The Pope on Hope
Too bad Steve Case isn’t a better actor. Palpably pathetic as he made the endless rounds of TV interviews this week, the AOL Time Warner chairman played victim, repeating his “I‘m resigning because I’m a distraction” mantra even though everyone knew the mea culpa was as phony as AOL‘s cooked books. Case’s weekend ouster capped a brutal year of Big Media beheadings climaxing this past week with the “resignations” of Tommy Mottola (Sony Music), Andy Lack (NBC) and Walter Isaacson (CNN). The secret of success is staying power, so sometimes the moguls do humbling things to hang on even if it‘s by their fingernails: for Michael Eisner, kowtowing to kvetchy board members; for Sumner Redstone, tolerating a rude-’n‘-crude No. 2; for Rupert Murdoch, kissing the feet of federal regulators.
And, for all of Big Media, it means groveling before the Pope on Hope.
Thank god someone keeps chairmen’s and CEOs‘ feet to the fire. Even better that it’s not a wizard of Wall Street but a downtown Los Angeles portfolio manager -- Gordon Crawford, the senior vice president of Los Angeles--based Capital Group‘s Capital Research and Management, one of the world’s biggest institutional investors. This is the guy who, once upon a time, placed a big bet on what were then blue-chip entertainment stocks and made gazillions for a lot of people, including himself. As those show-biz firms morphed into Big Media, Crawford assumed even more power when his investment positions became huger by default. Soon, the business press was ring-kissing that no merger of infotainment behemoths could take place without consulting him.
But then everything turned to shit. So if today‘s Big Media mess was made with Crawford’s blessing, how come he shouldn‘t shoulder some of the blame? Just imagine if, instead of crying crocodile tears on camera, Steve Case had the cajones to cry out, “You think I’m taking the rap alone? Off with Gordy‘s head!” (For that matter, ATW’s Teflon don, CEO Dick Parsons, also backed what now is the biggest corporate bungle next to Enron, Tyco and WorldCom. But that‘s another story.)
Crawford has become more careful. He used to be the moguls’ pal. Increasingly, he‘s their pallbearer. With a reputation for supporting the management of media companies, Crawford at first seemed in the AOL founder’s thrall like everyone else. But, as the ultimate outsider, Case couldn‘t know what every Hollywood insider learns as the first lesson of survival: Pay attention to the man behind the curtain -- or, in this case, to the preppy baby boomer, Wesleyan grad, University of Virginia MBA whose office is on the 52nd floor of the BP building at 333 S. Hope St. Sucker-punched by AOL’s accounting irregularities and pissed off that his 8% of ATW lost 85% of its share value, Gordy vowed to send Case packing. And, with the help of two other bigtime ATW shareholders Ted Turner and John Malone, as well as board members like Beverly Hills--based Steven Bollenbach (Hilton), Gordy did just that.
But someone as shrewd as Crawford should have realized at its inception that AOL‘s offer to buy Time Warner was all smoke and mirrors. This was, after all, the same Gordy who invested in MCA back in 1972, in cable when fewer than 35% of homes were wired, in Ted Turner’s company when it was on the verge of collapse. The overnight legend who refused to vote his 5% investment in CBS in favor of management‘s slate of directors because he hated that chairman Larry Tisch was running the company into the ground. That’s the role of institutional investors: being the shareholders‘ eyes and ears.
It’s hard to pinpoint exactly when Gordy stopped watching Big Media‘s snake-oil salesmen and started becoming one of them, but it was probably around 1995 -- when he was the only investment portfolio manager to make Vanity Fair’s list of the 50 “New Establishment” power-brokers, when he was canonized in a Los Angeles Times profile, when he succeeded Mike Ovitz in print as the most powerful man in Hollywood.
What goes up must come down. Not that Crawford was ever infallible. It was Crawford who telephoned then--Warner Communications and asked if it would be interested in a technology-based, rapidly growing entertainment company. Yes, it was Crawford who urged Warner to buy Atari and ushered in the late Warner honcho Steve Ross‘ worst mistake. Gordy also fell for that fool’s paradise of an independent studio, Carolco. But those were rare missteps.
Then, in 1995, Crawford backed Edgar Bronfman Jr.‘s gamble when Seagram’s bought MCA. (As a result, Gordy was left with -- egads -- a sizable Vivendi stake even now.) It was Crawford who urged Eisner and Ovitz to “work it out” (though it was clear this was the worst buddy pairing of all time). He cheerleaded the merger between Time Warner and Turner Broadcasting. (Turner intended to keep running his own assets but wound up in forced retirement by former Time Warner CEO Gerald Levin‘s betrayal.) In 1996, The New York Times asked Crawford, who then controlled a 9 percent investment in News Corp., about the chances of Murdoch’s plan for a 24-hour news service to compete with CNN and MSNBC. “Betting against Rupert has often proven wrong, but he‘s coming in very late against Ted Turner and NBC,” Gordy said. (Fox News Channel rapidly bested CNN and decimated MSNBC.) In 2000, Crawford boasted that he and Edgar Bronfman Jr. agreed the Napster problem would go away and that the music industry was too powerful and entrenched to stand for such antics from an Internet company. (Starting with Napster, piracy has spirited away the music industry’s profit potential.)
None of this is to say that Gordy isn‘t a great guy. People love him. He’s soft-spoken in a sea of screamers, he‘s low-profile in a realm of egotists, and he’s nice in a nexus of nasties. Besides, it‘s hard to say a harsh word about someone who in 1993 suffered such a profound personal tragedy: the death of his 21-year-old son Brett during a hiking accident in Taiwan while enrolled in a semester-at-sea program. Crawford has told friends: “I’d give up all the money I ever made for one hour with him.”
All criticism aside, Crawford should be commended for some very recent canniness. He dumped Disney‘s spiraling stock suddenly and swiftly. He rounded up disgruntled shareholders after Adelphia Communications disclosed $2.3 billion in off-balance-sheet loans, mostly to founding Rigas family members, to put pressure on the company to clean up its day-to-day operations. Then he held a conference call with bondholders to devise a united strategy in case Adelphia filed for bankruptcy protection. And Crawford traveled to AOL Time Warner’s Rockefeller Plaza headquarters in New York last fall to bluntly tell Steve Case to resign because he no longer had the support of many shareholders or his own employees. That set in motion Case‘s “resignation.”
During his swan song, Case kept telling current and potential ATW shareholders to “not focus on the past” and “start thinking about the future.” Here’s hoping Crawford better than anybody knows that he who ignores history is doomed to repeat it.
If you want to reach Nikki Finke, send her an e-mail at firstname.lastname@example.org.