Saturday, February 21, 2004

Oligopoly profile: Walt Disney Company Could Disney be the latest victim of the acquisition roll-up in the media, thanks to a hostile takeover by Comcast? The 75 year old company, by some measures the world's second largest media company, is itself an icon, and it owns many more of the icons of American culture. It's a brand that rivals Coca Cola or McDonald's as the shorthand representation of the US across the world. But the company is in trouble. Disney's revenues (around $27 billion) have remained pretty much static since 2000 and its net profits, while better than nonexistent profits of 2001, are ho-hum. And unlike most media giants, the so-so profits can't be blamed on costs for major acquisitions that will be recouped eventually. Disney has not made a major move since it bought Cap Cities/ABC 1996. Whatever growth it has shown since has all been organic, and lately that organic growth has been very slow. Blame it one several factors: The post-9/11 drop in resort travel, though that's long over. The gradual decline of network TV, though ABC has been particularly hard hit. The so-so record of Disney films in recent years The imperious, micromanaging leadership of Michael Eisner which was tolerated while the company was growing but now has caused board resignations and a rebellion among stockholders All this has been softened by two factors: the major growth of sports network ESPN as a brand, and the major success of certain animated films like Toy Story, Monsters, Inc., and Finding Nemo, megahits has filled the company's coffers. But there are problems here: By jacking up the cost for cable networks to carry ESPN on their systems, Disney may have roused the ire and interest of Comcast, their larger customers. Comcast had threatened to create a competitor cable channel to rival ESPN. Then the company decided to just buy it outright. By failing in its negotiation with Pixar, the company that created Finding Nemo and other hit animation features, Disney will lose big. Its own animations lately have been so-so to poor at the box office. And while Pixar still has to deliver two films under the old contract, it will soon become a direct competitor. Whatever happens with Comcast bid, Disney is certain to get shaken up profoundly, as it ahs no available remedy for its current mediocre performance. While journalists have railed a lot about foolish over-commitment to media mergers and acquisitions, Disney may have been foolishly reticent. It owns ten TV stations, standing pat while News Corp. and Viacom have snapped others up. It has about 64 radio stations, but ClearChannel and Viacom are far more dominant. It owns all or part of a bunch of cable channels, but GE, Viacom, and News Corp. own far more. Buying the Muppets or opening a Disneyland in Hong Kong is not going to make any difference in the company's presence in the media oligopoly. 3:04:24 PM

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