or envisioning the kind of companies they now are responsible forhence their palpable sense of uncertainty and even, it seems, despair.
Indeed, the theme of virtually all great consolidations is the complexity of the financial schemes that created them (the better the deal, the more difficult it is to understand). But Parsons’s managerial credo at AOL Time Warner, at a company built almost entirely out of confounding transactions, has been a pledge of “no more complicated deals.”
His most significant move so far has been to untangle AT&T’s (soon to be Comcast’s) investment in certain AOL TW properties (you don’t want me to explain this dealno one, really, has ever been able to explain it). Parsons’s proposal is to pool the company’s cable assets into a separate public company. So although AOL Time Warner will still be running this new company, it will have a fiduciary and legal responsibility to maintain an independent relationship with its sister divisions (which, come to think of it, may be even more unwieldy than the former arrangement). In any event, in a stroke of rationalism (or at least attempted rationalism), Parsons has undone all possibilities of synergy, the shibboleth upon which the entire foundation of media consolidation has rested. In fact, by spinning off the single largest part of AOL Time Warner, Parsons has taken a clear step toward breakup.
Fourtou, for his part, is also in retreat from complexity and entanglements. For Vivendi, at this point, it is all about negotiated retreat and undoing the ties of empire. Of course, Fourtou and Vivendi are in the humiliating position of having someone from the mogul generation as the local strongman. Barry Diller not only runs Vivendi Universal butbecause he, a real mogul, bested Jean-Marie Messier, Vivendi’s would-be mogul, in their initial, and vastly complicated, mogul-to-mogul arrangementhas effective control over whom the company can be sold to (i.e., him). Fourtou, no doubt, wishes the bus would run over Barry.
Now, while the mogul deaths at AOL Time Warner and Vivendi have been transformative, these companies are still facing a protracted, agonizing, and comical endgame. Whereas Disney, I think, is ready for a cleaner kill. In fact, the lesson for Disney shareholders may be to avoid the effort or charade of new management after the elimination of Michael Eisner, the company’s long-presiding, widely hated mogul-in-chief.
In some sense, Disney’s lack of any clear successoralways thought to be a major liability for the company (and part of Eisner’s strategy for keeping control)becomes a big advantage. It may enable Disney shareholderswho include an angry and organized oppositionto wash their hands of the whole thing and proceed from putsch, bus accident, or act of God directly to dissolution.
Moguls believe, of course, that other moguls will die or be eliminated, but not them. This is one of the reasons the remaining moguls are now petitioning the FCC. The prospect of the end of AOL Time Warner, Vivendi, and Disney means good pickings. According to business mythology, all industries reach a point where, in a final spasm of consolidation, there is a last man standing.
Murdoch? Redstone? Diller?
But what happens if the bus heads their way?