4 July 2005Rednova
The annual retreat for media bigwigs, investors and technology gurus in Sun Valley, Idaho, is known as a place for CEOs to take the family on vacation and talk about business deals.
Which is just what Allen & Co., a well-connected investment bank which traces its roots to the 1920s, had in mind when it started putting on this high-powered conference in 1983.
Allen's close relations with Rupert Murdoch, Barry Diller and other entertainment honchos are the stock in trade for this small but powerful family firm, which recently passed control to the third generation in the Allen family.
The setting for the conference is a scenic mountain resort which has been a favorite with well-heeled celebrities since it was founded in 1936. Actor Tom Hanks and Las Vegas mogul Steve Wynn are among those who have homes in the area.
Each year, the meeting brings together CEOs from top media companies, several technology leaders and a number of big investors who mingle, listen to presentations, and talk shop over rounds of golf, horseback riding and even whitewater rafting.
The week is structured as a family retreat for corporate leaders, and all the events are closed to reporters.
But with so many heads of major media companies in attendance, the annual conference is also seen as a breeding ground for potential merger deals. Walt Disney Co.'s landmark acquisition of Capital Cities/ABC in 1996 famously began with conversations struck up at a Sun Valley conference.
But as they head into this year's weeklong meeting, which gets under way Tuesday, media CEOs are facing a much tougher business environment than many have seen in the past, with advertising growing sluggishly and the Internet and ad-skipping devices like the digital video recorder challenging traditional media business models.
Plus, Wall Street has largely soured on giant media conglomerates, so much so that one of the biggest stories in the media world so far this year is that Viacom Inc., a major media conglomerate, is breaking itself up into two units in hopes of regaining favor among investors.
Other media companies are also slimming down. Cablevision Systems Corp., a New York-area cable TV provider, is spinning off a business unit containing three cable networks and Madison Square Garden, and radio industry leader Clear Channel Communications Inc. is spinning off its live entertainment division.
It's not necessarily that doing deals is a bad thing, it's just that there's not as much enthusiasm for big media companies being big just for the sake of scale.
"The main issue is not consolidation but conglomeratization," says Jim Rutherfurd, executive vice president at Veronis Suhler Stevenson, a media private equity firm.
"There's a lot of sense in combining like media, for example magazines or TV stations," Rutherfurd said. "Where things went ... too far is when companies were acquiring too many kinds of businesses under one roof."
Viacom is hoping to fix that problem and reverse a long slump in its stock price, which is down 10 percent so far this year, by splitting itself into a "growth" company anchored by its MTV Networks group, and a "value" company centered on CBS.
The split will essentially undo Viacom's acquisition of CBS, which was announced in 1999. At the time, bigger is better seemed to be the mantra among media companies, with Disney buying ABC and Time Warner later agreeing to be acquired by AOL.
Now, the Big Media Theory just isn't what it used to be.
"It's always been a tradeoff," says media consultant Peter Kreisky. "Do you create more value with scale, or with focus? And the jury is clearly out in terms of the advantages of scale."
But even if they're not talking about big deals, the media honchos at Sun Valley still have plenty of big issues to discuss over their golf games and skeet matches.
Finding new ways to reach consumers through developing technologies like cell phone screens is a major topic for media honchos, and so is the widening impact on media consumption by personal storage devices like TiVo video recorders.
Another big topic at Sun Valley is sure to be a pair of Supreme Court rulings last week which handed big victories to media companies. In one case, the court ruled that media owners can go after file-sharing companies for copyright infringement, and in another the court found that cable companies did not have to share their lines with rival Internet access providers.
The monster growth of Apple Computer Inc.'s iPod and similar digital listening devices is sure to be a major topic, as well as the implications it has for the future of traditional radio companies. Apple CEO Steve Jobs is expected to attend, as is Clear Channel Chairman Lowry Mays.
There are sure to be interesting matchups in conversation among the eclectic group of guests this year, which includes regular visitors such as Berkshire Hathaway founder Warren Buffett and Microsoft Corp. Chairman Bill Gates, as well as relative newcomers like the Google Inc. founders Sergey Brin and Larry Page. Allen & Co. participated in Google's IPO last year.
Comcast Corp. chief Brian Roberts won't attend because of a scheduling conflict, but other media bigwigs are expected to turn up, including Time Warner Inc. CEO Dick Parsons, Murdoch and his son Lachlan, and outgoing Disney CEO Michael Eisner.
