net.wars: Everybody ought to have a Mouse
by Wendy M Grossman | posted on 13 February 2004
So Comcast wants to buy the Mouse. Inveterate CNBC watchers will have had a good week listening to analysts explain why this could be a good thing for both companies. At last, someone said yesterday, this could bring us that world of video on demand we've all been waiting for. Like the only reason that vision has largely failed is a lack of wholly distributor-owned content.
All the standard merger things are going to happen now. Comcast shares are dropping - acquirer's always do, because acquisitions stress the buyer. Disney's have gone up to the proposed purchase price - also standard, since who's going to sell his shares saying, "Oh, that's OK, you take the profit when the time comes"? The thing we can be most pleased about is that at least we probably won't see the CEO of Comcast twinned with Michael Eisner on the covers of Comcast cable boxes the way we saw Gerald Levin and Steve Case on the cover of Time in 2000. Though, as Larry Lessig is probably already pointing out, this is a dangerous move because it puts ownership of content in the hands of the owners of the pipes through which that content is distributed.
Let's not forget that Disney owns ABC, one of the Big Three US TV networks.
Historically in the US, that has been the stuff of which antitrust suits are made. It's why Standard Oil was forced to divest itself of gas stations and the movie studios were forced to sell off their theatre chains. This would be a good moment for the FCC to enter the fray and head the whole thing off at the pass. Under Michael Powell, not bloody likely.
Comcast is, of course, the Philadelphia-based cable company I railed against here not long ago for blocking VPN traffic on its residential broadband connections. It already owns a few channels, although it recently sold its stake in QVC. It's more fun to wonder if Disney will like being owned by a company that also gets significant revenues from distributing porn via its adult channels and pay-per-view.
This might be a less disastrous merger than AOL/Time-Warner. When that merger was announced the combined company was valued at $350 billion. Its market cap now: $79.07 billion. In between, of course, AOL's management has been jettisoned in favour of Time-Warner's old-media moguls, and - the ultimate act of revenge - the AOL stock symbols has been retired in favour of good old TWX.
But that by itself isn't saying much. The deal has a few of the same characteristics. Comcast has $27 billion in debt, and it's losing money - in 2003, $218 million. Disney, on the other hand, had $1.2 billion in profit in the year ending September 30, 2003, showing some modest growth over the previous year, nicely offsetting the $13.16 billion in debt it's carrying. Also like Time-Warner, Disney has not managed to make much of a splash on the Net - Time-Warner in 2000 had fielded four failed online ventures; Disney made a mess of Infoseek. The only really good, new, exciting thing Disney's done in years is distribute Pixar's movies - and we found out only a couple of weeks ago that it's not going to be doing that much longer.
Some of that shows in its market valuation. In 2000, when AOL married Time-Warner (for better or for worse, and it's probably been worse than either partner thought it would be) Disney's market cap was $72.1 billion. Of course, everyone else has shrunk too. Yahoo! was then $96 billion; now it's $31.24 billion. Amazon.com: then $22.6 billion, now $18.98 billion, despite the fact that it was losing money then and is modestly profitable now. Even Microsoft: then, with rumours flying that the DoJ was about to break up the company, $546.3 billion; now $290.91 billion. But unlike those other guys, Disney is not an IT company or a dot-com, and it hasn't been lumbered with a bubble partner. If any company should have grown during the bust, you'd think it would be Disney. When things are bad Out There, don't people stay home and want to be entertained? Compare and contrast to Pixar.
Which leads us back to VoD - video on demand - the great promise Comcast's execs are making to the business world. I think, personally, that VoD keeps failing because they're doing it all wrong.
VoD is perfectly salable - even desirable - if you think of it as owning DVDs or using a TiVo. What's wrong with the way the cable and telcos - let's call them catelcos - think about it is that people don't trust them not to move the goal posts at the last minute, suddenly adding unexpected charges, privacy invasions, or hoops to jump through. You may actually be in control of VoD as a catelco might offer it, but it doesn't feel like it. It only really feels like you're in control of your VoD if you have physical charge of the medium holding the video stream or if you can say, "I want to see the doubles matches from that tennis tournament you're showing" and get them instead of yet another singles rerun.
And if you don't feel you're in control it isn't VoD, it's VMTLUHI - Video Maybe They'll Let Us Have It.
Technorati tags: disney comcast
You can discuss this article on our discussion board.
Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).
net.wars: Everybody ought to have a Mouse