The Big Five

excerpted from the book

The New Media Monopoly

by Ben Bagdikian

Beacon Press, 2004

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... it would have been difficult to imagine in 1983 that the corporations that owned all the country's dominant mass media would, in less than twenty years, shrink from fifty separate companies to five.

If however one looks at the properties of the dominant five, it provides some insight into how it could have happened. Their steady accumulation of power in the world of news, radio, television, magazines, books, and movies gave them a steady accumulation of power in politics. Political leaders and parties know that the news media control how those politicians are depicted to the voting public; the more powerful the leading media, the more powerful their influence over politicians and national policy. Prudent politicians treat the desires of all large corporations with care. But politicians treat the country's most powerful media corporations with something approaching reverence.

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Who and what are these dominant five media corporations?

Time Warner, The Largest

On January10,2000, the American television audience was invited to the most expensive marriage ceremony in history. It was a corporate wedding, so the loving couple were two men, and it was not uncouth to mention money. In the Wall Street Book of Common Stock, it is mandatory to mention the wealth of newly joined couples. That is why the news mentioned that the ritual combined one party worth $163 billion with its soul mate worth $120 billion.

The merger joined America Online, headed by Steven Case, and Time Warner, headed by Gerald Levin (in corporate weddings it is not always easy to distinguish which is the groom and which the bride). Case, forty-two years old, had built a firm with the most common acronym, aol, for the servers that lead to sites in the vast universe of the Internet. Earlier, AOL had already merged with competitors Netscape and CompuServe. Levin's Time Warner bad been the empire Henry Luce had built seventy-seven years earlier when Luce had co-founded Time magazine. Long before the marriage, Luce and his successors at Time, Inc. had spawned a growing family of magazines that included Life, Fortune, Holiday, Sports Illustrated, and People; Time, Inc. later merged with Warner Brothers, which itself had gathered other firms in music, movies, television, and newer media.

In addition to its other headline-making news, the merger became the most spectacular celebration of what was, at the time, the ultimate holy word on Wall Street, synergy. Synergy, borrowed from physiology, describes how the combination of two separate entities produces a power greater than the simple addition of the two. The word became a mantra with merger specialists, investment bankers, and entrepreneurs. it seemed inevitable that combining the two corporations would more than double their separate powers in the marketplace.

AOL Time Warner was seen as synergy perfected: Time Warner had by this time a large quantity of media products from magazines to movies (an undifferentiated commodity known on Wall Street as "content"), and AOL had the best pipeline through which to send this "content" instantly to customers' computers.

A list of the properties controlled by AOL Time Warner takes ten typed pages listing 292 separate companies and subsidiaries. Of these, twenty-two are joint ventures with other major corporations involved in varying degrees with media operations. These partners include 3Com, eBay, Hewlett-Packard, Citigroup, Ticketmaster, American Express, Homestore, Sony, Viva, Bertelsmann, Polygram, and Amazon.com. Some of the more familiar fully owned properties of Time Warner include Book-of-the-Month Club; Little, Brown publishers; HBO, with its seven channels; CNN; seven specialized and foreign-language channels; Road Runner; Warner Brothers Studios; Weight Watchers; Popular Science; and fifty-two different record labels.

The marriage ran into difficulties over, as usual, money. The couple's wedding required massive debt, but it was a time when debt was considered unimportant. In 2000, the marketplace was flooded by investors in the digital world eager for magical pieces of paper called stock options that had made some people millionaires overnight. Major banks with fine old nineteenth-century names lent billions without looking too closely at the arithmetic in the borrowers' balance sheets (or at their own, it later became clear). The public was told that this was the "new economy." Dismissed as hopelessly obsolete were notions like judging a company on the basis of whether there was some relationship between income and outgo or between assets and liabilities.

The new economy developed, at the very least, birth pains. By 2003, Time Warner had a metaphoric yard sale on its front lawn. It was trying to sell its book divisions, the fifth largest in the country, worth more than $30 million. Steven Case and Gerald Levin had been unseated by unhappy board members, and by 2002 the Securities and Exchange Commission and the Department of justice had announced that they wished to examine how AOL had kept its books before the merger.

But it was still the biggest media firm in the world.

Disney, the Mouse That Roared

The lovable rodent with big ears, the one called Mickey, with the squeaky, baby-like voice and the innocent charm, is really more than seventy-five years old and makes more than $25 billion a year. To be more precise, he and his playmates really make that money for his corporate parent, the Walt Disney Company. The firm now controls more subsidiaries than Walt himself had added, like his first Disneyland. The innocence of Mickey and his friends Goofy, Dumbo, and the Seven Dwarfs enchanted generations of children around the world. David Low, the British political cartoonist, called Walt "the most significant figure in graphic arts since Leonardo."

It is true that Walt Disney, the father of the mouse empire, was a country boy who became an international phenomenon. His creations are everywhere in the world - "Topolino" in Italy, "Mi Lao Shu" in China, and "Mikki Maus" in Russia. His Fantasia, a series of color movie episodes set to music played by the Philadelphia Symphony Orchestra, is still presented periodically in theaters all over the world.'

Walt's touch with the tastes of children was genuine. He grew up on a Missouri farm, and after his Uncle Mike, a locomotive engineer on the Atchison, Topeka, and Santa Fe, bought him a box of crayons, Walt drew pictures of tiny animals on everything, including the side of the farm truck. When the farm failed, the family moved to Chicago, where, after his daytime high school classes, Walt went to night classes at the Academy of Fine Arts. After he had become a Hollywood success, a legend grew that he had no ability in art, but it was not true (although, when his artists went on strike shortly after World War II, their picket signs read, "Walt Cant Draw").10 When Walt Disney died in 1966 of lung cancer (he had chain-smoked French Gitane cigarettes), radio-television commentator Eric Severeid said, ,we'll never see his like again."

Severeid was right, but the Disney company grew in ways Walt might not have imagined. It would become the seventy-third largest industry in the United States under a leader whose roots could not be more different. Michael Eisner, chairman and CEO of the Walt Disney Company, grew up in a fashionable Park Avenue apartment in New York City, the son of an affluent lawyer. His parents required him to do two hours of homework for every hour he watched television. Michael began as a premedical student at Dennison University (A.B., Class of 1964) but switched to English literature and theater. He then got a job as a clerk in the Federal Communications Commission. But in six weeks he went to CBS children's programming, where his job was picking the right spot in which to drop commercials.

Eisner was not charmed with the routine, and instantly he sent out hundreds of resumes. He received only one response, but that one was crucial. It was from Barry Diller, head of programming at ABC. Diller, who by 1967 had produced his own TV special, "Feelin Groovy at Marine World," became Eisner's mentor. When Diller became chairman of the board, he made Eisner president and CEO. Eisner soon cut costs at Paramount Pictures to $8.5 million per picture at a time when the industry average was 30 percent higher.

Eisner had caught the merger and acquisition fever of the 1980s and 1990s. In 1984 he was named ABC's chairman and CEO, and ten years later acquired the newspaper-broadcast chain ABC/Cap Cities. It became the Walt Disney Company. When Eisner hired Michael Ovitz, "the most powerful man in Hollywood" and head of the dominant Creative Artists Agency, Time magazine ran a full-color portrait of Ovitz in royal robes and a crown."

The national media coronation of Ovitz may have been a tactical pitfall. The Walt Disney Company was now a global empire, and empires seldom remain peaceful with co-emperors. In a short time, Ovitz "the most powerful man' was out. The Los Angeles Times published a satirical "My Dinner with Ovitz," in which Ovitz blames his fate on Hollywood's "gay mafia," in which he seemed to include other big names like David Geffen, Michael Eisner, Barry Diller, and many others."

Eisner, who has a talent for promoting his own enterprises, had a reputation for wanting nothing about his personal life publicized. If he heard of some possibility, he made rigorous efforts to suppress it. But inevitably there were moves for the usual tell-it-all books about any powerful national figure, and that began a battle. Broadway Books commissioned an Eisner biography, Keys to the Kingdom, by Kim Masters, a contributor to Vanity Fair, with a $700,000 advance. The publisher's spring catalog listed it as "brilliantly reported." But the head of Broadway Books suddenly decided that the "brilliantly reported" manuscript was "unacceptable." Another publisher, Morrow Books, found it fine and picked it up. The suspicion was that Eisner, increasingly powerful, had the original contract killed.

In the nature of many celebrity biographies, this became a mud fight. The book was said to include Eisner's quarrel with his former protégé Jeffrey Katzenberg. Author Masters said her original editor had received a Disney demand to cancel the book. There were Hollywood rumors that Broadways Book's parent firm, Bertelsmann, was planning to buy some German television stations from Eisner's Disney company and did not wish to displease Eisner. 14

Despite the ingredients of a stereotypical Hollywood publicity war, a more immediate problem arose. Board members, including Walt's nephew Roy Disney, questioned the Disney company's falling revenues and shareholder value. There were pointed queries about Disney accounting and about Eisner personally. The usual rumors questioned whether the directors were about to take back Eisner's "keys to the kingdom."

Disney ownership of a hockey team called The Mighty Ducks of Anaheim does not begin to describe the vastness of the kingdom. Hollywood is still its symbolic heart, with eight movie production studios and distributors: Walt Disney Pictures, Touchstone Pictures, Miramax, Buena Vista Home Video, Buena Vista Home Entertainment, Buena Vista International, Hollywood Pictures, and Caravan Pictures.

The Walt Disney Company controls eight book house imprints under Walt Disney Company Book Publishing and ABC Publishing Group; seventeen magazines; the ABC Television Network, with ten owned and operated stations of its own including in the five top markets; thirty radio stations, including all the major markets; eleven cable channels, including Disney, ESPN (jointly), A&E, and the History Channel; thirteen international broadcast channels stretching from Australia to Brazil; seven production and sports units around the world; and seventeen Internet sites, including the ABC group, ESPN.sportszone, NFL.com, NBAZ.com, and NASCAR.com. Its five music groups include the Buena Vista, Lyric Street, and Walt Disney labels, and live theater productions growing out of the movies The Lion King, Beauty and the Beast, and King David.

The company has a quarter interest in the Anaheim Angels baseball team and owns fifteen theme parks and its cruise line. It has its own interactive subsidiaries, with CDROMs for video games, and computer software. Its more than one hundred retail stores sell Disney-related products. Almost as an after-thought, it has a part interest in Bass oil and gas production.

Like all other dominant media corporations, Disney takes on cartel-like character through twenty-six joint ventures with other corporations, most of them media companies that constitute Disney's main "competitors." Some of the joint ventures are with General Electric (whose NBC competes head to head with ABC, Hearst, ESPN, Comcast, and Liberty Media).

By late 2003, Eisner's leadership of the Disney empire was seriously threatened. Disney stock was falling in value and Roy Disney, nephew of Walt Disney and vice chairman of the board, resigned along with another board member. He issued a highly publicized demand that Eisner resign as well.

The "magic kingdom" apparently had lost some of its magic, especially in financial performance of its ABC network and one of its most profitable divisions, the Disney cruises. This encouraged big cable's Comcast to move toward merger or purchase.

Murdoch's News Corp: Hearst Reborn?

When Murdoch's News Corporation acquired Hughes's DirecTV satellite system, it not only added $9 billion a year in annual income but also gave his Fox programs a new medium for reaching millions of homes through small rooftop satellite dishes. Though fiberoptic channel, with its huge transmission capacity, has a better foothold, Murdoch's new acquisition gave him the power to intimidate bigger systems like Time Warner and cable systems, by offering home gadgets to record his programs via DirecTV without commercials. The possibility of eliminating commercials is a perpetual nightmare for media industries and their advertisers. Consequently, promises of adless commercial television and cable programs have a short half-life: once adless cable programs have accumulated a large enough audience, grateful for the absence of commercial interruptions, the program owners seem unable to resist selling their audiences to eager advertisers.

Furthermore, Murdoch realized be could use DirecTV to put himself on both sides of bargaining tables. He is a tough and patient negotiator and can use earlier acquisitions of his cluster of Fox sports channels plus DirecTV to get his own price for carrying schedules of big sports teams and special events. Other network outlets, like Disney's ESPN, ESPN2, and ESPNRegional (some held jointly with Hearst) may have to deal with DirecTV, as will cable companies for households desiring Fox-originated sports. Professional teams use broadcast rights as a major source of their income, but Murdoch can make them sell him their broadcast rights for less because his acquisitions have further reduced the number of bidders.

in bargaining between owners of sports teams selling broadcast rights and the broadcasters bidding for them, Murdoch found a way to be both buyer and seller. Like other media companies, he wanted broadcast rights for popular sports events. So he bought the teams. At one time he owned the Los Angeles Dodgers, New York Knicks, and part interest in four others, plus Fox Sports Radio Network. Gene Kimmelman of Consumers Union said, "Hold on to your wallets. Prices will go through the roof." The rising prices will, of course, result in higher payments by the public.

Those who possess that kind of power seldom permit it to remain idle. The mass media, especially the news media, have used their power to obtain special governmental favors for themselves and their proper-ties. Rupert Murdoch, brazen in his methods, makes clear what other major media owners achieve by more conventional methods, like campaign contributions and lobbying in Washington.

Brazen or not, two impulses seem to drive Murdoch's business life -the accumulation of as much media power as possible and the use of that power to promote his deep-seated conservative politics.

Born Keith Rupert Murdoch in 1931, he soon dropped the Keith and, at the age of twenty-three, was given control of a faltering paper in Adelaide, a tiny part of his father's Australian news empire (an echo of the original William Randolph Hearst, whose rich father gave him a present of his first paper, the San Francisco Examiner). At Oxford, Murdoch had been a wild Marxist, nicknamed "Red Rupert," a youthful fling with leftism that settled into ultraconservatism (again, a parallel with the transformation of young socialist Hearst, who soon became the adult reactionary Hearst).

Murdoch became an unrelenting builder of international media empires. He left his Australian papers for England, where he soon owned two of Great Britain's largest papers, an afternoon sleazy tabloid and a Sunday paper full of overflowing female bodies and sensational gossip.

Wanting direct political power beyond his sensationalist moneymakers, he moved to acquire two more newspapers that happened to be among the world's most influential, the Sunday Times and the (daily) Times. Because he already had acquired two national newspapers with circulations in the millions, his acquisition of the Sunday and daily Times was forbidden by England's Monopoly Commission. But he obtained stock pending official approval and used his media to help Conservative candidate Margaret Thatcher win election as prime minister. With Thatcher's cooperation, Murdoch broke the Minority Commission rules and acquired both Times newspapers. The Economist magazine reported that Murdochs British holdings in 2000 had $2.1 billion in profits, but by creative bookkeeping and political influence he did not pay a shilling in British taxes. This would not be the first time Murdoch would use his media power to evade laws and regulations that might interfere with his acquiring still more media power.

If Murdoch wants something sufficiently valuable, he can momentarily suspend his personal politics. When China disapproved of Murdoch's satellite news carrying British Broadcasting Company (BBC) items critical of Communist China, he immediately dropped the BBC from his Asian satellite programs. When he decided to establish a U.S. empire, he bought the once-liberal tabloid, the New York Post, and with the support of New York's Democratic mayor (whom he had wooed with pleasing stories in the Post), he gained approval. When he decided to create his own U.S. radio and television network, Fox, he was confronted by an American law no broadcaster had ever circumvented, though many had tried. The law requires that no foreign entity may own more than 24.9 percent of a U.S. radio or television station. Murdoch changed his citizenship from Australian to United States, but that gesture was not enough. He still failed to comply with the broadcast law that requires the broadcaster's parent corporation to be based within the United States.

Murdoch refused to move the company because he had special tax advantages in Australia. Instead, he used his new American power base of four newspapers and two magazines as levers for his legendary political behind-the-scenes navigating to obtain special favors. It was a shock to other foreign firms, which had attempted but never succeeded in entering U.S. broadcasting, when Murdoch was granted the first waiver of that United States-only ownership law that had ever been granted. It still has never been granted to anyone else.

Still dedicated to his right-wing politics but willing to make temporary suspensions for corporate advantages, in 198o he applied for a taxpayer-subsidized loan from the Export-Import Bank of the United States. The bank staff rejected the application. Murdoch had lunch in the White House with President Jimmy Carter, a Democrat, and with the president of the Export-Import Bank. Two days later Murdoch's New York Post endorsed Carter in a bitterly fought New York presidential primary. Six days later the Export-Import Bank gave Murdoch his loan for $290 million for his airline, a loan underwritten by American taxpayers for a foreign airline.

After Newt Gingrich (whose ultraconservative politics were also Murdoch's) led the 1994 Republican sweep of Congress, he was considered the most powerful politician in the United States. Murdoch, through his wholly owned book house, HarperCollins, offered Gingrich $4.5 million for an as-yet-unwritten book.

Murdoch now has the Fox television network, the most violent and conservative in U.S. broadcasting. Beyond that, he has created a vast global network of proper-ties and complex media partnerships. As he ages, he remains in command of the huge operations. His two sons could inherit leadership if they can avoid ruinous sibling rivalries that have afflicted other media empires whose children, like King Lear's, quarreled over their inheritance with disastrous results."

Murdoch's empire is one to whet the appetite of a possible heir. In book publishing alone, the parent firm, News Corporation, owns HarperCollins Publishers, with twenty-six imprints that include HarperCollins (once Harper and Row), William Morrow, and Avon, with $i billion annual revenues.

In due course, one station at a time, small group by small group, Murdoch' s Fox Network has emerged as the fourth TV network, joining what had been the old-line triumvirate of ABC, CBS, and NBC. Fox has twenty-three wholly owned or affiliated network stations in the United States; is the prime broadcaster of sports, with twenty different sports broadcasting franchises around the country; and has a reputation for the network with the most violent shows on TV, a superlative that in U.S. television requires a truly prodigious flow of blood on the screen.

The man famous for the most open display of supporting only far-right commentators, many of them shouters of insults about broadcasters considered insufficiently conservative, seems to have a certain lack of self-awareness. When satirical author Al Franken issued a book called Lies, and the Lying Liars Who Tell Them: A Fair and Balanced Look at the Right, lawyers for Murdoch filed a lawsuit claiming the theft of a trademark, namely, the title of Murdoch' s news coverage, "Fair and Balanced," which an outside observer might consider cleverly self-satirical except that Murdoch uses it in dead, literal earnest. His lawyers told the court that Mr. Franken's book would "blur and tarnish' Murdoch's news.

Bibles, Bottoms and Bosoms

With Murdoch' s acquisition of DirecTV, the number of television and data channels he owns runs into the hundreds. He has thirty cable and satellite properties, including a half-interest in the National Geographic cable channel, in which he shares ownership with not only National Geographic but also his broadcast "competitor," General Electric, which owns NBC. Outside the United States, Murdoch owns twenty-eight broadcast channels in the United Kingdom, eight of them shared ownership with Paramount, Nickelodeon, and other British broadcasters. He owns two services in Germany, sixteen in Australia, one in Canada, six in India, a minority stake in an Italian station, two in Indonesia, two in Japan, and eight in Latin America.

Murdoch owns eight magazines in the United States, one of which is a conservative weekly edited by William Kristol and is the political primer for George W. Bush's White House policymakers.

Motion pictures are also in the collection of the News Corporation, with eight subsidiaries, including Twentieth Century Fox. The total empire includes media in North and South America, Asia, and Australia. Murdoch owns thirty-one newspapers in Australia, three in Fiji-one in English, one in Fijian, and one in Hindi- and a half-interest in a New Zealand newspaper chain. He is the largest broadcaster in Asia, with forty channels in eight languages, covering fifty-three countries.

His partnerships include major competitors in the United States, such as General Electric (NBC) and Paramount (Viacom).

Mr. Murdoch is a man of many parts. He still publishes the sex-and-sensation News of the World, which has the largest circulation in the United Kingdom, and, as noted by Rod and Alma Holmgren in Outrageous Fortune, 22 Murdoch has been called "buccaneer, tycoon, octopus, gambler, union scourge, and pirate." But he is also the owner of Vondervan, the company that publishes the largest number of commercially printed Bibles in America. One wonders whether somewhere a publishing deity grants Murdoch absolution because his "bottoms-and-breasts" News of the World has 4 million circulation, but his Vondervan sells 7 million Bibles a year.

Viacom

What is now the fourth largest media conglomerate in the country began in the back room of a house in Chicago, where family members of a Russian immigrant spent their days rolling cigars. An uncle took each day's production to find smoke shops that would sell them. The business prospered, and Sam Paley, the cigar maker, opened first a small plant and then a dozen factories; finally he created a prize brand, La Palina, as in "Paley." Sam took his young son, William, into the business and sent him to the University of Chicago and the Wharton School of Business, by which time the family had moved to Philadelphia. Today's giant, Viacom, might not exist if young William had not taken advantage of a wild idea when he was left in charge while the rest of the family took a European vacation. He spent fifty dollars a week of company money to buy air time to put on what he called "The La Palina Hour" (it ran only thirty minutes).

A family friend bought a group of scattered radio stations that he called the Columbia Broadcasting System (CBS), though they were separate operations and not a system or network. In any case, they were dwarfed by the giant NBC. Soon, the CBS stations approached bankruptcy. Purely out of friendship, Sam Paley bought out his debt-loaded friend and, as much to be rid of a friendly burden as anything else, turned the stations over to his son William. Sam told a friend, "I just bought the Columbia Broadcasting System for my son. I paid a quarter of a million for it, " Sam added that he doubted that it would amount to much.

CBS had no affiliates like those of NBC, which were required to take some programs from network headquarters on condition that they paid NBC, gave some time from their local schedules, and let NBC keep the money from its commercials. A real network was the only way the scattered CBS stations could hope to become a real system with a chance to compete with NBC. But CBS affiliates weren't willing to sacrifice any of their own moneymaking time for an unproven upstart. So William told his distant stations that he would produce shows himself and, unlike NBC, let the affiliates have them free of charge if they would give him spots during their schedule for a few of his CBS-made programs and commercials. CBS thus became a real network.

With the start of World War 11 in Europe, CBS knew it needed correspondents in what was becoming the Battle of Britain against German air bombardments. In London, a tall, lean man from North Carolina was assigned to the job. For American listeners, his deep, resonant voice became a link to the sound of German bombs falling in London. As the war spread and America's role expanded, so did CBS reporting, and soon the tall, lean man from North Carolina, Edward R. Murrow, had gathered around him the reporters called "Murrow's Boys." For decades thereafter, they were the voices of CBS News-voices like those of Walter Cronkite, Howard K. Smith, Charles Collingwood, Marvin Kalb, and Charles Kuralt. Murrow's producer was a man born Ferdinand Friendly Wachheimer in Providence, R.I. A local Providence station hired him, and the first day his boss announced bluntly, "From now on your name is 'Fred Friendly."

The Murrow-Friendly team lasted until Murrow, whose chain-smoking was almost his trademark, died of cancer in 1965.

For fifty years CBS was the gold standard of American radio and television news. it had the best documentary unit and the best news staff in American radio and television. When something big happened in the world, sophisticated Americans turned to CBS because when they suddenly heard, "We interrupt this program. . ." they knew that, if it was truly important, CBS would put it on the air at once and do it with trusted reporters. (CNN's twenty-four-hour news was not created until 1980 by Ted Turner.)

If the 1990s was the decade of the dot.com boom and bust, the 1980s was the decade of the hostile takeover. Investors looking for a killing would watch balance sheets of big corporations to see if they were putting some of their comfortable profits into more quality, giving some to shareholders, and putting some into reserves for a rainy day. Spotting that kind of prudent financial management, the takeover specialists would begin buying blocks of stock, thus raising profits to push share prices even higher. This would entice shareholders to sell their stock while prices were rising. Then, at the right moment, the hostile takeover operator would sell it all off to make instant millions and billions. Often, these operators left behind weakened or wrecked companies.

In 1986, CBS knew it was a target. General Electric had just paid $96 billion for RCA with its subsidiary, NBC. CBS feared a similar fate and, like some other traditional corporations facing hostile takeovers, they looked for a "white knight," a sympathetic firm they could trust to buy enough controlling stock to rebuff the marauders. The Paleys believed they had found one in Lawrence Tisch, whose Leow's Investment Company owned billions in Manhattan real estate. Tisch agreed to be the white knight who would save CBS. In 1995, "White Knight" Tisch sold CBS to Westinghouse, which began selling off CBS subsidiaries for fabulous profits; Sony, for example, paid Tisch $2 billion for CBS Music Group alone. in 1999, Viacom, headed by Sumner Redstone, who had become rich as the head of a film distribution firm, bought CBS for $5o billion. The CBS network came with its boss, Mel Karmazin. Three years earlier Karmazin had sold his radio group, Infinity Broadcasting, to Westinghouse Electric. Karmazin had hoped to buy CBS himself. It was inevitable that Karmazin, with a tough and hard-driving personality, and Redstone would clash. Redstone won by conceding that Karmazin would have a three-year contract, to 2003, and that whenever Redstone, then eighty years old, ceased to be CEO, Karmazin would get the job.

The two sparring leaders of the fourth largest media conglomerate in the country and one of the two hundred largest in the world are an odd couple: Redstone, a New Englander, Boston Latin, Harvard '44, Harvard Law School, and a familiar among high federal court judges, the Masons and the Harvard Club; Karmazin, born in a Long Island City housing project, his father a cab driver, his mother a factory worker. Starting as a smalltime worker in an ad agency, Karmazin worked with demonic zeal selling ads and became a phenomenon. He took a job at the new Infinity station group on condition that he get 1 percent of ownership, $125,000 starting salary, and a red Mercedes. After NBC fired "shock jock" Howard Stern and raunchy talk radio star Don Imus, Karmazin hired them for CBS on condition that their broadcast rants would never mention the name Mel Karmazin. His old boss, John Kluge of Metromedia, says that Karmazin' s stake in CBS is worth $400 million, but in his ambitious and frugal way (except for the red Mercedes) "he acts like it's $40,000."

Redstone and Karmazin may be an odd couple, but after a period of public battle over the negotiations, they renewed the partnership in 2003, making peace only in a subtly worded press release. Together, feuding or not, they rule one of the largest media conglomerates in the world.

Bertelsmann and Its Ghost

If one drives southwest from Hanover, Germany, and is careful to remain on Berliner Strasse for about 125 kilometers, one will come to Gutersloh, a pleasant town of sculptured tulip gardens, high-spired churches, and tree-lined streams and lakes. It is a town of thirty-six thousand that lists as an honorary citizen, among others, Reinhard Mohn. This is the ancestral home of the Mohn family, who happen to own the privately owned firm of Bertelsmann A.G., the fifth largest media corporation in the United States and, among other things, the largest printer of English-language books in the world. Yet, Gutersloh is so obscure that it isn't even mentioned in American travel guide books on Germany, including the ones Bertelsmann owns, Fodor's Travel Guides.

The picturesque town gives little hint that Bertelsmann is one of the world's largest broadcasters, magazine publishers, and record companies, as well as a massive book publishing business. Like the other members of the Big Five that dominate the American media world, Bertelsmann's list of media companies is lengthy. It requires nine typed pages. Thirty percent of its holdings are in the United States, bringing from this source alone $63 billion annually.

Most of Bertelsmanns eighty-two book subsidiaries were once freestanding, independent publishing houses, some of them household words not so many years ago Alfred Knopf, Pantheon, Random House, Ballantine, Bantam, Crown, Doubleday, and Modem Library. Its magazine groups include familiar names like Family Circle and Parents (joint ventures). The twenty different record labels issued by Bertelsmann include RCA, RCA Victor, and Windham Hill. Like others in the Big Five, Bertelsmann has shared enterprises with its "competitors," including a 50-50 ownership with Disney of a German TV operation, Super RTL.

With all its power, Bertelsmann is haunted by a ghost.

Of all the new corporations that dominate the American scene, none can trace uninterrupted lineage as far back as Bertelsmann. In 1835, Carl Bertelsmann set up a print shop in Gutersloh to publish Lutheran hymn books. The company printed German-language editions of Lord Byron and the fairy tales of the Brothers Grimm. By the early 1900s, the company was a major publishing house with growing international subsidiaries.

With the advent of Hitler and Nazism in the 1930s and the aftermath horrors of the Holocaust in World War 11, questions were asked how the company had emerged from the war ready to resume its growth around the world. To queries like "What did you do under Hitler?" the Bertelsmann official answer was, in effect, "We suffered for our anti-Nazism." Postwar records seemed to confirm this because in 1944 there was a temporary closure of the Bertelsmann plant in Gutersloh. But as postwar German archives became available, Gennan sociologist Hersch Fischler discovered that, during the war, Bertelsmann had, in fact, been the largest publisher under Hitler. Among its 19 million books, it had large contracts from the Nazi Propaganda Ministry, including anti-Semitic tracts supporting Hitler's insistence that Germans needed to take over central and western Europe. One book echoed Hitler's propaganda claim. Bertelsmann's anti-Semitic tracts were standard literature for Hitler's Brown Shirts.

In Germany, as everywhere else, media power is political power, so even in postwar anti-Nazi Germany, Professor Fischler's findings were not printed in any German newspapers or magazines. They appeared first only in Switzerland and later in The Nation in the United States. Bertelsmann apologized and appointed a commission of four historians to study the entire wartime history of the company. As it had said, the company did stop publishing during the war but not because of its alleged anti-Nazism. The deteriorating Nazi regime had simply run out of paper. Presumably, by now the Nazi-era ghost has been exorcized, and the Bertelsmann empire continues to expand.

In late 2003, Bertelsmann experienced the Lear-like question of family-run empires that was also true when Rupert Murdoch was forced to decide which of two sons would someday become the new leader. In the case of Bertelsmann, the leader was Reinhard Mohn, at eighty-six, an age that inevitably creates a sense of urgency over succession. His much younger wife, Elisabeth, sixty-six, is head of the trust that controls a majority of Bertelsmann stock and sits on the four-member committee within the board of directors that selects top executives. Some board members and executives have been restive over Mrs. Molin's increasing power in replacing three executives and her appointing two of her three sons to operating influence within the giant firm. The German magazine Der Spiegel quoted one unhappy Bertelsmann executive as fearing "a matriarchal dynasty."

Though unrelated to family members, the chieftains of the other three of the Big Five had their own leadership stresses. Case and Levin were unseated at Time Warner; Eisner was in trouble at Disney; and Redstone and Karmazin eyed each other warily on succession to the Viacom throne. Despite skirmishes over top leadership, the Big Five media conglomerates possess such commanding size and power in the marketplace that boardroom rivalries leave untouched their corporate domination of the country's mass media. Rivalries for top titles are merely part of personal intrigues typical of all hierarchies, described by Shakespeare, "Uneasy lies the head that wears a crown."

The New Media Monopoly

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