It's beginning to sound a bit formulaic: Start with equal parts high profile, controversial chairman or CEO, and ambitious business plan that sounds brilliant but will ultimately fail. Next, add a generous helping of debt, with just a hint (or perhaps more) of an accounting scandal or other infraction of the law. Finally, stir in increasingly nervous investors, a few credit downgrades to junk status, and an all-time low in your company's share price. Now kick back and watch as your concoction boils over in a sea of unfavorable media coverage.
So is Media Watch talking about Enron, WorldCom, Qwest, Tyco, Dynegy, or Global Crossing perhaps? None of the above. Just to show that America doesn't have a lock on bad publicity, the scandal of the week goes to Vivendi Universal, the world's second largest media conglomerate, which just ousted its chairman, Jean-Marie Messier.
In all seriousness, though, the downfall of Vivendi Universal is tragic; evaporating billions of dollars in share value and likely resulting in many layoffs. Already facing $33 billion in debt, its lowest stock price in 13 years, and having been downgraded by Moody's (to junk status) and by S&P, the company decided it was time to start fresh with new management.
Although much of the coverage focused on Messier's missteps, Media Watch paid particular attention to the media's views on what might be in store for the company in its post-Messier era. The consensus is that the media conglomerate must be dismantled in order to pay down the gargantuan debt it faces. A guest analyst told CNNfn (July 1) in no uncertain terms, "It has to get split up."
But there was no consensus as to which parts of the company would be sold and which would stay. It was often suggested that the company might be divided with most of its media assets going to an American company, while the French utilities and Canal+ would remain under French control.
The Los Angeles Times (July 2) quoted a Wall Street analyst as suggesting, "Render unto Hollywood the things that are Hollywood's, and unto France the things that are French."
The media also commented that Messier's resignation marked the death of his strategy to bring multi-media content to wireless devices, computers, and TV. The Washington Post (July 3) remarked, "Messier was ultimately impaled on his own futuristic vision. Several reports also commented that the boardroom coup was welcomed with open arms by investors, who had grown weary of the plan and mammoth losses. As it transitions to new management, the company was said to be further troubled by even the most basic question as to which lines of business it wants to be in.
The media also pondered what role Barry Diller would play in the shake-up at Vivendi Universal. Diller, who sold USA Networks to Vivendi, is now chairman of Vivendi Universal Entertainment. There was some debate among media members as to whether Diller might be in a good position to either buy back USA Networks (at a substantially lower price than he sold it for) or whether he'd focus on running the internet-oriented USA Interactive.
While most in the media viewed the ouster of Messier as a step in the right direction for Vivendi Universal, there was also agreement that the company needs to publicize a clear vision for what it intends to be and do in the post-Messier age.
Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.