TIME: Almanac 1993/TIME Almanac 1993.iso/time/121090/1210200.000

Text File | 1992-08-28 | 10.8 KB | 234 lines

                yS>                                                          BUSINESS, Page 68

Let Us Entertain You


Matsushita rattles American nerves by paying $6.1 billion for
a Hollywood dream machine, but the giant MCA is likely to be
stronger as a result

By JANICE CASTRO -- Reported by Barry Hillenbrand/Tokyo, Thomas
McCarroll/New York and Jeanne McDowell/Los Angeles


    All that was missing was a small boy to tug at Lew
Wasserman's sleeve and plead, "Say it ain't so, Lew."

    Central Casting could not have supplied a better chorus of
worriers than the screenwriters, politicians and just plain
citizens who weighed in last week after MCA chairman Wasserman
announced that he was selling Universal Pictures and the rest
of the MCA entertainment giant to Matsushita Electric
Industrial for $6.1 billion. How could he, they asked, sell to
foreigners the studio that made To Kill a Mockingbird, Jaws,
E.T., Born on the Fourth of July and Back to the Future? The
home of TV heroes Magnum, Columbo, Jim Rockford, Sonny Crockett
and even the Beaver? The company that runs the lodgings and
jitneys in Yosemite Park? In Hollywood, some moviemakers
wondered whether industrialists in Osaka would now censor
Hollywood's ideas. Even the Bush Administration raised some
objections to the deal.

    Some business strategists were puzzled by the fuss. Overseas
investors, after all, already own more than $400 billion worth
of U.S. businesses and real estate. And Matsushita doesn't make
a very convincing villain. The world's largest consumer
electronics firm (fiscal 1990 revenues: $38 billion), it
manufactures some of America's favorite brands of video and
audio gear: Panasonic, Quasar and Technics.

    But Hollywood is close to America's heart, if not its
heartland. After last year's deal in which Sony paid $3.4
billion for Columbia Pictures, many Americans began to fear
that the country's cultural heritage was being auctioned off,
bit by bit. Universal is the fourth of Hollywood's seven major
studios to be acquired by foreign companies: 20th Century Fox
is owned by Rupert Murdoch's Australia-based News Corp., and
MGM/UA was taken over earlier last month by Italian financier
Giancarlo Parretti. That leaves only three major studios in
American hands: Disney, Paramount and Warner Bros.

    Entertainment is one of the last businesses in which America
clearly dominates the world market. Every year consumers around
the world buy $300 billion worth of movie tickets, compact
discs, videotapes and other American entertainment products.
One-fourth of those sales are overseas. No other country's film
industry creates such universally popular entertainment. In
Europe, American films capture at least half the box office.
The top-grossing film in Japan last year, Indiana Jones and the
Last Crusade, earned $32 million in theaters, twice as much as
the most popular Japanese film. Of the 27 movies currently
showing in Rio's cinemas, 21 are American. Overseas fans say
they are drawn to the American spirit of independence and
optimism. Says Roberto Fernandez Blanco, an Argentine
businessman: "When you see an American work of art, you feel
a breeze of freedom of expression." Thus the MCA deal strikes
some Americans as another example of selling the goose instead
of the golden eggs.

    This time around, even Secretary of the Interior Manuel
Lujan jumped into the fray. Citing hundreds of angry letters
and calls from citizens, Lujan said he wanted to keep the
Yosemite Park and Curry concessionaire in the hands of
Americans. MCA will be given a year to find an American buyer.

    Some Hollywood insiders as well as political critics are
worried that foreign owners might change the fundamental nature
of American movies and television shows, subtly shifting their
tone and content. Those concerns were heightened last week at
the press conference Matsushita president Akio Tanii conducted
by satellite video hookup after the deal was announced. In
answer to an American reporter's hypothetical question about
what Tanii would do if Universal wanted to make a Japan-bashing
film or one that criticized the late Emperor Hirohito, Tanii
responded ambiguously, "Something like that shouldn't emerge.
Filmmakers must create films that are inspirational, that will
be enjoyable for everybody." Many interpreted his answer as a
chilling assertion that future Universal film projects must meet
home-office approval. Said a startled George Kirgo, president
of the Writers Guild of America, West: "What does that mean,
`inspirational'?  To be told that there are going to be
restrictions for writers is appalling." Two days later, though,
Tanii, who apparently had been caught off guard, clarified his
response: "There should be no misunderstanding of Matsushita's
position in this important area. Creative decisions for MCA
will be made by MCA management."

    For Matsushita (pronounced Mat-soosh-ta), the MCA purchase
is a way of ensuring an immensely valuable supply of so-called
software: the movies, records and films that can be played on
the machines Matsushita sells. Says Donald Richie, a leading
arts critic and longtime resident of Japan: "There's no reason
for a Yellow Peril scare. The Japanese just want to milk the
cows and pull in the profits that they know these studios
create." Matsushita hopes to put half a century's worth of MCA
creative output into new CDs, videotapes, laser discs and other
formats. Besides producing movies and TV shows, MCA makes
records by such heavy hitters as Elton John, Bobby Brown, Tom
Petty and Fine Young Cannibals.

    Rather than hobble American pop culture, foreign ownership
of U.S. entertainment companies seems likely to increase its
exposure around the world. Already, Dallas boasts loyal viewers
from Jerusalem to San Jose. As the global audience for
U.S.-produced entertainment has grown, producers and directors
have aimed for broader, cross-cultural appeal. Arnold
Schwarzenegger is one of the biggest box-office stars in the
world. Twenty years ago, no actor with a heavy German accent,
no matter how gifted, would have topped Hollywood's talent
ladder.

    At the same time, pop culture reaching America may become
more diverse as the country becomes a crossroads for new
entertainment. In the past year or so, Americans have been
treated to such unlikely musical stars as the Gipsy Kings, a
popular French-flamenco band, and the Bulgarian State Radio and
Television Female Vocal Choir.

    Matsushita is cautious but forward looking. The company has
never had Sony's cosmopolitan polish, yet it was Matsushita's
subsidiary JVC that developed the original VHS video technology
in 1976. Tanii, then the youthful chief of Matsushita's
fledgling VCR division, convinced his superiors that consumers
would choose VHS over Sony's Betamax if they could also buy
compatible videotaped entertainment.

    Matsushita spends generously for R. and D. as well. In the
current fiscal year, development costs are $3 billion, or 6.2%
of sales, almost double that of most U.S. companies. The
72-year-old firm that started out as a manufacturer of
electrical plugs is now a leading global purveyor of goods
ranging from semiconductors to refrigerators.

    For his part, Wasserman saw the deal as a necessary step in
beefing up MCA's ability to compete globally. Long known
affectionately in Hollywood as the Godfather, Wasserman, 77,
has run MCA for 44 years. When he joined the Music Corporation
of America, as it was then known, at age 22, it was a talent
agency specializing in booking bands into nightclubs. As it
grew, MCA picked up the nickname the Octopus for controlling
more than half the top stars in the business, including Clark
Gable, Marilyn Monroe, Jimmy Stewart and Bette Davis. Wasserman
became MCA's top agent. As president of the company in 1949,
Wasserman began producing television shows. In 1962 he bought
Decca Records, which owned Universal Pictures, and dropped the
agency business.

    During the past few years, however, as one media giant after
another merged with a powerful partner, Wasserman apparently
became convinced that MCA needed to make a strategic alliance
to gain King Kong-like size and access to hoards of cash.
Capital Cities bought ABC, General Electric acquired NBC,
Murdoch bought Fox, and Time Inc. acquired Warner
Communications. As Wasserman reportedly told an MCA shareholder
last year, "We're a 200-lb. gorilla in a game with 1,000-lb.
gorillas. We've got to become a 1,000-lb. gorilla or get out
of the game."

    King Kong was roaring after last week's announcement.
Matsushita has some $16 billion in cash but plans to borrow
much of the MCA purchase cost, which leaves the company with
cash to buy up more properties at distressed prices. Said David
Geffen, the music mogul whose 10 million shares of MCA stock
were suddenly worth some $660 million, nearly twice their value
three months ago: "This will be the most acquisition-minded
company in the world."

    Other global entertainment deals are being done almost
daily. Last week the Japanese electronics maker Pioneer bought
the Japanese rights to all Carolco films, which include the
Rambo series and Total Recall. Yet control of the remaining
three U.S.-owned studios seems likely to remain in American
hands. To reduce its $11 billion debt load, Time Warner is
looking abroad for partners to take minority stakes in some of
its entertainment subsidiaries. "We agree with Matsushita's
concept [of globalization], but we disagree with the execution,"
says Time Warner chairman Steven Ross. "Parent companies
should keep their national identities."

    Disney too is probably off limits. Says Paul Marsh, who
follows media firms for the Los Angeles investment firm Bateman
Eichler, Hill Richards: "The Mickey Mouse trademark is a bit
like the Statue of Liberty. I don't think it's for sale."
Paramount, valued at about $5 billion, seems more interested
in buying than in being bought.

    Finally, while Americans may gripe about the foreign
takeovers of Hollywood's dream machines, none of the buyouts
have been hostile. Far from sneaking into Hollywood, both Sony
and Matsushita were squired around by superagent Michael Ovitz,
the homegrown power broker. All of which brings to mind a scene
in the 1978 film Heaven Can Wait in which the fictional owner
of the Los Angeles Rams decries the abrupt takeover of the team
by a fancy-pants financier. "The s.o.b. got my team," he moans.
But how did the sneaky businessman do it? Says the team owner:
"I asked for $67 million. And he said O.K." Last week
Matsushita said O.K. Does that make American culture a victim?
Hardly. If anything, a company that invests $6.1 billion in a
venture is likely to treat its new possession like the rarest
of gems.