Hard to believe but it was exactly a decade ago that Time and Warner got hitched -- followed in short order by WPP Group's hostile takeover of Ogilvy. Coming on the heels of the Saatchi snatches and the Omnicom expansion, the communications mergers appeared to herald an era of giants, with massive media replacing mass media at the center of the infotainment universe.
When a pair of laggards called Viacom and Disney devoured, respectively, Paramount and Cap Cities-ABC, it only seemed to confirm the future belonged to the megamerged content and distribution behemoths, in both the consumer media and marketing communications industries.
But a funny thing happened on the road to mega: nothing.
In the media and entertainment realm, Time Warner teetered for years, its share price lagging, its fractious executives conniving. Only by successfully defenestrating his rivals and securing surprising cooperation from the unstable Ted Turner was Chairman-CEO Gerald Levin able to survive. Viacom, too, was a hotbed of tumult, afflicted with management instability and seesawing businesses.
In advertising, Martin Sorrell hovered on the edge of insolvency before his banking brinksmanship and a rising marketplace brought him back from near death. As for the Saatchis -- there's a lot of them l'il buggers running around these days, and they don't all seem to belong to the same company. In the 10 years since the media megamergers really began, most merged megas significantly underperformed the S&P 500.
If I sound a little put off by the whole thing, it's because I was one of those gullible reporters who swallowed the moguls' rationale -- hook, line and "synker." Synergy was the magic word then. Although Viacom and CBS Corp. executives have studiously avoided the now-discredited term, they're still pushing the concept on credulous analysts and journalists.
MTV and CMT: Country Music Television and the radio stations -- they "fit"! The Paramount studio and the CBS network -- they "mesh"! The TV stations, the billboards, the cable networks -- we can "cross-sell"! The cable nets and the broadcast net -- we can "cross-promote"!
There are many reasons synergy has been less than meets the eye. I've learned to boil them down to one: people. There are the people who sell; generally, they want the highest prices for their products. And there are the people who buy; they prefer the lowest possible prices. For a multidivisional conglomerate bent on seeking efficiencies in the production and distribution of information and entertainment products, these damn people are always getting in the way.
While it may be in the interest of an infotainment giant to force its productions onto its network to capture a syndication windfall somewhere down the road, that's too risky for the people actually managing the network, whose jobs rest on their ability to keep ratings, ad prices and revenues as high as possible. If they do manage to squeeze a hometown hit onto the neighborhood network, the pesky talent has a way of demanding a raise.
On the marketing communications front, the mega-agencies failed miserably at cross-selling packages of services; even at a discount, clients rightly recognized the attempt to ram second-rate resources down their throats. Media companies' efforts to package ad time and space across products and platforms have met a similar fate. Whatever the enterprise, managers whose compensation is based on increasing revenues aren't willing to fall on their swords for the sake of a sister division.
Meanwhile, creativity seems in terribly short supply in all these merged entities. The networks and studios have come up with nothing to stave off broadcasting's long-term decline; Hollywood is ceding its audience to the independents; and Madison Avenue, having bought all the boutiques, finds itself in the creative doldrums.
I don't mean to diss the latest deal. Last January in this space, I wished someone would come along and put CBS out of its misery. Someone did -- Mel Karmazin. Abetted by Les Moonves and other senior execs, he's improved its programming, developed a cogent new media strategy and, by engineering the Viacom buyout, done well for the shareholders.
But the lesson of the last 10 years -- dare we call it the Media Decade? -- is still clear. There's only one path to success: Make great products that attract audiences and revenue, and build companies so well-run they translate those revenues into predictably increased earnings, year after year.