Say you pitched a movie about a young man living in France, or a book or magazine article or television show about anything to do with a foreign country, or anyone associated with a foreign country: You would, in the American media business, instantly have marginalized yourself. Even England has to be played for laughs if it’s going to play at all.
So ha ha: The American media is now dominated by foreign companies.
But that’s a reductive irony, whereas the takeover is really quite a complex and compounded one. Because many of these foreign media companies have been built on distributing the lowest common denominator of American media – Starsky & Hutch, Magnum P.I. lowest common denominator – to European audiences.
On the one hand, there is the European ill temper about American cultural and perceptual imperialism (the end of foreign cinema and the complete dominance of Hollywood movies); on the other hand, there are the realities of syndication and licensing deals (Canal+ is in the business of selling The A-Team to the French) that have provided the economic wherewithal for the takeover of American media companies by foreign upstarts.
And there’s the Internet, which, briefly, was going to be the ultimate instrument of the exportation of American innovation and hegemony, until, shit, it turned out America had screwed up its cell phones, fallen way behind on wireless stuff. So here we are, having to sell the Internet, too, to the Euros. There isn’t a U.S. dot-com company that isn’t hustling around right now for European dough.
European media moguls have tried to ape American media moguls. But they have achieved even more outsize egos and a greater sense of entitlement than their American mogul counterparts.
But this is not just simple reverse imperialism, or it is, except you have to couple it with the well-established tradition of being a foreigner who owns a media company in the U.S., i.e., the likelihood that you the foreigner are going to be stripped naked and plundered and held up to public ridicule for your American media adventure.
This, the plundering part, is probably a good place to start in considering the proposed creation of Vivendi-Universal, a three-way merger of Vivendi, the former Générale des Eaux, a 150-year-old French water company that also owns waste-management systems, lots of publishing properties, and a global ad-agency business; Canal+ (say ploos), Europe’s largest pay-TV channel, in which Vivendi is a minority holder; and Seagram, the world’s largest liquor distributor, which owns, for reasons too ridiculous to recount, a major movie studio and the world’s largest music company. (After the combination of those three entities, the new entity will become the second-largest media company in the world after the combination of AOL Time Warner.)
My wife, a media attorney who has had her share of dealings with foreign media barons, believes that, partly as a result of language barriers and compensatory arrogance (with the French, of course, being among the most compensatorily arrogant), foreigners are incapable of doing a proper due diligence. Therefore you can sell them anything. This was true of the Japanese when they bought Hollywood studios. The Germans when they bought book companies. The English (who have their own linguistic – and emotional – issues) and the Dutch (and French) when they bought magazines. And the French (and English) when they bought ad agencies. (Murdoch is the exception to the foreigners-get-brutalized-and-robbed paradigm. But then, he did what most foreigners would never do: He became an American – a role that neither Vivendi CEO Jean-Marie Messier or Canal+ chief Pierre Lescure seems suited for.) Foreigners just don’t know the questions to ask and are, relatively speaking, too embarrassed to ask anyone who might know the questions. Such embarrassment, my wife believes, translates into a dismissive attitude about the silly American obsession with details (like leases, and contracts, and trademarks, and, in general, who owns what, and what moneys are reliably due), and often results in a bonanza for American media sellers – in this case, allowing the Bronfmans to sell the French a probable pig in a poke. (God knows, you haven’t seen other bidders lining up.)
“Everybody makes a lot of money when the French come to town,” says Jerry Della Femina, who made a lot of money when the French (from the same company that is now buying Seagram) bought his advertising agency.
It is, though, not just a case of American media people taking advantage of foreign media people. Many students of this art, including Della Femina, would argue that it is American media people taking advantage of people trying to take advantage of them. (Della Femina has also sold his agency to the English – indeed, he sold it first to the English, and then managed to get the French to buy it again from him; in addition, his book From Those Wonderful Folks Who Brought You Pearl Harbor is an early classic of the global economy.)
Certainly the Europeans can be difficult to deal with. (Let us not forget Gian Carlo Paretti, who bought MGM, took the French bank Crédit Lyonnais, which financed the deal, for nearly all it was worth, and has been on the lam pretty much ever since.)
My wife’s analysis is that European media moguls have tried to ape (or out-ape) American media moguls. But they have achieved even more outsize egos and a greater sense of entitlement than their American mogul counterparts, because in Europe, there is a greater tradition of the one true strutting supremo (together with milder accounting rules and securities oversight).
My favorite Euro-media supremo is Berlusconi, the Italian in the guise of the very American figure of a smiling, affable salesman (the usual European big-cheese affect is of an intellectual, or aristocrat, or bureaucrat). He has managed to monopolize his nation’s media (half of its television, its largest magazine publisher, its leading news magazine, a major national newspaper, and the biggest book publishers) as well as to be headed for a second term as its prime minister.
Indeed, it is this connection between the government and the media, a deeply incestuous relationship in almost every European country, that suggests, not unreasonably, a lot of self-dealing and tends to create a culture of people saying things with the assumption that other people know they are saying something else.
“The French,” Della Femina declares, “are simply incapable of telling the truth.”
The Europeans, of course, accuse the Americans of small-time literal-mindedness, hypocritical moralism, and intellectual dishonesty. Life and business, the Europeans argue, are complex, shaded, many-layered.
As it happens, the result of this live-and-let-live, you-scratch-me-I’ll-scratch-you attitude is a national web of interlocking companies so tight that all companies become one, and monopoly is truly complete (or else unnecessary).
On the other hand, the Euros would argue that this is exactly what AOL Time Warner is about, so shut up.
Here’s a snapshot:
Havas, the centerpiece of the Vivendi media empire and the largest and oldest publisher in France, collaborated with the Germans during World War II and, as punishment, was nationalized after the war. (So, along with Bertelsmann, that makes two of the most important media companies in the U.S. former Nazi accomplices.) Under the management of the French government, it added advertising agencies, bus-tour companies, and pay television to its portfolio.
Havas arrived in the U.S. in the late eighties, under chairman Pierre Dauzier, an associate of French prime minister Jacques Chirac, when it took a small stake in the English advertising group WCRS, which owned the U.S. agencies Della Femina McNamee and HBM/Creamer. As the English group encountered financing difficulties, the Havas agency, Eurocom, continued to raise its stake, taking over all of the WCRS advertising and public-relations interests by the early nineties.
In 1991, under the firm encouragement of the French government, Eurocom merged with the ailing French advertising group RSCG (“Why should we?” perhaps the conversation went with government authorities. “Why? Because you are French” was perhaps the answer), which owned U.S. agencies Messner, Vetere, Berger McNamee & Schmetterer and Tatham-Laird.
In 1995, Havas, officially privatized but with the French government still a major shareholder, exchanged part of its shares with French telecom giant Alcatel Alsthom, another partially government-owned entity, and took over its publishing operations. In 1997, utility conglomerate Générale des Eaux, also partially owned by the French government, and run by Jean-Marie Messier, the former Finance Ministry functionary who had headed the government’s privatization team, acquired 30 percent of Havas. In 1998, Générale des Eaux, now renamed Vivendi, bought the 70 percent of Havas it didn’t own, which includes a 49 percent interest in Canal+. Last year, Vivendi, in its first digital foray, bought Cendant’s computer-game division for something close to $1 billion. It also took a 24.5 percent stake in Murdoch’s BSkyB. Now it has allied with Vodafone AirTouch, the world’s biggest mobile-phone company, to create Vizzavi (for vis-à-vis), a wireless Web portal, which launched last week with elephants and a big top on the banks of the Seine.
What does this mean, other than that Ron Meyer and possibly even Barry Diller are now French civil servants?
In all probability, it means nothing. You buy a company because you can do a deal for it, not least of all because your government, and your friends in government, are helping you out. (Indeed, at the root of many of these Euro acquisitions is a more favorable accounting rule about the amortization of goodwill – i.e., the value of brand – than exists for American media companies.) So what is happening is just a series of trades and flips allowing the Bronfmans to take advantage of Vivendi and giving Vivendi the opportunity to maximize the incredible cash flow available from film and television libraries and, in the near to medium term, to take advantage of someone else. In other words, no one is really planning on staying around for the long haul.
But at the same time, the deal does represent the philosophic and strategic rationale of the moment. This rationale is that media is a utility. It is pipes. And therefore, if you have experience in piping water, then you’re qualified to administer the digital flow too. This is, in essence, the AOL Time Warner rationale – pipes are stable. The hope is, on the part of both the world’s soon-to-be first- and second-largest media companies, that if you reduce media to plumbing, the vagaries of content won’t matter so much. Of course, Vivendi argues that the AOL Time Warner pipes are rusty and that its pipes, the wireless ones, are the next big thing now. In addition, there is the global rationale. Jean-Marie Messier has taken to characterizing AOL Time Warner as a parochial concern, emphasizing the A in AOL. (Gerry Levin, for his part, refers, in a meticulous French accent, to “the former Générale des Eaux” when the subject of Vivendi comes up.)
But the Europeans, i think, are right. To understand this deal, you have to look at it less literally than we are accustomed to. The comedy is important here. When I asked Della Femina what he thought was going to happen, I heard a big rich laugh over the phone. When I asked my wife, she offered a very slapstick description of people running around the house of Bronfman sweeping things under the rugs.
But the thing about the global economy is that while you know someone is the sucker, it gets harder and harder to say who.