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 hurrah—the next consolidation will be the ultimate, career-capping one.)But on the other hand, you have investors, who are shunning these companies, and managers, eager—even desperate—to 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 synergy—even 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 students—what 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 leaders—moguls-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 for—hence 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 deal—no 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 but—because he, a real mogul, bested Jean-Marie Messier, Vivendi’s would-be mogul, in their initial, and vastly complicated, mogul-to-mogul arrangement—has 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 successor—always 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 shareholders—who include an angry and organized opposition—to 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?
There is no company that is as much a reflection of one man’s vision as News Corp. To the degree that media consolidation has worked, many people might argue that it has worked best at News Corp.—and they would say, too, that the reason it has worked is Rupert.He’s the Tito of the media business.It is virtually impossible to get people at News Corp. to speculate about or follow the logic of a future without Murdoch. Life after Rupert—soon to be 72—may be the most existential proposition in business today.
It is certainly reasonable to believe that with Murdoch still safely in place, a whole new dimension of consolidation is in store for his company. DirecTV seems inevitably to belong to Murdoch, and in the end will surely be seen as a brilliant Murdoch play (walking out of his negotiations with General Motors precisely because he knew GM would do a deal with a company that could not complete a deal, meaning Murdoch would get the company little more than a year later at a fraction of the price). And what else might Murdoch, in a distressed market, have a go at? What—or how much—will he want of a disaggregating AOL Time Warner, Vivendi, and Disney? (At the very least, why shouldn’t Fox devour ABC News instead of CNN?)But what would happen without Rupert? His son Lachlan is faithfully by his side and is, one would suppose, getting a thrilling education. And there are numerous loyal executives who would step into the breach. And yet, after Rupert, is it even necessary to argue that News Corp. will be a more realistic, less adventurous, even gentler place?And then there are Mel and Sumner.Which one will the bus hit first? Or, more to the point, who will be driving the bus?
The contract of Viacom’s COO, Mel Karmazin, is up for renewal this spring. Will Viacom’s CEO, Sumner Redstone, the nation’s oldest mogul, off his successor or keep him? (Or will it be Mel’s move: He decides he’s had enough of this already and goes off on his own to pick at a collapsing AOL TW, Vivendi, Disney, and even, post-Sumner, a parceled-out Viacom?) Without Karmazin, Viacom would be run by one or more of a group that includes Tom Freston from MTV and Jon Dolgen at Paramount and Les Moonves at CBS. Now, these men are much-vaunted career executives—and who does not think a career executive would be more modest in his appetites and ambitions than a born-and-bred mogul? It will be such a slower, safer, duller sort of game.And then there’s the 60-year-old Diller, whom I find I am reluctant to kill off. I just can’t forgo the spectacle of watching whatever it is he will do (if he does get control of Vivendi Universal, I’m betting he reverse-merges into Disney—or there is a plan, vague to me in its outlines, but startling in its foresight, wherein Diller, seeing the future through Match.com, his dating service, grabs everything that’s left of the Internet).This is the problem with my dead-mogul analysis. We know that the media world teeters near collapse and will inevitably be divided and administered by more modest men.And yet, for better or worse, so many of us have this helpless mogul worship.
I have seen Michael Powell, the chairman of the FCC, who is meant to restrain these men and their companies, laughing dreamily and schmoozing delightedly in the presence of moguls. He can’t escape his awe. You bend to the larger power, the bigger ego.It is hard to escape the thrall. It is hard to believe that all of this—big companies as well as big men—will pass. That this generation is done. (Once, when asked about Murdoch’s brush with prostate cancer, Barry Diller described the extraordinary steps—stake through the heart, deep-excavation burial, concrete reinforcement—it would take to kill him and keep him dead.) Especially because this generation is so much larger, meaner, more heroic than the one coming next—which will be dealing with all the problems caused by large, mean, heroic fathers.Still, the last deal, for which the FCC is now clearing the way, is probably not yet done.“Anyone,” said 79-year-old Sumner Redstone to 80-year-old Don Hewitt as they left a recent CBS gathering, “who thinks age is chronological is an asshole.”