THE CAREER NOVELIST
Baen-. Viacom (via its distributor Pocket Books)
Bantam/Spectra-. Bertelsmann
DAW: Pearson (via Penguin USA)
Del Rey-. Advance Publications, the Newhouse family publishing
empire
HarperPrism-. HarperCollins
NAL/ROC: Pearson (via Penguin USA)
TOR: Holzbrink (via St. Martin's Press)
Warner/Aspect-. Time Warner
So that's the history. Whatever the reason for M & A activity, M &
As ultimately continue only with the consent of the conglomerate's
shareholders. They expect to earn higher dividends because of
them. But how? Especially when so much debt is involved?
The first rationalization is obvious: economy of scale. A con-
glomerate can, supposedly, boost earnings by fusing certain func-
tions of separate companies. For instance, when the payroll and
benefits departments of two subsidiaries are merged into one small
unit, money is saved. The shareholder gains.
Then there is bigness itself. More products equal more profit,
provided those products are the type that produce a steady cash
flow—like cable or books. But this rationale does not fool anyone
anymore, really. Shareholders know that M & As must be paid for.
The conglomerate must either raise the capital by issuing new
stock, thus diluting earnings, or by taking on debt—junk bonds, for
instance, which are nothing more than corporate credit cards with
outrageously high rates.
The biggest rationalization for M & As is the concept of vertical
integration; that is, the conglomerate's ability to market an enter-
tainment property simultaneously in many markets and media, per-
haps even in many countries around the world. Disney is masterful
at this. Well before a film like The Lion King is released, tie-in prod-
ucts of all kinds show up in stores. When the film finally hits with a
media blitz, the company is poised, sponge-like, to soak up every bit
of loose revenue.
Or take Time Warner... consider Sports tilustmted's highly popular
swimsuit issue. In the old days Time made money on this. Today