FEELING SYNERGETIC?
The media: Paul Johnson
on the latest merger-mania in communications
THE new buzz-word in the world where men do billion-dollar deals is 'synergy'. The term is medical: it refers to a group of muscles or nerve- or brain-centres working together to produce a movement. Thus there is said to be synergy between Time Inc and Warner Communications, which explains their decision to merge to produce the world's largest media company, worth Perhaps $18 billion. Are they synergetic? Time still has at its core the grand old news magazine which Henry Luce invented in the 1920s. Luce was a marvellous innova- tor in his day, but since his death the corporation has not produced much in the way of new ideas. It has gone into cable and video and bought such famous old businesses as the Book of the Month Club and the Boston publisher Little, Brown. But it is not what you would call dynamic; many of its ventures, such as its attempt to Publish a rival to the Washington Post, ended in costly failure. WCI likewise has at its core the famous Warner Brothers movie company, which specialised in gangster films. It is now the biggest US film-maker but also produces television series such as Dallas, videos, records, books and cable services. It too lacks the self-confident verve of its parent company in its prime. 130th these two big, lumbering businesses are trying to huddle together for self- protection. The idea seems to be that, While each separately is vulnerable to a hostile bid, both together are beyond the Power of the deepest pocket. That may Prove an illusion since many (including its largest shareholder) think Warner is going cheap. But what the rest of us want to know is: how will the customers be served by this kind of synergy? Will it indeed Produce a movement, and if so a move- ment to where?
In the 1960s Harold Wilson was a great believer in synergy (though it wasn't called that then) and put together groups of inefficient companies to make huge and supposedly efficient ones. He tried this With the British motor car industry, for instance, with results we can all see. The search for economies of scale often pro- duces economies of brain-power and ideas. If you merge a dynamic with a dozy
business, there's no certainty that dynam- ism, as opposed to narcolepsy, will pervade the whole. By merging two mediocre businesses you are more likely to have problems of scale rather than economies. Harold Wilson's one-time friend, Cecil King, in the search for gigantism, turned the highly successful Mirror Group into the International Publishing Corporation, then the biggest in the world: that was the beginning of his, and its, decline. The assertion that a big concern can do more for an individual publication is sometimes true; often false. I remember when IPC boasted about what they would make of the then flourishing New Society. Where is it now? Abandoned and interred in the New Statesman, itself sick. A high-quality product, which knows what it is doing, like Country Life, is probably better off on its own or in a small group than as part of an anonymous omnium gatherum like IPC, which is now having trouble even with its core-business, its women's magazines.
It is true that some mergers or acquisi- tions do make explicit sense. That is why I sympathised with Rupert Murdoch's desire to acquire control over Collins, so that he can build it, together with Harper & Row, into a transatlantic publishing Set-up. But some of Murdoch's purchases are no more logical than Cecil King's. Business empires, like territorial ones, acquire their own crazy momentum, always moving forward to meet competitive threats, real or imaginary, until they suddenly implode from over-extension. Lord Salisbury used to say that politicians should never be allowed to look at maps — it gave them dangerous ideas. Perhaps media tycoons should be forbidden other people's balance-sheets. I don't at all like the look of Murdoch's Sky venture: it could be a bridge too far, draining the profit-making sections of an empire which is already too big for one man effectively to control. I would like to see Murdoch drop his Alex- ander act, looking for more worlds to conquer, and concentrate, for a year or so, on making the Times a really good quality newspaper. Equally, Robert Maxwell, another audacious businessman who finds it hard to delegate, should stop trying to do too many things at once and make a serious, sustained effort to turn the Mirror Group into the best tabloid newspapers in Britain — not indeed by fiddling with their editorial content but by making them technological and commercial leaders.
However, neither Murdoch nor Maxwell is likely to pause. The 1990s even more than the 1980s will be the age of media empires, just as the 1890s was the age of colonial ones. The way the Americans see it is that, during the last decade, they remained too conservative while the Euro- pean empires built up their strength. First there was Murdoch, buying up big city newspapers, then television stations, to weld them into a fourth network, then books and magazine publishers. Other invaders from across the Atlantic included the German publishing giant Bertelsmann, the French group Hachette, and finally Robert Maxwell, who with the acquisition of American Macmillans is now a major force over there, and looking for more properties. An even more significant in- truder is the Japanese electronic group Sony, which has been busy getting into the American record industry.
• Americans feel they must consolidate their own internal empires to stiffen the resistance' to these invading forces. Their nationalism is rising. In the tong term they must be most worried.. (and perhaps we should be too) about Japanese penetration of Western media industries. Japan con- tinues to pile up trading surpluses and its strengthening currency makes foreign in- vestments, especially in America, look cheap. Hitherto the Japanese have been held back from media acquisitions by the difficulties they experience with the En- glish language. But as the media move ever deeper into the electronic epoch, the mas- tery the Japanese are establishing over it is bound to encourage them to invest a growing proportion of their surpluses in media outlets all over the affluent West. There will be no resisting, in my judgment, the sheer volume of cash the Japanese will be able to deploy, especially since they will pursue the softly-softly approach. We may, in fact, be at a historic watershed. Once it was the Time-Life culture of Henry Luce which dominated the media world. Cur- rently it is the brash opportunism of Murdoch. But will the age of Rupert's Sun be followed by that of the Rising Sun?
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