BUSINESS

It came from Japan II

Another studio takeover sparks U.S. concerns

PATRICIA CHISHOLM December 10 1990
BUSINESS

It came from Japan II

Another studio takeover sparks U.S. concerns

PATRICIA CHISHOLM December 10 1990

It came from Japan II

BUSINESS

Another studio takeover sparks U.S. concerns

Like many of the 29 million people who visit Los Angeles each year, Jesse and Laurie Howard of South Dakota toured one of the city’s most popular tourist attractions, Universal Studios. Nestled at the foot of the Hollywood Hills, the theme park features rides and stunt shows based on movie classics, including King Kong, Jaws and The Ten Commandments. But as they strolled through the grounds on a sunny afternoon last week, the Howards had one complaint—a day earlier, Japan’s giant Matsushita Electric Industrial Co. announced that it was taking over the park’s parent company, MCA Inc. of Universal City, Calif., for $7.1 billion.

“It seems like the Japanese are buying everything these days,” said Jesse Howard, 22. He added: “I think most Americans would be angry about it.

We start something and they come up with the way to buy it away from us.”

Last week’s sale of MCA marked the largest Japanese takeover of a U.S. company—and the latest in a series of acquisitions that are transforming the U.S. entertainment industry. Matsushita’s president, Akio Tanii, said that his company’s aim was to wed Japanese “hardware,” including video cassette recorders and compact disc players, with U.S. “software,” such as films, TV programs and recorded music. Declared Tanii: “They are like wheels of the same car.” But some industry analysts said that the sale of MCA, an entertainment conglomerate with interests in film, television production, audio recording and publishing, could compromise artistic freedom.

At the same time, there were indications that the takeover might lead to changes at the Toronto-based movie theatre chain Cineplex Odeon Corp.

The chain is now jointly controlled by MCA and Claridge Investments & Co.

Ltd., owned by Montreal’s Bronfman family. But last week, Claridge officials said that the firm would be willing to purchase Cineplex’s 565 Canadian screens if MCA’s new owners offered to split the company into separate Canadian and U.S. operations.

For Matsushita, the MCA purchase offers several key advantages. A highly profitable consumer-electronics giant with 1989 revenues of $44.3 billion, Matsushita has traditionally been known in Japan as a cautious imitator of products developed by rival corporations. But recently, the company adopted a more

aggressive approach. Five months ago, the 73year-old conglomerate made its first foreign acquisition, buying 25 per cent of a German optical company. Now, in acquiring MCA, Matsushita appears to be trying to catch up with its smaller but more aggressive competitor, Sony Corp. Sony has greatly strengthened its grasp on the U.S. market during the past two years

by buying Columbia Pictures Entertainment Inc. for $3.96 billion and CBS Records for $2.3 billion.

For many Americans, the MCA takeover is an unsettling reminder of Japan’s steadily increasing global economic power. If the sale goes through, Japanese companies will control a quarter of the U.S. movie industry. Said Alex Ben Block, an executive editor of The Hollywood Reporter : “I am concerned as an Ameri-

can and as a taxpayer whenever a foreigner buys a cultural organization.” But Block added that Matsushita’s arrival in Hollywood would likely lead to higher salaries for actors and larger budgets for new movies. “If you are an agent or a movie star,” he said, “things just got a whole lot better.”

Some entertainment industry analysts, meanwhile, said that the takeover of both MCA and Columbia Pictures by Japanese companies could affect the content of new movies and television series. Chalmers Johnson, professor of international relations at the University of California in San Diego, said that some Japanese distributors have declined to exhibit movies that they consider offensive to Japan. In other cases, they have insisted that movies be recut for Japanese audiences.

Matsushita took steps to try to avoid any political opposition to the purchase before the deal was announced. The company’s lobbying team in Washington includes Robert Strauss, former chairman of the Democratic National Committee; Jody Powell, a press secretary to former president Jimmy Carter; and Howard Baker, a former chief of staff to President Ronald Reagan. Both Strauss and Baker are also members of MCA’s board of directors.

Meanwhile, Cineplex last week announced that it had reached a new agreement with its major lenders. Under the accord, the chain will be released from an earlier undertaking to raise $200 million this year by selling off some of its assets. The company is currently carrying $460 million in debts after a rapid expansion by its founder and former chairman, Garth Drabinsky.

For now, analysts say, MCA’s new owners will likely focus on trying to accelerate their drive to introduce new technologies to the entertainment industry. In the next few years, Matsushita and Sony will square off over the anticipated worldwide market for high-definition television—a new form of television production and transmission that makes it possible to achieve dramatically sharper picture quality. And with its new and plentiful supply of entertainment software, Matsushita will likely find it easier to convince North American viewers to purchase the video recorders and televisions necessary to take advantage of the latest technology.

PATRICIA CHISHOLM

ANNE GREGOR

Los Angeles

MCA’s EMPIRE

By snapping up MCA Inc. for $7.1 billion, Japan ’s Matsushita Electric Industrial Co. has laid claim to a vast entertainment and publishing conglomerate: