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Disney Comcast Madness February 11, 2004

Posted by David Card in Uncategorized.

I’ve ranted before about my preference for horizontal versus vertical integration in media businesses. And as my colleague Todd Chanko reminds me, all these deals come down to money – not synergy. But the financial implications of the merger are beyond me and I won’t comment on them, other than to observe that in most cases cable is the cash generator, not content.

Some of my Pro arguments are similar to those for NBC Universal:

– Much as I dislike vertical integration of studios and distribution, given today’s market conditions, it may be necessary for negotiation leverage
– Comcast is running well & has smart management; Disney has plenty of smart managers under Eisner, but isn’t running that well right now & has huge turmoil surrounding the board
– Comcast has a billing relationship with its customers, which might help Disney with on-demand content strategies
– Disney is one of the few media companies whose brand means anything, but what that does for Comcast Cable escapes me
– In contrast to Time Warner and Sony, both Disney and Comcast are centrally managed companies, so if a “robbing Peter to pay Paul” strategy ever made sense, they could probably enforce it

Cons (that outweigh the pros)
– I can’t see any of those RPTPP strategies that couldn’t be done better with a win-win deal between partners
– Most content needs maximum distribution: Comcast doesn’t have a national footprint so Disney/ESPN et al will still have to do deals. Unless Disney’s datacasting Moviebeam is the secret plan
– Most distributors can’t afford to put all their eggs in one (studio) basket: ABC has not thrived because of Disney content while Warners (a studio without a major network parent) is the most successful TV studio these days
– Size is rarely a good thing, except for negotiations, and for “efficiencies” of which I see precious few
– Although they’d have a general-purpose TV network, the combo still lacks a general-purpose online network or portal. Now if together they bought Yahoo…

Brian Roberts’ letter to Eisner outlines the usual merger platitudes, and specifically calls out technology and on-demand content potentials:

…As you have expressed on several occasions, one of Disney’s top priorities involves the aggressive pursuit of technological innovation that enhances how Disney’s content is created and delivered. We believe this combination helps accelerate the realization of that goal-whether through existing distribution channels and technologies such as video-on-demand and broadband video streaming or through emerging technologies still in development-to the benefit of all our shareholders, customers and employees…

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