Telecom Moguls

Get ready for Mickey Mouse nation — a creation of two moguls, Disney’s Michael Eisner and Capital Cities — ABC’s Thomas Murphy in their recently announced $19 billion merger.

The usual boilerplate rationale was given: companies have to be big to compete in the global marketplace. Other media moguls weighed in: “It’s an utterly great transaction,” said Barry Diller, former CEO of QVC, Inc. “This immediately creates the No. 1 media company in the world,” observed David Geffen, partner in DreamWorks. “It’s a great deal for both parties,” commented Rupert Murdoch, CEO of The News Corp.

Great for whom? Concentrating ownership in the media by a fantasy entertainment company does little for improving the quality and courage of a news operation. If Disney’s movies and other products are as good as Michael Eisner thinks, then why does he need to own a distribution company like ABC? Do you have to own a dairy in order to get milk, asked John Malone, CEO of the nation’s biggest cable operator, TCI?

What Malone means was explained well by Professor Rajendra S. Sisodia in a Wall St. Journal article right after the Disney merger announcement. “All of the ballyhooed synergies being talked about in this merger could as well be accomplished through nonexclusive strategic alliances between the companies. If it indeed does make sense to package the Disney Channel and ESPN together to penetrate overseas markets, the same outcome could be achieved without a merger,” Sisodia wrote.

This Disney-ABC merger is about exclusion of competitors, about power to dominate, about empire-building, about making the big shareholders in Capital-Cities-ABC much richer.

Warren Buffett, the Nebraska investor worth $9 billion, urged Eisner to merge with Capital Cities during a chance sidewalk meeting. Two weeks later, Buffett made hundreds of millions of dollars from appreciation of his large stock holdings in Capital Cities due to the merger agreement.

ABC Nightly News reported its purchase by Disney in a bland manner, putting on no critics and offering no interpretation as to possible government antitrust challenges. Earlier on Good Morning America, Murphy and Eisner put themselves on Charlie Gibson’s Good Morning America Show to give ABC the scoop. Eisner did not smile when Gibson, who apparently had no advance notice of his two guests, much less of the deal, muttered: “I never thought I’d be working for Mickey Mouse.”

Under the telecommunications bill that passed Congress last week (which Clinton has vowed to veto), this giant merger of Disney-ABC could buy a telephone or cable company. It could buy up every AM and FM radio station in America. There are no longer restrictions on how many radio stations can be owned, and the limits on the number of television stations are loosened substantially in the legislation.

The more economic interests that a media conglomerate has, the more inhibited its news division is likely to be. This goes beyond having to soft pedal, for example, Disney’s penchant in shaking down state and local governments for huge subsidies to its profitable operations from Orlando to a renovated theatre off Times Square. With two nuclear power plant sellers, General Electric and Westinghouse respectively owning NBC and now probably CBS, what kind of fearless, probing reporting can be expected about the costs and hazards of atomic power from them?

The public will get more and more of the same choices from more and more channels and videos. Or as Jeff Greenfield, the ABC news commentator told a reporter: “there may be more choices but less diversity.”

Back in the Sixties, the conglomerate ITT, run by Harold Geneen, acquired ABC in a consenting takeover. When the FCC opened public hearings, ABC executives said the takeover was essential because ABC needed the ample financial resources of ITT to compete against the other larger networks. After a sharply divided FCC approved the deal, the Justice Department sued in federal court and ITT called off the merger.

There was considerable public debate then about how ITT would or could censor ABC from coverage of such future ITT escapades as their questionable political involvement in South America.

Today, the FCC’s veteran commissioner, James M. Quello, issues a statement praising the merger. No public hearings are planned. Not a word from the Justice Department’s Antitrust Division. The six million dollar or so ABC men and women like Peter Jennings, Barbara Walters and Ted Koppel have distinct views on this merger, but they feel unable to speak out.

The unorganized shareholders, who have to approve this merger, are given their management prepared rubber stamp in readiness. Tight control on all fronts leads to controlling processes in the minds of those who have a right or duty to say their piece.

The next event to contemplate is whether when Mickey Mouse squeaks, the ABC news division will bark. Disney has already moved to take over the weekend children’s programming of the Network.

One last note: A few years after the collapse of the ITT-ABC merger, I asked the head of ABC how it rose to number one in the ratings without the deep financial reserves of ITT. He said: “I got my executives together and told them to roll up their sleeves and compete.” How quaint that sounds today!