Ms. Fabrikant noted that Viacom's announcement was the second in as many days
"Viacom said yesterday [March 16] that it was weighing a plan to divide its businesses into two public companies, a move that would unravel years of empire building by the chief executive, Sumner M. Redstone."
Fabrikant supported her coup de grace--that "with the announcement that he is now considering a breakup of that empire, [Redstone] has admitted his acquisition strategy did not work"--with the comments of Richard Greenfield, a media analyst at Fulcrum Global Partners:
"by a media company preparing to split up assets. On Tuesday, Liberty Media announced that it would spin off the Discovery Holding Company. Those plans raise the question of whether, after a decade of building media conglomerates, companies will start breaking them up. Already there is a drumbeat among investment bankers to promote such splits....
"It is a momentous event that Sumner is willing to admit he was wrong and get smaller...He is totally reversing everything that has occurred since 1995 and totally undoing all the size and scale that he hoped to create through acquisitions."As fashionable as it is--at this blog and elsewhere--to bemoan the seemingly endless publishing merger-mania that has created an industry dominated by seven or eight behemoths, it would be naive and dishonest to compare the enormous complexity of the composition of businesses contained within a multi-component entity like Viacom with the relatively like-minded goals of the publishing imprints Viacom has gathered beneath the Simon & Schuster umbrella--S&S's Adult and Children's divisions, Scribner, Pocket Books, The Free Press, Fireside, Touchstone, Atria Books, Washington Square Press, MTV Books and several others; collectively they make up but a small portion of Viacom's overall "media portfolio."
It would likewise be dishonest to suggest that, from an institutional perspective at least, there are not immediate advantages to be seen in, for instance, the no-longer-so-recent merging of the "Little Random" imprint of Random House with Ballantine Books. In terms of its ability to attract and build certain kinds of big, commercial authors, Little Random's hard-cover publishing arm was always disadvantaged (as have been Knopf, Doubleday and Hyperion, to name just a few) by not having a dedicated and closely integrated mass market division. Damn the purists who say Little Random has been corrupted: from a strictly-operational perspective, merging RH with Ballantine made sense. They could now offer the same sort of "full-service" publishing operations--hardcover, trade paperback and mass market, all carefully coordinated (theoretically, anyway) by unified management--that are found at S&S, HarperCollins, Bantam Dell, the Time-Warner Book Group and the Penguin-Putnam Group.AND YET.
Remember the Laffer Curve? The Laffer Curve was a crudely drawn illustration of a "theory" (I use quotation marks because, as far as I'm aware, it was utterly unsupported by data, but was nonetheless given credence by economists and policy makers in the early 1980s) documented (legend has it) on a martini napkin, whereupon one Arthur Laffer drew for a like-minded Milton-Friedmanite (of the sort who then dominated Ronald Reagan's inner circle) a bell-shaped curve. The outline of the bell represented represented a theory of the psychology of taxation and the relationship between tax rates and total tax income. The tax rate was charted along the horizontal axis (because, after all, this was a graph, not simply a drawing of one of the bourdon at the Cathedral of Notre Dame), while revenue was plotted along the vertical axis The principle was simple: as the tax rate (charted along the horizontal axis) increases, so does the income the government collects...
The principle that Laffer's curve so elegantly protrayed was that, once tax rates become too high (i.e. once the bell reaches its apex) investors will be so disincentivized to continuing investing, and wage earners to continuing producing--that all parties to the economy will be so demoralized by the intrusive effects of Big Government upon their wallets--that productivity will diminish. The natural consequence, of course, is that tax income will also fall--ultimately, to nothing, zero. Nada.
This simplistic (and no-doubt Max-imally mangled) explanation of Laffer's simplistic theory (upon which, for the record, Reagan's infamous "trickle down" theory of economics derived: cut taxes, and the money will come! Cut, especially, the tax rates of corporations and the wealthy, and they'll continuing striving, building, investing, ever upward, thereby expanding by virtually unimaginable proportions the tax base!) is, I acknowledge, wearisome. The point isn't really to discuss Laffer's laughable notion, but to discuss the principle (considerably better supported by documentary evidence, I might add) behind the principle, called
"In economics, law stating that if one factor of production is increased while the others remain constant, the overall returns will relatively decrease after a certain point. Thus, for example, if more and more laborers are added to harvest a wheat field, at some point each additional laborer will add relatively less output than his predecessor did....The principle, first thought to apply only to agriculture, was later accepted as an economic law underlying all productive enterprise."
It's fair, by now, to ask where the hell I'm going with this ramble, given my concession that the organizational differences between publishers (even as currently, and inelegantly, configured), and the infinitely larger media conglomerates of which they are a part, is a bit like comparing grapefruits to grapevines. The answer is the question: have we, as an industry--as currently configured--reached the point of diminishing returns?
It cannot be insignificant that, within days of each other, Sumner M. Redstone and John C. Malone both concede that their respective plans for global market domination have not yielded the results promised to their shareholders? And, let's face it, there's only so much back-office compression/"redundancy reducing" that can be done before the workers themselves become overwhelmed to the point of, umm, diminishing returns.
Back to Geraldine Fabrikant in the New York Times. "'In large conglomerates, size and complexity is the enemy,' said Bruce Greenwald, professor of economics at the business school at Columbia University. 'Often, executives can't focus carefully on each of the businesses, so they don't run as well.'"
Is it not possible that our industry, too--pared to the bone as it is in terms of personnel, so as to deliver up the best short-term results possible to our share-holder--suffers, and increasingly so, from these very same disadvantages? Might there not be some wisdom to be gleaned from reconsidering Mr. Hely-Hutchinson's course and looking, instead, for ways to decentralize, to break down into smaller, more narrowly focused units?
"Writing is considered a profession, and I don't think it is a profession. I think that everyone who does not need to be a writer, who thinks he can do something else, ought to do something else. Writing is not a profession but a vocation of unhappiness. I don't think an artist can ever be happy."
PRACTICAL MARKETING [Courtesy Zornhau, 2005]
"They should put the 1st couple of pages up in subway adverts. Having read them several times, you'd feel compelled to try the book - if it was any good."
PLATE OF SHRIMP [Courtesy Alex Cox’s REPO MAN, circa 1984]
"A lot of people don't realize what's really going on. They view life as a bunch of unconnected incidences and things. They don't realize that there's this like lattice of coincidence that lays on top of everything. I'll give you an example, show you what I mean. Suppose you're thinking about a plate of shrimp. Suddenly somebody will say like "plate" or "shrimp" or "plate of shrimp" out of the blue, no explanation. No point in looking for one either. It's all part of a cosmic unconsciousness."
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- ▼ March (12)