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Become sharper, smarter players.

Become Sharper, Smarter Players

In its oldest sense, entertainment means "to hold," to grip the imagination, to command attention. And when we're at our best, that's precisely what first-class entertainment does. It doesn't only divert. It engages as much as amuses, reflecting our human expectations, hopes, desires, dreams, and aspirations. Most important, it educates. It's my belief that, at root, the implicit message of the films and programming we make is profoundly democratic.

Taking the widest possible look at the prospects for this industry, those of us who are part of it have a right to be proud as well as optimistic. Our industry is now America's second-largest net exporter, behind only the aerospace industry. But the one thing we can't afford is complacency. We must work to prevent the imposition of regulatory frameworks that embody a complete misunderstanding by our political leadership of the competitive environment we operate in. Besides the immediate damage such cynical political maneuvering does, there is the danger that it will result in protectionist legislation that will provoke - as it always does - retaliation.

Protectionism is a dead-end street. The real choice we face isn't between closing our markets or opening them but between learning to compete internationally or accepting the leadership of those who can.

There are no instant, ready formulas for ensuring success, but I think it is very clear that four fundamental forces will drive those corporations that thrive into the next decade and the next century. Those forces are globalization, vertical integration, strategic alliances, and technology.

Globalization is basic to everything we do. It is an economic fact of life for our industry and for every American corporation. In order to succeed and be leaders in industry, companies must understand international markets.

Unfortunately, as the events of the last few years have underscored, both as a nation and as an industry we seem to be fumbling the very global opportunities that America, more than any other nation, has done so much to create. Instead of building on our success and finding new and better ways to use the underlying reality of globalization to our advantage, we've been selling the store. Since 1985, multinational companies based outside of the U.S. have spent over $35 billion to acquire a wide range of American media and entertainment properties.

Although I think this fire sale is a long-range disaster for the United States, I don't fault the acquirers. We Americans are often more than a little naive when it comes to doing business internationally, which is why we've been so badly outplayed. The burden is on us to become sharper, smarter players, learning to deal with the world as it is, not as we wish it would be.

Vertical integration as the basis for risk-taking will be a second key force behind America's survival. A big, vertically integrated company can take risks without endangering its future on every project. It can support creativity and give artists and independent producers the space - and support - they need so desperately to achieve their vision. So, size is important.

But the art of being big is in remaining small, in maintaining separate, autonomously run divisions and encouraging the people who run those operations to take risks. If you recall, the conglomerates of the late 1960s, and early 1970s sank under their own weight, with decisionmaking bottlenecked at the top.

Big companies also need relationships with small ones. No company, no matter how large or how rich with talent or how committed to innovation, can hope to gather under one roof all the creative resources it needs.

Not only will there always be a place for independent quality boutiques that fill a particular niche, but as vertical integration results in the existence of a handful of global giants - hopefully, some American companies among them - with mid-sized companies being merged or acquired, the importance of these boutiques will increase enormously.

The object, then, of vertical integration isn't size for the sake of size or as a means for controlling the distribution of software in the marketplace. It's size for the sake of surviving and being a successful international competitor - size as the basis of risk-taking.

This brings me, then, to the third force driving us into the future: strategic partnerships formed at the subsidiary level.

Whether with American or international companies, strategic partnerships are important to a company's domestic operations. They bring instant access to invaluable expertise and understanding that might take a company years or decades to develop on its own. In a country like America, with its huge regional markets and its insatiable appetite for innovation and new products, strategic partnerships are a matter of common sense.

But it would be wrong to limit their use to inside the U.S. They make just as much sense internationally, helping us to be smarter players in the global economic competition.

Through their subsidiaries, parent companies can bring their respective strengths to bear on a local, national, or international opportunity. Vertically integrated and working from a strong base in their home markets, the partners have the ability to contribute assets and/or cash, depending on what makes the best strategic sense in a particular situation. The parent companies keep their national identities, which is crucial, and their subsidiary alliances are able to be, through French, American, and Japanese partners, a French company in France, an American company in the U.S., and a Japanese company in Japan. The concept of strategic partnerships is rooted in the recognition that the old notions of rigid distinctions between so-called domestic and foreign operations are obsolete.

Certainly, we're in need not only of new concepts but of a whole new framework for how we think about the future of this industry, which brings me to the fourth and final force - technology.

We're entering an American-driven worldwide revolution in technology that will change forever the way consumers receive and transmit entertainment and information in the home. Fiber-optic cable is about to do to our old concepts of mass communications what the Gulf War did to our old concepts of warfare. The age of multichannel, two-way interactive cable television is here.

The implications for the future are immense. Unlimited channel capacity will give consumers much more than just a wider choice. Consumers themselves will now be in control of what they see and when they see it. That's the way it should be. And that's the way it will be.

Education must be the most important priority for all Americans. And it's precisely in this area that interactive cable will have its deepest and most far-reaching effects. People will bring interactivity into their homes for the entertainment and information choices it makes possible, but once in the home, multi-channel interactivity offers the greatest single teaching tool that's ever existed, a tool to reach students of all ages in many different formats and, most important, in conjunction with the written word.

We all know the tremendous power of technology. But the greatest power in this world isn't in machines, no matter how sophisticated or capable they may be. Real power is in the human mind, in the intellect and imagination, and in the human heart. What is more important than any device is the software we put into it - software that can enlighten people as well as delight them, that can help set loose new creative energies greater than anything that's gone before.

Despite its occasional shortcomings, this industry has helped change our world for the better, carrying democratic values into every corner of the earth. Now working in a truly global context, as partners with other corporations and with the cooperation of governments worldwide, we can turn the age-old dream of a single international community - without boundaries or divisions that halt the free flow of information, culture, or commerce - into a reality. We cannot rest until people everywhere can work with dignity, live with dignity, and walk the world with dignity.
COPYRIGHT 1991 Directors and Boards
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Special Section: Being a Global Leader; views of Steven J. Ross, Chairman and co-CEO of Time Warner Inc.
Publication:Directors & Boards
Date:Sep 22, 1991
Words:1324
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