Modus Vivendi
Americans aren't the only ones betting the ranch on risky visions these days
DAVID IGNATIUS
Washington Post

Jean-Marie Messier.with Edgar Bronfman STUART RAMSON, AP / Jean-Marie Messier and Edgar Bronfman Jr. share a laugh during their press conference last week in New York.

"Synergy" is a nonsense word, and maybe it's a nonsense concept, too. But Jean-Marie Messier, chief executive of Vivendi, is betting his company on the dicey prospect that a transatlantic hodgepodge of European and American assets can indeed produce synergy - and make real money.

Messier last week delivered the formal announcement of his $34-billion mega-deal to buy the Canadian drinks and entertainment company Seagram, which owns Universal studios and Polygram records. His hope is to make the merged Vivendi Universal into a Paris-based media company that will play in the same monster league with AOL-Time Warner.

A comment by Messier at last Tuesday's news conference made it clear that one factor behind this deal is France's decades-old insecurity about the reach of America's cultural imperialism.

"For the first time in Europe, there is a communication group of a size that will be able to rival all the American giants," Messier boasted. Maybe so. But many a would-be entertainment baron has stumbled in the pursuit of Hollywood's irresistibly glamorous assets. Just ask the Japanese company Matsushita, which a decade ago was seduced into buying MCA, which it later sold in frustration to Seagram, which Seagram is now selling in frustration to Vivendi. When it comes to the entertainment business, it seems, there's always one more sucker.

Even by recent standards of the merger-crazed business world, this one is a high-risk combination. It's premised on the belief that immense scale is essential to compete in today's economy. That remains a shaky proposition, in my book. Insiders say that even before the planned merger with AOL, Time Warner was an almost unmanageable collection of rival princes running their own fiefdoms. Add to that the difficulty of combining Paris and Hollywood - Gerard Depardieu and Julia Roberts - and you have a truly daunting challenge.

"The chance of the French succeeding in running a U.S. music and film business properly is about zero," one analyst told Reuters news service.

Messier's greatest asset is what's known in Hollywood as chutzpah. He was a superstar graduate of France's elite educational system. He went on to a brilliant career in the French civil service, followed by a brilliant career as an investment banker. Then he leapt into Vivendi.

When he arrived in 1996, the company was still mostly a sleepy water utility called Compagnie Generale des Eaux. He immediately began remaking it into a far sexier (but often not so profitable) communications and entertainment giant, with interests in cable television, pay TV, wireless communications and the Internet.

The funny part about this deal is that Wall St. analysts expect the combined company to sell off the old fuddy-duddy assets that have actually been making good money all these years. The Seagram side is likely to shed its spirits business, while Vivendi will probably sell its water and waste-management business. According to analysts cited by Wall Street Journal Europe, the liquor business accounted for 67 per cent of Seagram's cash flow last year, while the water-utility business provided 69 per cent of Vivendi's 1999 earnings. Those stodgy old businesses are boring, evidently, whereas being a global media giant has panache.

Still, there is something undeniably powerful about the personal ambition of Rupert Murdoch, Bill Gates - and now Jean-Marie Messier. These entrepreneurs have taken the risks that more prudent people avoid, and in doing so have created giant companies that are transforming the business landscape.

If Daimler can merge with Chrysler, then maybe Messier will indeed be able to combine his array of European and American assets and leverage them to make money. Like AOL-Time Warner, he'll have both content and the "pipes" to distribute it to consumers. Messier, above all, will be an international spectator sport - in some ways the most daring innovator yet in the global economy.

The Vivendi Universal deal shows that globalization fever is spreading. It's not just crazy Americans who are betting the ranch on risky visions anymore.