Merge is the word at studios
High-tech innovations lure media moguls into high-finance marriages
The Associated Press
LOS ANGELES—And then there was one.
With this week's announcement that Viacom Inc. was buying Paramount Communications Inc. in a deal valued at $8.2 billion, there is only one Hollywood studio — the Walt Disney Co. — that has not changed hands.
The tenacity of the bidding (MGM, Columbia Pictures, 20th Century Fox, Warner Bros. and MCA all were sold or merged in the last decade) dramatizes the impending revolution in the entertainment business. While movie and television shows will continue to be uneven and often crummy, they soon will be coming at us in new ways.
Although the promise of 500-channel cable systems, "video-on-demand" in-home movies, virtual reality simulators and interactive programming remains largely unfulfilled, these megamergers were made with the expectation that Hollywood is about to be reinvented.
The companies that flourish in this new environment will be those that marry delivery systems — cable networks, video games, CD players, TV stations — with the producers of feature films, sitcoms and music albums.
Viacom already is one the country's top cable network owners, with its MTV, VH-1
and Nickelodeon channels generating surging profits. MTV alone has a worldwide audience of 233 million, and it has crass music-video commentators Beavis and Butthead, too.
Paramount is a top supplier of movies and TV shows, with its recent hits including "The Firm," "Indecent Proposal," "Deep Space Nine" and "Entertainment Tonight."
Among the most logical outgrowths of the deal is a potential fifth television network. Furthermore, since Paramount has a new interactive technology division, it's now possible for any Paramount innovation to reach consumers through the 1.1 million subscribers to Viacom's cable-TV systems.
"You have a merger agreement that will create a company that will be superbly positioned for the future," said Gordon Crawford, whose money management firm Capital Guardian is Paramount's largest shareholder with an 8 percent stake.
Said Viacom head Sumner Redstone: "The shape of our industry will never be the same. ... I guarantee you, this will be the single most powerful entertainment and communications company in the world."
In fact, in terms of financial value, it's the fifth largest media conglomerate. But the potential is endless.
"Strategically, everything fits," said Paramount chairman Martin Davis. "We just
have unlimited possibilities looking at the future."
Just two days after the Paramount-Viacom deal was revealed, video store giant Blockbuster Entertainment Co. used its majority interest in a TV producer to buy the Republic Pictures movie studio, home to John Wayne Westerns.
The goal of the $100 million deal is to create a new, although comparatively smaller, multimedia company which could capitalize on the booming video-game business and interactive computer programs.
"We're going to look at new media and the growing potential for interactivity," said Ron Castell, Blockbuster's senior vice president of programming and communications.
The companies that are likely to dominate the future are those that have both a wealth of creative personnel and that control copyrights to entertainment programming: Hightech hardware isn't worth much without first-rate software.
That's why there's still speculation another bidder may emerge for Paramount.
"This is the last great repository of copyrights in the world that's available," said Crawford. "it's really the last chance."
Despite all the excitement generated by the Paramount-Viacom deal, the track record of Hollywood mergers is not particularly good.
Time Warner spent several years digging out from a pile of debt after Time Inc. and Warner Bros. became one entity. With hardware sales stalled, Sony Corp.'s expected
synergies with Columbia Pictures have not been fully realized. MCA has a hit with "Jurassic Park," but the movie, TV and record company makes up just 6 percent of hardware giant Matsushita Electric Industrial Co.'s revenues.
Although it already has been sold once (to convicted felon Giancarlo Parretti), the MGM studios are again on the block. It's far less attractive than Paramount, however, with a modest film library and a weak presence in both feature films and television production.
Disney, on the other hand, is robust, except for its struggling Euro Disney theme park. While the company's not for sale, the asking price if it were would be extravagant — probably well in excess of $20 billion.
"I don't think Disney could be sold," said Jessica Reif, an entertainment analyst with Oppenheimer & Co. "I don't think anything is imminent."
She did not rule out a merger, however, and said broadcaster Capital Cities-ABC would be a near perfect fit.
TRAILERS: You've seen Keanu Reeves mangle Shakespeare in "Much Ado About Nothing" and maim Bram Stoker in "Dracula." Soon you'll have a chance to watch the "Bill and Ted" veteran take a shot at playing a religious leader. Miramax announced this week that it has acquired North American rights to "Little Buddha," director Bernardo Bertolucci's high-budget biography. Expect it later this year.
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20 ENTERTAINMENT '93 • Kyou • September 24, 1993