Guest Commentary: Megamergers lengthen unemployment lines

Dec 10, 2001  •  Post A Comment

Until recently, as a general rule the entertainment industry had been considered a resilient, recession-proof business. Dating back to the Great Depression, we’ve heard stories of people standing in bread lines who would somehow find a way to save a few bucks so that they could see a movie. This stress-relieving diversion, this escape mechanism, has been a testimonial to the durability of the American psyche and gave birth to the song and adage “There’s No Business Like Show Business.”
Little did we know that eight decades and many recessions later, show business itself would be a major contributor to unemployment lines and its own human-resource ranks would be victimized by the multiple megamergers that are causing massive staff downsizings across the board. By ceding too much power to these few oversized corporate entertainment entities, the federal government’s ongoing deregulation policies are actually instigating a negative domino effect on the economy. Each one of the following merger and/or acquisition deals has led to major job losses this year. The frightening reality is that more are in the works. A broken record is playing, and no one is listening as it spins out of control.
* The AOL Time Warner merger has caused 12,000 layoffs since last January.
* It’s no longer just speculation that Disney’s acquisition of Fox Family will trigger multiple layoffs.
* News Corp.’s purchase of the Chris-Craft stations is having a devastating effect on the television job market. In every city where a duopoly exists, staff is being consolidated, and the Chris-Craft general managers are losing their jobs while the Fox GMs take charge of both stations.
* Clear Channel Communications has acquired The Ackerley Group, which will almost certainly result in a newly sharpened ax falling on many employees, primarily from The Ackerley Group, due to redundancies in those markets where operations and/or duties and responsibilities are duplicated.
* NBC/GE, which already owns one-third of Paxson Communications and will almost certainly soon exercise its option to own the majority share, and a large number of Paxson employees have already been laid off due to centralization of resources and operations. NBC is now spending $2 billion and assuming $700 million in debt to acquire Telemundo, the nation’s No. 2 Spanish-language television network. Who knows how many jobs will be lost as a result of this deal? We are certain the number will be significant, not to mention the fact that NBC will now have a multilingual triopoly in New York and a quadropoly in Los Angeles. Can the sale of Univision be far behind?
* Last month we learned that Sony’s network television unit is being disbanded because it’s a business that cannot compete profitably without the vertical integration that exists among many of its competitors, who through mergers and acquisitions have added their own distribution outlets. Sony (which is limited by the foreign ownership cap) has not. If you examine the situation closely, the cumulative effect of many forces contributed to Howard Stringer’s painful decision to get out of the network television production business, which is a deficit-financing quagmire.
Unless you own your own distribution outlets in today’s marketplace, you are at the mercy of those who do. First, the feds dropped the financial interest-syndication rule, which immediately gave back the power that the measure had stripped from the networks in 1970, when ABC, CBS and NBC reigned supreme. Now, cross-ownership, duopolies, triopolies and even potential quadropolies are likely to be permitted, as openly declared by Michael Powell, chairman of the Federal Communications Commission.
* Well, it finally happened: EchoStar won the bidding war for DirecTV. The greater of the two evils has prevailed (the lesser being an acquisition by News Corp.). And if the deal is approved by the government’s regulatory agents, as has been the recent trend, one company will own 91 percent of the DBS skies in America. This will be a true test of Michael Powell’s deregulatory resolve. With the unemployment ranks swelling to an October/November high of almost 6 percent, this merger is not good news for the economy. Redundancy and consolidation will lead to the loss of many more jobs, not to mention the ramifications pertaining to fewer programming options available to the viewers and the cost of installation and higher subscription fees to new customers.
Rumor has it that AOL Time Warner or Comcast Corp. will soon merge with or buy AT&T Broadband. Now that NBC has acquired Telemundo, if Univision is sold and one of the other networks such as Fox buys this prize, there is a potential quintopoly in the making.
We’re predicting that the sale of Sony Corp.’s Sony Pictures Entertainment now seems inevitable. Sony CEO Nobuyuki Idei has lost his enthusiasm for this enterprise. Don’t be surprised if you see another major studio or broadcast network gobble it up-and just watch the resulting layoffs.
Stay tuned. It appears that Santa isn’t going to take care of many of his workers this Christmas. He already gave away all of the presents to a handpicked group of oversized, greedy rich kids.
Brad Marks is CEO of the executive placement firm Brad Marks International.