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PARAMOUNT COMMUNICATIONS CHAIRMAN ISSUES STATEMENT

 WASHINGTON, Oct. 27 /PRNewswire/ -- Martin S. Davis, chairman and chief executive officer of Paramount Communications Inc. (NYSE: PCI), testified today before the U.S. Senate Subcommittee on Antitrust, Monopolies and Business Rights.
 Following is a copy of his remarks:


REMARKS OF MARTIN S. DAVIS, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
 PARAMOUNT COMMUNICATIONS INC., BEFORE THE SENATE SUBCOMMITTEE ON
 ANTITRUST, MONOPOLIES AND BUSINESS RIGHTS
 Mr. Chairman and members of the subcommittee ... good morning.
 My purps?e today is to tell you why the Paramount Communications Board voted unanimously to enter into a merger agreement with Viacom -- a decision we announced on Sept. 12, 1993.
 We are proceeding with this merger agreement on the basis of the revised and enhanced offer to our shareholders just made by Viacom -- an offer which, we strongly believe, provides our shareholders with more value -- both short and long term -- than the unsolicited hostile takeover bid announced by QVC.
 Let me now turn to the basis for our agreement with Viacom.
 Paramount is a copyright-driven, American-owned enterprise. Our operations are primarily in film and television production and distribution, as well as in book publishing. Our studio in Los Angeles, I might add, was founded in 1912 by the pioneers of the American film industry.
 Today, we are one of the nation's leading publishers of educational textbooks and related instructional materials, as well a a premier trade book publisher through Simon & Schuster. Paramount is bringing advanced multimedia and CD-ROM technologies into the nation's classrooms -- from elementary schools to high schools and to colleges.
 Paramount owns the now completely modernized Madison Square Garden and its popular regional sports cable network, five recently acquired and expanding theme parks, and seven UHF broadcast stations. Paramount also helped to launch USA and "Sci-Fi," two successful cable networks jointly owned with MCA.
 Over the past decade the worlds of entertainment and publishing -- our two core operations -- were forever altered by changes sweeping through our marketplace both here and abroad. These dramatic changes posed formidable challenges to our management. Let me cite some of them:
 First, aided by a weak dollar and by less rigorous foreign accounting practices, European and Japanese companies have entered the U.S. market on a massive scale. Foreign owners are now in control of large Hollywood studios and have gained an enormous beachhead for the production of films, television and cable programming, as well as access to extensive and valuable film libraries. They have also acquired a number of major American publishing houses who produce instructional materials for our schools.
 Second, our competition overseas has intensified as we pursue new global opportunities in the information and entertainment fields. Our competition now comes in large measure from huge horizontally and vertically integrated foreign-owned entities who are protected and shielded by their governments in a trade playing field which is far from level when it comes to American companies. If the U.S. is to remain a robust competitor in Asia and throughout the common market, then only those American companies with strong complementary product franchises and efficient distribution system will succeed over the long-run.
 Third, within our own country, the media lineup has been radically transformed. Companies that were once independent and limited to a single market, have joined forces across product and service lines as well as technologies to create powerful, multinational and domestic giants against whom we must also compete.
 On that note what must be of concern to you as members of the Antitrust Subcommittee -- as it is to us as independent programmers -- is the extraordinary market power amassed by the cable forces who are an integral part of the QVC lineup.
 First, we have TCI, which is by far the nation's largest cable operator with over 10 million subscribers. Add to that the 3 million plus subscribers in Liberty Media, soon to be folded back up again by John Malone into TCI. But it doesn't stop there -- Comcast, part of the original QVC group, has 2.6 million subscribers, making it the fourth largest cable operator. The more recent QVC allies are Cox Cable with 1.7 million subscribers and Newhouse Cable with 1.3 million, the fifth and seventh largest MSOs. This brings the grand total to nearly 19 million subscribers. Effectively, this nationwide cable cartel would give TCI and its partners the ability to control access to one out of every three cable homes in America. When you throw in the Bell Atlantic service area, it is frightening to contemplate that the TCI/QVC group would hold the power to control the cable gateway to one out of every two homes in this country.
 This concentration of market power does not even stop there. The TCI/Liberty Media empire owns all or part of as many as 23 cable networks and 16 regional sports networks. This combination of horizontal and vertical power would have even a greater anti-competitive mass if it were to succeed in acquiring the Paramount studio and its extensive film library and production capability, as well as controlling the MSG cable network and our 50 percent interest in the USA network.
 A QVC-Paramount board consisting of TCI/Liberty Media, Comcast, Newhouse and Cox nominated directors would exert enormous leverage over the marketplace not only in cable but in publishing since Newhouse's Random House competes head-to-head with Simon & Schuster.
 Surely, this aggregation of media power in so few hands must somehow be brought under control if we are to preserve the values of competition, programming diversity, and the best interests of the consumer. Our antitrust agencies must take a long and hard look at the anti-competitive aspects of the TCI/Liberty Media/QVC hostile takeover bid.
 I'd like to give you some historical perspective with a direct bearing on the subject before you. During the 1930s and '40s, companies who owned the movie seats also owned the movies that were being shown. This combination of content and carriage was stifling competition and hurting the consumer.
 In 1948, the government broke up this vertically integrated monopoly in, as it turns out, the Paramount case. Despite the hand-wringing at the time, the film makers prospered. They were able to increase their production, not only to serve their traditional market, the theaters, but the new free television markets which were opened up.
 We are in the same situation today. Instead of movie seats there are armchairs in the living room in front of a screen in a form of television set wired for cable.
 By severing the link between cable program ownership and the control over the means of delivery could we, by taking a leaf out of the Paramount case book, serve both the consumer and increase competition in this new media age?
 The new media gateway, I submit, whether it is called the Communications Superhighway, or whatever label one chooses to affix, must be open to all programmers on a fair and equitable basis.
 Despite the intent of the 1992 Cable Act, a crucial question you must answer is whether large integrated cable combines like TCI will be able to continue to discriminate against independent cable programmers by denying them fair access to their delivery systems. By so doing, they can block the only currently available cable media path to the consumer. These cable bridge-keepers should no longer be allowed to hold up independent program drivers by charging exorbitant tolls or by keeping them off the cable roadway.
 In the face of the structural changes in our business environment that I referred to earlier, it became clear to management that Paramount could not simply stand pat. Since I became chairman of Paramount in 1983 -- a company at that time known as Gulf+Western where I have spent almost all of my working life -- my colleagues and I began to explore a number of alternative directions. These strategies were aimed at equipping Paramount to become a first-class competitor in the domestic and international arenas and thus to build long-term rather than short- term shareholder values.
 A decade ago we redefined our businesses by sharpening our focus on entertainment and publishing. We were not afraid to undertake the challenge of "de-conglomerating" and to concentrate on what we considered to be the growth areas of the future as the information age began to dawn. In so doing, we created exciting opportunities for the writers, editors, directors, producers and performers -- the talent that is at the heart of our business. And we did so while strengthening our balance sheet by paying down our once very heavy debt load and increasing our liquidity. In the process our shareholder values increased tenfold. During this restructuring we also began to explore the possibilities of a business combination ... to find, if you will, an "ideal fit."
 In pursuing that course we wanted to avoid the dangers of highly leveraged, or "bust up," transactions that undermined so many companies in the "go for it" '80s. Our strategy led us to a careful search for an acquisition that could meet these criteria:
 -- A compatible management culture and business philosophy.
 -- A combination that would present no antitrust hurdles. We wanted to avoid any regulatory problems that could delay the consummation of the transaction and thus create uncertainty and instability. We believe in competition, not in the heavy hand of monopoly.
 -- A financially strong association without the need to sell off valuable assets dislocating employees and their families as well as the communities in which they live.
 -- A creative and innovative product mix, proven entertainment franchises, and a motivated talent base together with a global distribution and marketing system taking full advantage of the latest delivery technologies.
 Andt? importantly ... a community of interest that would enable us to grow and build our businesses together for the long haul -- businesses that would inform, entertain, and educate audiences both here and around the world.
 Viacom's chairman, Sumner Redstone, and I have been business associates since the mid-'50s, when he built a successful film exhibition circuit throughout New England. Over the past four years, Sumner and I talked about the possibilities of a Paramount-Viacom merger. Last summer, these spirited and arms-length negotiations gained momentum. They culminated in the friendly merger agreement approved by the Paramount board.
 Clearly, I am convinced our agreement with Viacom meets all of the criteria I outlined. Together, our combined companies can achieve more ... and compete more vigorously ... than each could have done in its own right.
 We saw the unusual benefits that could flow by bringing together the array of creative talent both our companies have assembled in recent years. You cannot mass produce what we do best. Each film, or each book, and each television show is a separate creative effort. This cross-fertilization of talent will lead to even more imaginative media programming and original and informative literary works.
 We looked at the international distribution systems represented by Viacom's MTV Latin America, Europe and Asia services. Linking these networks to our programming would enhance our ability to reach viewers all over the world.
 We visualized the intriguing opportunities in educational publishing. Let me cite Viacom's popular children's cable network, Nickelodeon, and the computer-based interactive learning technology Paramount is bringing into the nation's classrooms. Uniting these two great franchises would promote educational innovation and literacy training. This is another example, it seems to me, of how our merger with Viacom can meet both private sector and public interest goals at the same time.
 We saw the potential of additional free television programming, and have just announced the creation of a fifth broadcast network with Chris-Craft -- a project we have been working on for more than a year.
 We saw a commitment to maintaining the integrity of our assets and a resulting company that would accelerate its growth, expand employment opportunities and promote the flow of exports -- the uniqueness and popularity of American "intellectual property" that can measurably improve the U.S. trade balance.
 We could not identify any antitrust or regulatory problems. Paramount owns no cable franchises and Viacom's systems rank only 12th in size. Our combined broadcast station line-up easily falls within the FCC's audience reach and station limit caps. In fact, we are pleased to note that our proposed merger with Viacom last week received the required Hart-Scott-Rodino clearance from the U.S. government. Our agreement therefore presents no monopoly concerns. It is at its heart pro-competitive.
 Finally, we recognized that Paramount Viacom -- while still only half the size of Time Warner and smaller than Fox's News Corporation, or Sony-Columbia, Matsushita's MCA, or the German Bertelsmann group -- could serve as a model for a new form of business alliance ... one prepared to meet the goals of competition, programming diversity, and state-of-the-art product innovation, while at the same time honoring our joint commitment to building long-range shareholder values.
 Mr. Chairman, that completes my remarks. I'd be pleased to respond to your questions.
 -0- 10/27/93
 /CONTACT: Jerry Sherman, 212-373-8725, or Carl Folta, 212-373-8530, both of Paramount Communications/
 (PCI VIA QVCN)


CO: Paramount Communications, Inc.; Viacom; QVC ST: District of Columbia, New York IN: ENT SU: TNM

TW-TS -- NY065 -- 7332 10/27/93 13:15 EDT
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