2/11/2004

DISNEY GETTING DIZZY

This morning brought the surprising news that Comcast (which has a history of getting what it wants) initiated a hostile-takeover attempt of Disney. Comcast’s offer of $66 billion represents about a 10% premium over Disney’s market capitalization.

The offer comes as many disgruntled Disney stockholders have begun questioning Disney CEO Michael Eisner’s leadership. The company failed to renew its agreement with the computer-animation studio Pixar, thus cutting Disney off from its only reliable source of successful movies in recent years. (Pixar produced “Finding Nemo” and “Toy Story,” among other films.)

While overall Disney is the biggest player in the motion-picture industry, much of that success is due to its subsidiaries, like Hollywood, Touchstone, and Miramax. Disney’s own movies, of late, have been flops like “Hercules” and “Atlantis.” Likewise, many parents (like me, for instance) have grown tired of Disney’s attempts to slap its brand on everything remotely related to childhood. The company is underperforming right now, making it a perfect target for a buyout.

I’m inclined to think that what Comcast is really after, though, is Disney’s television properties. (Disney owns ABC, ESPN, A&E, and, of course, the various Disney channels.) In today’s hyper-competitive cable/satellite market, there’s a real advantage to a cable company owning a network or three. Like, for instance, not having to pay the $2 per subscriber per month that ESPN is rumored to require–but still being able to collect it from your competitors.

This is 1980s-style boardroom drama coming back to life. I think this story bears watching over the next few weeks.

Posted by Mark @ 8:51 am | | Permalink
This post is filed under: Media

3 Comments

  1. What would be very entertaining is if they took everything, but spun off Mickey and company. As you pointed out, the problem seems to be Disney, not its subsidiaries.

    Comment by Dave — 2/11/2004 @ 9:53 am

  2. Hah, you are part of the cover up.
    The price is $66.6 billion
    666
    The number of the beast.
    Now if you will excuse me, I’ll be in my basement with my shotgun.

    Comment by Zygote — 2/11/2004 @ 11:21 am

  3. Actually, the most profitable part of the Disney empire is the theme parks. They throw off tons of cash, which is used to prop up unprofitable losers like ABC. Disney has lost its way in the movie-making business, relying on Pixar instead of developing in-house talent. Some people think Eisner (and his mercurial temper) is to blame for that, as he has a tendency to alienate the creative types.

    Eisner blew the Pixar deal long before last month. Steve Jobs’ current proposal is a bad deal for Disney (Pixar wanted Disney to redo the current deal, which would cost Disney millions), but if the relationship had been managed properly, Jobs wouldn’t have been in a position where he could make such a grandstand play.

    This bid by Comcast makes an interesting situation even more interesting. The last active member of the Disney family has been trying to get Eisner thrown out for a few months (see www.savedisney.com), and now there’s all this Comcast drama. Like Mark said, it’s been quite a while since we’ve had an interesting business-deal drama to watch.

    Comment by Jim — 2/11/2004 @ 2:12 pm

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