What a parable for our consumerist times is the $10.6bn (6.3bn) deal that Seagram has struck for PolyGram, embracing as it does practically all the modern leisure products that are inessential to human existence, but which the Western world finds that it cannot do without at the end of the second millennium.
Movies, music and booze could be a title for this chapter of corporate and cultural history. And the sums of money that they command surely tell us what is important in our culture. But, for all that, there is a delightful symmetry to this deal.
The Canadian drinks and entertainment combine becomes the world’s largest record company; Seagram’s fruit juice subsidiary, Tropicana, will be floated in one of the largest share sales – some $4bn – in American corporate history in order to finance the deal; PolyGram’s film division will also be sold for about $1bn through the good offices of Goldman Sachs. A likely purchaser is the French media group Canal Plus, which is putting together a consortium of European investors.
For once, American antitrust authorities are unlikely to have much to say in opposition, despite the combined entity commanding about 25 per cent of the American music market – if there are any objections, Seagram has indicated that it can sell one or more record labels in the States. The only outstanding issue is how Seagram aims to deliver value from its new combine to shareholders – we shouldn’t rule out some form of demerger of interests. But that prospect does not sit easily with the dynastic nature of Seagram’s corporate culture.
And so, inevitably, to the Bronfman family, without which no serious assessment of the prospects of Seagram can be developed. Edgar Bronfman Jr, Seagram’s Generation-Next chief executive, has indicated that he expects executives from PolyGram and Universal, Seagram’s music subsidiary, to devise a new management structure, but has not indicated yet whether PolyGram president Alain LÃ©vy will remain at his post. Much will rest on what decisions are made over the next few days with regard to this management structure.
I say this because there is a real test in store for Bronfman and his ability to absorb and develop PolyGram’s businesses. It has been suggested in the past that Bronfman Jr is not so much a chip off the old block as a splinter from a family branch. He has displayed, it is said, greater interest in Hollywood and movie-making through his Universal acquisition than in the core drinks businesses on which the family’s fortunes have been founded. There are those in Toronto who would breathe the word “dilettante” into their Tropicana.
I wonder whether this PolyGram deal is an opportunity for the boy Bronfman to silence such murmurs. He’ll be playing for high stakes, but it occurs to me that the opportunity is there as never before to demonstrate that he has the vision for constructing an entertainment combine for the new millennium.
The management challenge is, at one level, rather simple. Bronfman and Universal/Seagram have to hold on to PolyGram’s star artistes under the new label. PolyGram’s precious stable includes U2 (whose Bono is now the Boutros Boutros Gali of Ireland and is consequently unlikely to have suffered a crisis of self-esteem), Tricky, Sheryl Crow, Hanson and Metallica. These and others contributed revenues of some $4.5bn in 1997. Universal, by contrast, managed about $1.6bn from the likes of Aqua, the Wallflowers and Erykah Badu.
Now, I don’t pretend be any kind of guru of contemporary musical culture, but I would hazard a guess that PolyGram has got the edge here. Not just commercially – important as that is – but also in terms of kudos and industry standing. You can cut the ego in slices at PolyGram and, when you’re dealing with highly strung artistes, that’s an important commercial consideration too.
When Dutch electronics conglomerate Philips acquired 75 per cent of PolyGram the industrial logic ran that the artistic software was linking up with the hardware of electronic formats. It’s interesting that PolyGram is now abandoning that position for Seagram – when the next generation format for CDs appears from Philips, PolyGram won’t be living in the same house anymore (and nor will Philips have a ready-made line of artistes).
Instead, PolyGram’s software will be living with a drinks and entertainments combo. This has both negative and positive implications. Negatively, artistes may throw tantrums and walk out, claiming that they’re misunderstood. That’s what they do and, some argue, that’s what they’re for. Look at the trouble Sony had when it acquired CBS – some of the geese that laid the golden eggs, most notably George Michael (though he had been through a prolonged period of constipation), decided that Sony knew nothing of music and art and wanted out.
But what Seagram can bring to PolyGram’s party, by way of artistic compensation for loss of access to formats, is a worldwide drinks distribution network and the disciplines of brand marketing and promotion that go with it. The music industry needs better distribution channels. And we really could see rock ‘n’ roll on the labels of bottles of whisky (or whiskey).
Furthermore, Bronfman Jr is absolutely passionate about music. His test will be whether he can combine his passion with the cold disciplines of consumer drinks marketing. If he succeeds, then the food of Seagram’s new love should play on.