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Now that Matsushita owns MCA, the questions come like shooting stars.

Now that Matsushita Owns MCA, The Questions Come Like Shooting Stars

Japan's "buy American" drive hit its peak with the $6.13 billion acquisition of Matsushita Electric Industrial Corp. of Music Corp. of America, parent company of Universal Pictures. The deal, which puts the second major American studio under Japanese domination, has wide and potentially serious implications.

The ink on the contracts wasn't dry yet, when both industry and the media started asking questions and expressing concerns.

The reactions to the Matsushita power grab fall into roughly three categories.

There are those who, on a purely emotional basis, simply don't like the idea the Japanese can exert such influence in Hollywood. They argue - ignoring much more significant investments by the Dutch and the British - that Japanese culture is distinctly different and they interpret this as some kind of a danger to established American norms and practices.

Then there is the group which sees the Japanese exerting undue influence on the product turned out by companies which they own.

And, finally, there is that quite large segment of American industry opinion that argues that there is nothing wrong with Japanese billions pouring into Hollywood which, in fact, can use the money and which isn't likely to change its ways just because Tokyo pulls the financial strings.

In fact, some like Sidney Sheinberg, the MCA president, argue the gold in those Matsushita coffers is going to allow his company access to "greater knowledge and experience in the technological development area" and further expansion.

On the side lines, there are a good many executives who puzzle over the Japanese incentive to pay out all that cash to an industry which is volatile at best, and which can never absolutely guarantee a healthy return on investment.

The argument one hears most often is that, apart from the vigorous competitive feeling between Sony and Matsushita, both companies moved into Hollywood to achieve vertical integration - the logical flow of business from electronic hardware, in which they both excel, to the creation of the software that's needed to make the hardware more attractive.

Some Americans feel that Sony and Matsushita have made bad deals. "Why did they have to take over the manufacturing process?" asked one executive. "They could just as easily have leased the libraries or assured themselves of a product flow on a much cheaper basis."

Such arguments make sense to the American business mind, but don't necessarily reflect the Japanese psyche, which American critics of Sony/Matsushita mega dealings tend to ignore.

The Japanese are quite aware that, while they dominate the hardware market, their own software is confined strictly to the Japanese isles. When Sony bought Columbia, and Matsushita grabbed MCA, they not only acquired the factory, but also American production know-how capable of turning out the only movies that consistently appeal internationally.

Both the Sony and the Matsushita managements maintain that they will not interfere with the choice of subjects to be filmed by Columbia and Universal. This is a sore point with many Americans, who suspect that no company - having spent better than $6 billion on an acquisition - is then going to leave that acquisition completely alone.

"Can you imagine Columbia making Bridge over the River Kwai today?" asked one producer. It's generally accepted, albeit with regret, that while the Japanese won't overtly attempt to dictate to their studios what to make or not to make, their known preferences and prejudices are likely to predetermine what the studios will even consider.

"They surely aren't going to ask Matsushita to approve a project which they know in advance is likely to offend Japanese sensibilities," was one comment.

Both Sony and Matsushita have said that they intend to maintain the managements of Columbia and MCA, which is presumably meant to justify their (expensive) acquisition of a successful company. However, logic dictates that - at MCA at least - there will be changes.

Lew Wasserman, the MCA chairman, is 77 years old. Rumor in the industry has it that he will be succeded by Sydney Sheinberg, the MCA president. Others say that, once Wasserman goes, it won't be Steinberg but Michael Ovitz, the powerful Hollywood agent who brokered both the Sony-Columbia and the Matsushita-MCA deals, whom the Japanese will install as the man-in-charge at MCA, and that Ovitz will then proceed to overhaul the MCA management to give it a younger, more aggressive image, both domestically and abroad.

The Japanese are clearly catching on to Hollywood's ways, though reports indicate that they find many of them shocking and dismaying when measured up against their own way of conducting business. Still, they have decided to play the game which, going by recent industry records, is a profitable one.

But once the euphoria of their new expansion begins to wear off, and harsh American commercial realities intrude, they may yet learn to regret having listened to Hollywood's siren song.
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Title Annotation:News Analysis; Matsushita Electric Industrial Company Ltd.; MCI Inc.
Publication:Video Age International
Date:Jan 1, 1991
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