Comcast's Bid for Disney Ripples Through a Linked Industry

  1. One may ask "Why is Ted posting this article?" or "Who Cares?" Good questions. In the short run, it's probably no big deal to the average "Joe" like you and me. However, in the long run, it is a big deal for this reason: More and more of the media, entertainment and news businesses are being owned by fewer and fewer people/companies. These mergers place more power in the hands of a few. Information is everything, especially in a democratic country. How that information is provided to the people does matter. The article doesn't talk about this particular concern (and THAT concerns me). But it's informative non-the-less. And again. . . "Information is everything"!


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    Comcast's Bid for Disney Ripples Through a Linked Industry


    Published: February 13, 2004

    With Comcast's $54 billion bid for the Walt Disney Company Wednesday morning, the knots that bind the intricately intertwined media business pulled tighter. They may get tighter still.

    Already, eager investment bankers trolling for business have been pelting executives of Time Warner and Viacom with phone calls. The advice went like this, two media-industry investment bankers said:

    For Time Warner, allowing another major cable company to gain control of Disney's studios and television networks would badly undercut Time Warner's bargaining power over programming costs. Disney's ESPN network, for example, could more easily squeeze Time Warner Cable for higher fees, while Comcast's cable systems could be more stubborn in haggling with Time Warner's HBO, CNN , and TBS. And Time Warner would miss its chance to own Disney's ABC television stations, another valuable bargaining chip.

    The pitch: bid for Disney.

    For Viacom-owner of CBS, MTV and the Paramount studio-standing by while Comcast swallowed Disney would leave it surrounded by three integrated media giants, counting Time Warner and the News Corporation, all combining major studios and television networks with cable or satellite systems.

    The pitch: merger with the satellite service Echostar to match its rivals reach.

    For consumers, the proposed deal would step up the race between cable and satellite companies to provide elaborate new video and telecommunciations services, such as TiVo-like set-top recorders and telephone service over cable wires. It also poses a considerable threat to the smaller cable operators and cable channels, which lack the bargaining power of the conglomerates-a trend some in the industry say may narrow the variety of new programming.

    Representatives of Time Warner and Viacom declined to comment or did not return calls.

    Yesterday, analysts played down the loss of competitive advantage for rivals like Viacom or Time Warner. Both control the large portfolios of popular programming-such as Viacom's MTV, VH1 and its local CBS stations and Time Warner's CNN, TBS and TNT-that Comcast cable needs. And Viacom does not need to rely on Disney for much besides films or programs for its CBS broadcast network.

    Time Warner executives, speaking on condition of anonymity, also said that it was unlikely the company would enter the bidding. Richard D. Parsons, the company's chairman, has said in the past that the company is most interested in acquiring other smaller, cable companies.

    Larry Gerbrandt, chief content officer of Kagan Media World, said that from Comcast's point of view the proposed deal would only pull it even with the likes of Time Warner and the News Corporation.

    "In a world where you have Warner Brothers, Turner and AOL and Time Warner Cable and a WB Network in the control of one company, and in a world where there is a DirecTV and a Fox and Fox Studio and the Fox Cable networks," he said, "Comcast can make a strong case that this just gets them back to a level playing field."

    The biggest single factor driving this latest bout of media consolidation is the News Corporation's acquisition of the satellite service DirecTV. With that deal, the News Corporation, whose chairman is Rupert Murdoch, became the first direct competitor for cable company subscribers that also controls valuable programming.

    In a conference call with investors on Wednesday, Mr. Murdoch ruled out entering the bidding for Disney but predicted a three-way battle for subscribers.

    "You'll have three very big competitive companies in Comcast, News and Time Warner," he said.

    Mr. Murdoch has already vowed to pour resources into improving DirecTV's marketing, customer service and interactive features, offering customers TiVo-style set-top recorders or the ability to select from multiple shots during news or sports programming.

    He is borrowing from a playbook he has tested in News Corporation's satellite operations in Britain and elsewhere with devastating effect on his cable competitors. And unlike other cable companies, which are limited to their respective territories, DirecTV also competes nationally against every cable company in the country.

    All cable companies are also facing competition from DirecTV that could drive down revenues while at the same time driving up the costs to carry its Fox News, Fox sports and other cable networks. And News Corporation also controls the Fox film studios and its library of films, which Comcast wants to buy in order to sell to its customers as video-on-demand services over digital cable, one of the high-tech features cable companies hope will keep their customers from switching to DirecTV.

    Acquiring Disney, however, would give Comcast more bargaining chips, including a film library of its own as well as cable networks like ESPN that DirecTV needs. "The ante gets raised, because Comcast is less exposed," Mr. Gerbrandt said.

    He and other analysts said they expected Comcast's bid for Disney would only spur Mr. Murdoch to spend more heavily and push even harder to win cable subscribers, especially while the deal is still pending. His efforts, in turn, will put new pressure on cable companies to step up their efforts to push their high-tech features, including their own TiVo-like set-top boxes, cable modems, and telephone service over cable wires.

    But the proposed deal may intensify the growing competition in video, data and telephone service means lower costs and new features for consumers, it would also tax the smaller players. In the last year, Cox and other many small or medium sized cable companies have called for Brian Roberts, chief executive of Comcast, to use its clout as the largest cable operator to drive the rising cost of programming, especially for ESPN and Fox's regional sports networks.

    But acquiring Disney would give Mr. Roberts much less incentive to drive a hard bargain with ESPN. Although regulations would require the combined company to offer ESPN on the same terms to other cable companies as to Comcast, Mr. Roberts may still have more to gain by raising the fees ESPN charges to other cable operators than by lowering them for Comcast.

    Analysts said the proposed deal was likely to accelerate an expected consolidation of the cable business as smaller companies such as Cox Communications, Cablevision or Adelphia which have the least bargaining power against rising programming costs and few resources to fight off Mr. Murdoch satellite attack. "It may force them to decide what they want to be when they grow up," said Jessica Reif Cohen, an analyst at Merrill Lynch.

    The consolidation of the cable and satellite business, in turn, only further makes life harder for independent studios, channels or producers. If Comcast acquires Disney, for example, it will only tighten the screws for MGM, the last major free-standing studio in a business of intertangled conglomerates.

    "That is why you hear talk of MGM selling," Mr. Gerbrandt of Kagan media world said. "The independent content producer has already suffered from consolidation. They are pretty much gone, or a shadow of their former selves."

    There are also been warnings-from Barry Diller, chairman of InterActiveCorp., and Ted Turner, founder of Turner Broadcasting, among others --that the virtual extinction of independent producers of news and entertainment is diminishing the variety of new programs of on the air.

    "These people essentially only accommodate each other. There is no way in any more," Mr. Diller said of the media giants, arguing against a pending deregulation in an interview last spring. Among other things, the rule changes allowed a cable company like Comcast to own local television stations in its markets, enabling a company that Comcast or Time Warner to acquire Disney's ABC stations. Yesterday, Mr. Diller declined to comment further.

    Still, many in the industry argue that the proliferation of channels with digital cable and satellite services has partially offset the obstacles to entering the business. Quirky shows like "Queer Eye for the Straight Guy," for example, can still bubble up on basic cable.

    "The three broadcast networks used to have 90 percent of the viewing out there and now they have less than half," Mr. Gerbrandt said. "The remote control is a remarkably democratic instrument, and people have voted with their remote."
    Last edit by Ted on Feb 12, '04
  2. 10 Comments

  3. by   SmilingBluEyes
    I for one, dont' like this. We are ever-closer to monopolies all the time. It's scary, really.
  4. by   pickledpepperRN
    Friday, February 13th, 2004

    Comcast, the largest cable operator in the nation, launched a hostile bid to buy the Walt Disney Company that would create a powerful media conglomerate rivalling Time Warner in size and scope. Two dissident FCC commissioners say the deal raises big concerns about the increasingly concentrated media marketplace

    In a takeover play for the Walt Disney Company that stunned Wall Street and Hollywood, cable giant Comcast this week launched what's known as a hostile bid to buy one of the biggest names in entertainment. The deal is potentially worth $66 billion and it represents the second-largest hostile bid in U.S. corporate history. A takeover of Disney by Comcast would create a powerful media conglomerate that could rival Time Warner in size and scope. It would also give Comcast control of the powerful ESPN sports cable channels.

    This comes as Disney chairman and CEO Michael Eisner is under intense public pressure from dissidents and critics. It also follows the recent takeover of DirecTV by Rupert Murdoch's News Corp. And it comes as activists continue to fight attempts by the FCC to pave the way for consolidation of media ownership. In fact, Murdoch predicted recently that over the next three years or so, three media giants would dominate the industry by combining content and distribution. He said, "There will be us, Time Warner and maybe Comcast-Disney" or whoever clinches a deal.

    FCC chairman Michael Powell, the son of General Colin Powell, refused to comment on the deal, but dissident commissioners Michael Copps and Jonathan Adelstein said the deal raises big concerns about the increasingly concentrated media marketplace.

    Consumer advocates are saying they will fight the merger as part of the bigger battle over control of the public airwaves.
  5. by   Ted
    Consumer advocates are saying they will fight the merger as part of the bigger battle over control of the public airwaves.
    It seems to be a losing battle. . . and in the end we all lose (except for the monopolies that hold power over the "information highway"!)

  6. by   nekhismom
    Don't we have laws against monopolies in this country?? Didn't Bill Gates' Microsoft have a lawsuit because of an alleged monopoly last year or so??

    I don't like this either. Where are the LAWS of protection when we need them?

    *sigh* I guess I will just need to perfect my spanish so that I can start watching telemundo and univision to get a different view on the current goings-on in this country.
  7. by   Ted
    Those are good questions! And I don't know why they're not being enforced or why they are "watered down". . .

    At least Spanish is a pleasant language to learn. It's just a nice sounding language. . . .
  8. by   nekhismom
    who knows? Maybe it has something to do with the political connections of the powers that be over disney and time warner? Anyone know anything about that that would be able to shed some light on this?
  9. by   pickledpepperRN
    Quote from nekhismom
    *sigh* I guess I will just need to perfect my spanish so that I can start watching telemundo and univision to get a different view on the current goings-on in this country.
    Isn't ome pf them owned by CBS?
    If not it is a major station/contributor to political parties.
    Last edit by pickledpepperRN on Feb 15, '04 : Reason: typo again. Tired is my lame excuse
  10. by   nekhismom
    Quote from spacenurse
    Isn't ome pf them owned by CBS?
    If not it is a major station/contributor to political parties.
    I'm not really sure. I do know that during the actual declared days of the war, univision had many different stories than the american stations. I got quite a bit of education from that channel. It was just hard to understand.
  11. by   SmilingBluEyes
    Puedo hablar Espanol.....i am lucky I guess.

    But I am sure the others can be bought out too, seems no law applies to the rich and powerful among us.
  12. by   nekhismom
    Deb, I understand spanish and speak a bit, but I need to brush up on my skills. And you're right, I'm sure they can be bought out.

    Oh, I found out today that telemundo is owned by NBC.

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