Let Us Entertain You

By Janice Castro

All that was missing was a small boy to tug at Lew Wasserman's sleeve and plead, "Say it ain't so, Lew."

Central Casting could not have supplied a better chorus of worriers than the screenwriters, politicians and just plain citizens who weighed in last week after MCA chairman Wasserman announced that he was selling Universal Pictures and the rest of the MCA entertainment giant to Matsushita Electric Industrial for $6.1 billion. How could he, they asked, sell to foreigners the studio that made To Kill a Mockingbird, Jaws, E.T., Born on the Fourth of July and Back to the Future? The home of TV heroes Magnum, Columbo, Jim Rockford, Sonny Crockett and even the Beaver? The company that runs the lodgings and jitneys in Yosemite Park? In Hollywood, some moviemakers wondered whether industrialists in Osaka would now censor Hollywood's ideas. Even the Bush Administration raised some objections to the deal.

Some business strategists were puzzled by the fuss. Overseas investors, after all, already own more than $400 billion worth of U.S. businesses and real estate. And Matsushita doesn't make a very convincing villain. The world's largest consumer electronics firm (fiscal 1990 revenues: $38 billion), it manufactures some of America's favorite brands of video and audio gear: Panasonic, Quasar and Technics.

But Hollywood is close to America's heart, if not its heartland. After last year's deal in which Sony paid $3.4 billion for Columbia Pictures, many Americans began to fear that the country's cultural heritage was being auctioned off, bit by bit. Universal is the fourth of Hollywood's seven major studios to be acquired by foreign companies: 20th Century Fox is owned by Rupert Murdoch's Australia-based News Corp., and MGM/UA was taken over earlier last month by Italian financier Giancarlo Parretti. That leaves only three major studios in American hands: Disney, Paramount and Warner Bros.

Entertainment is one of the last businesses in which America clearly dominates the world market. Every year consumers around the world buy $300 billion worth of movie tickets, compact discs, videotapes and other American entertainment products. One-fourth of those sales are overseas. No other country's film industry creates such universally popular entertainment. In Europe, American films capture at least half the box office. The top-grossing film in Japan last year, Indiana Jones and the Last Crusade, earned $32 million in theaters, twice as much as the most popular Japanese film. Of the 27 movies currently showing in Rio's cinemas, 21 are American. Overseas fans say they are drawn to the American spirit of independence and optimism. Says Roberto Fernandez Blanco, an Argentine businessman: "When you see an American work of art, you feel a breeze of freedom of expression." Thus the MCA deal strikes some Americans as another example of selling the goose instead of the golden eggs.

This time around, even Secretary of the Interior Manuel Lujan jumped into the fray. Citing hundreds of angry letters and calls from citizens, Lujan said he wanted to keep the Yosemite Park and Curry concessionaire in the hands of Americans. MCA will be given a year to find an American buyer.

Some Hollywood insiders as well as political critics are worried that foreign owners might change the fundamental nature of American movies and television shows, subtly shifting their tone and content. Those concerns were heightened last week at the press conference Matsushita president Akio Tanii conducted by satellite video hookup after the deal was announced. In answer to an American reporter's hypothetical question about what Tanii would do if Universal wanted to make a Japan-bashing film or one that criticized the late Emperor Hirohito, Tanii responded ambiguously, "Something like that shouldn't emerge. Filmmakers must create films that are inspirational, that will be enjoyable for everybody." Many interpreted his answer as a chilling assertion that future Universal film projects must meet home-office approval. Said a startled George Kirgo, president of the Writers Guild of America, West: "What does that mean, 'inspirational'? To be told that there are going to be restrictions for writers is appalling." Two days later, though, Tanii, who apparently had been caught off guard, clarified his response: "There should be no misunderstanding of Matsushita's position in this important area. Creative decisions for MCA will be made by MCA management."

For Matsushita (pronounced Mat-soosh-ta), the MCA purchase is a way of ensuring an immensely valuable supply of so-called software: the movies, records and films that can be played on the machines Matsushita sells. Says Donald Richie, a leading arts critic and longtime resident of Japan: "There's no reason for a Yellow Peril scare. The Japanese just want to milk the cows and pull in the profits that they know these studios create." Matsushita hopes to put half a century's worth of MCA creative output into new CDs, videotapes, laser discs and other formats. Besides producing movies and TV shows, MCA makes records by such heavy hitters as Elton John, Bobby Brown, Tom Petty and Fine Young Cannibals.

Rather than hobble American pop culture, foreign ownership of U.S. entertainment companies seems likely to increase its exposure around the world. Already, Dallas boasts loyal viewers from Jerusalem to San Jose. As the global audience for U.S.-produced entertainment has grown, producers and directors have aimed for broader, cross-cultural appeal. Arnold Schwarzenegger is one of the biggest box-office stars in the world. Twenty years ago, no actor with a heavy German accent, no matter how gifted, would have topped Hollywood's talent ladder.

At the same time, pop culture reaching America may become more diverse as the country becomes a crossroads for new entertainment. In the past year or so, Americans have been treated to such unlikely musical stars as the Gipsy Kings, a popular French-flamenco band, and the Bulgarian State Radio and Television Female Vocal Choir.

Matsushita is cautious but forward looking. The company has never had Sony's cosmopolitan polish, yet it was Matsushita's subsidiary JVC that developed the original VHS video technology in 1976. Tanii, then the youthful chief of Matsushita's fledgling VCR division, convinced his superiors that consumers would choose VHS over Sony's Betamax if they could also buy compatible videotaped entertainment.

Matsushita spends generously for R. and D. as well. In the current fiscal year, development costs are $3 billion, or 6.2% of sales, almost double that of most U.S. companies. The 72-year-old firm that started out as a manufacturer of electrical plugs is now a leading global purveyor of goods ranging from semiconductors to refrigerators.

For his part, Wasserman saw the deal as a necessary step in beefing up MCA's ability to compete globally. Long known affectionately in Hollywood as the Godfather, Wasserman, 77, has run MCA for 44 years. When he joined the Music Corporation of America, as it was then known, at age 22, it was a talent agency specializing in booking bands into nightclubs. As it grew, MCA picked up the nickname the Octopus for controlling more than half the top stars in the business, including Clark Gable, Marilyn Monroe, Jimmy Stewart and Bette Davis. Wasserman became MCA's top agent. As president of the company in 1949, Wasserman began producing television shows. In 1962 he bought Decca Records, which owned Universal Pictures, and dropped the agency business.

During the past few years, however, as one media giant after another merged with a powerful partner, Wasserman apparently became convinced that MCA needed to make a strategic alliance to gain King Kong-like size and access to hoards of cash. Capital Cities bought ABC, General Electric acquired NBC, Murdoch bought Fox, and Time Inc. acquired Warner Communications. As Wasserman reportedly told an MCA shareholder last year, "We're a 200-lb. gorilla in a game with 1,000-lb. gorillas. We've got to become a 1,000-lb. gorilla or get out of the game."

King Kong was roaring after last week's announcement. Matsushita has some $16 billion in cash but plans to borrow much of the MCA purchase cost, which leaves the company with cash to buy up more properties at distressed prices. Said David Geffen, the music mogul whose 10 million shares of MCA stock were suddenly worth some $660 million, nearly twice their value three months ago: "This will be the most acquisition-minded company in the world."

Other global entertainment deals are being done almost daily. Last week the Japanese electronics maker Pioneer bought the Japanese rights to all Carolco films, which include the Rambo series and Total Recall. Yet control of the remaining three U.S.-owned studios seems likely to remain in American hands. To reduce its $11 billion debt load, Time Warner is looking abroad for partners to take minority stakes in some of its entertainment subsidiaries. "We agree with Matsushita's concept ((of globalization)), but we disagree % with the execution," says Time Warner chairman Steven Ross. "Parent companies should keep their national identities."

Disney too is probably off limits. Says Paul Marsh, who follows media firms for the Los Angeles investment firm Bateman Eichler, Hill Richards: "The Mickey Mouse trademark is a bit like the Statue of Liberty. I don't think it's for sale." Paramount, valued at about $5 billion, seems more interested in buying than in being bought.

Finally, while Americans may gripe about the foreign takeovers of Hollywood's dream machines, none of the buyouts have been hostile. Far from sneaking into Hollywood, both Sony and Matsushita were squired around by superagent Michael Ovitz, the homegrown power broker. All of which brings to mind a scene in the 1978 film Heaven Can Wait in which the fictional owner of the Los Angeles Rams decries the abrupt takeover of the team by a fancy-pants financier. "The s.o.b. got my team," he moans. But how did the sneaky businessman do it? Says the team owner: "I asked for $67 million. And he said O.K." Last week Matsushita said O.K. Does that make American culture a victim? Hardly. If anything, a company that invests $6.1 billion in a venture is likely to treat its new possession like the rarest of gems.

With reporting by Barry Hillenbrand/Tokyo, Thomas McCarroll/New York and Jeanne McDowell/Los Angeles