The Big Five
excerpted from the book
The New Media Monopoly
by Ben Bagdikian
Beacon Press, 2004
... 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.
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'
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
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
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
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
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
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
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
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.
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
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
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."
New Media Monopoly