Toppling Mega Media CEOs


August 2, 2002


BOB GARFIELD: We're back with On the Media. I'm Bob Garfield.

BROOKE GLADSTONE: And I'm Brooke Gladstone. The world's largest media companies are ousting their leaders. Among the most recent most prominent of the rolling heads are Jean-Marie Messier, CEO of France's Vivendi Universal; Thomas Middelhoff, chief executive of Germany's Bertelsmann, best known as corporate parent of BMG Entertainment, and America's own Robert Pittman who resigned under pressure as the chief operating officer of AOL Time Warner. Were they all canned for poor corporate management or were they deep-sixed for reasons that have more to do with the specific national character of their companies? James Surowiecki writes a regular financial column for the New Yorker and he joins us to talk about these oustings and what the future may hold for mega-media. Welcome to the show.

JAMES SUROWIECKI: Thanks for having me on.

BROOKE GLADSTONE: Okay, so Messier and Middelhoff, both European, both out of a job right now. What happened in each of their cases?

JAMES SUROWIECKI: Well in Messier's case, Vivendi ran into a lot of trouble, particularly towards the end of his tenure there. The truth is, relative to most media companies, it wasn't necessarily doing much worse but its stock price was really being driven down, and in fact it became clear that the stock was being driven down in part because Messier was running the company. People were skeptical about his strategy for the company which involved a lot of acquisitions, and the company itself was sort of a strange hodgepodge because you know its origins were as a French utility company, and then Messier had kind of remade it, trying to convert it into a, a media giant and had done so by buying Universal in the United States and had tried to start this elaborate internet site in Europe. So there are real questions about the validity of this strategy.

BROOKE GLADSTONE: Middelhoff's situation seems quite different. He was actually running the company pretty well!

JAMES SUROWIECKI:Yeah, it certainly seems that way. I mean Bertelsmann's performance was definitely better than most media companies have been in, in this kind of environment, and Bertelsmann had taken a somewhat slow approach to growth, and the acquisitions it had made you know seemed to be for the most part well done. You know Middelhoff certainly had a kind of sort of Utopian streak if you look at his acquisition of Napster and--

BROOKE GLADSTONE:Yeah, that was an odd power-to-the-people move there. I guess he went against the grain of the entire recording industry of which his own company was the biggest part!

JAMES SUROWIECKI: Exactly. And it was also sort of difficult from a business perspective to see you know what exactly Napster's future was. But the, the one business part of what Middelhoff was doing that I think raised some concerns within Bertelsmann is that there was some concern that he was spending too much time buying companies and not enough time managing companies.

BROOKE GLADSTONE:It's been said about both Messier and Middelhoff that they embraced the American way of business. Is this what raised the hackles of their bosses?

JAMES SUROWIECKI: Well, in Messier's case I think that certainly had a--an enormous amount to do with what happened to him. You know Messier was sort of, almost excessively American and in terms of his cultivation of, you know, sort of an American style; he was very flamboyant; he was, you know, appearing in business magazines and he moved to New York, he said that the French cultural exception which the French hold quite dear -- this idea that there's something unique about French culture -- was no longer really valid in today's world. And in every way he seemed to be sort of moving against the French idea of what business was. In Bertelsmann's case, there's certainly something about Middelhoff cultivating an American style, and you could argue for example that you know his emphasis on this kind of acquisitive strategy has something to do with that. But with Bertelsmann the culture is also to some degree more company-specific; you know Bertelsmann was founded as a company that had a social responsibility in its charter; it's a private company; not a public company. Middelhoff wanted to take the company public. So there I think you have this kind of mix of national cultural issues and then corporate cultural issues.

BROOKE GLADSTONE: Let's move to these shores now.

JAMES SUROWIECKI: Okay.

BROOKE GLADSTONE: AOL's chief operating officer -- former --Robert Pittman. What happened there?

JAMES SUROWIECKI:Well I think there you're really talking --it's interesting because I think you're again talking about a cultural clash, but in this case the cultural clash was between Time Warner on one side and AOL on the other. Bob Pittman came in to AOL Time Warner as basically the, the number two man at AOL, and he was the man who in some ways had really played a key role in turning AOL into this kind of economic powerhouse that everyone thought it was [LAUGHS] at the end of the 1990s. And what happened was that Pittman, you know, was in theory sort of running the-- AOL Time Warner on a day to day basis, but he had a very hard time unifying the two sides of the company, and he had a very hard time getting people I think on the Time Warner side to get on board with his bigger strategy for the company.

BROOKE GLADSTONE: Didn't he also just miscalculate when it came to broadband? He couldn't sell it?

JAMES SUROWIECKI:I think what Pittman did with broadband was what he did with a lot of things -- he over-promised and he under-delivered. So when he came in talking a lot about customers are going to pay 159 dollars a month for cable television and digital cable, you know, digital media, broadband access, blah blah blah blah blah, and we were a long way away from that two years ago. [LAUGHS] We're still sort of a ways away from it now. And so you know he spent a lot of time talking about how much AOL Time Warner was going to accomplish, and you know there's nothing Wall Street hates, hates more than being told you're going to do something and then, and then not seeing you do it. The, the other thing I, I would say is you know in part he's just a victim I think of the, the bursting of the internet bubble, and the fact that you know AOL's business no longer looks the way it did two years ago.

BROOKE GLADSTONE:So what do you think -- are these three ousters some indication of what's going to happen in the future of the multinational media corporation?

JAMES SUROWIECKI: Well, the one thing that's interesting about it is that you know most American media companies are actually in a way kind of throwbacks. They're actually run by people who effectively own those companies or control them to the point where there's no worry about getting dismissed. And if you think about Sumner Redstone at Viacom, Eisner at Disney, Rupert Murdoch at, at Newscorp-- technically an Australian company, but, but you know obviously plays a huge role in the United States -- I don't think that's going to change. But I do think that there is two things that are worth noting here. One is that you know CEOs are obviously, or COOs, in Pittman's case, are being paid tremendous amounts of money; they're reaping great rewards; but they're also being held to certain standards, and you know if you don't perform to whatever standard the board of directors think you need to perform to, you, you'll be, you know, shown the door. And I think that's a good thing. I mean it's good that people don't get a free ride. The second thing which is potentially even more interesting is that there may be a growing skepticism about this kind of empire-building that has been so central to the media business.

BROOKE GLADSTONE: Right. I mean in the '90s we really saw the celebration of the media mogul.

JAMES SUROWIECKI: Yes.

BROOKE GLADSTONE: They were practically movie stars. Do you think their day is passing?

JAMES SUROWIECKI:Well I think, I do think in general you're seeing that in America -- this kind of backlash against the, you know, exaltation of the, of the CEO. And, and I think you know media moguls are obviously the epitome of that. So I think there's something of that.

BROOKE GLADSTONE: Well James, thank you very much.

JAMES SUROWIECKI: Thank you.

BROOKE GLADSTONE: James Surowiecki writes a regular financial column for the New Yorker.