Disney Ponders Comcast Bid
Walt Disney Co. Chairman and CEO Michael Eisner offered little comment Wednesday on Comcast’s unsolicited proposal to merge the media and cable companies, saying only that the company will study the cable operator’s proposal.
Speaking at an investor and analyst conference in Florida during which Disney released fiscal first-quarter earnings, Mr. Eisner would only say that Disney’s board met Wednesday morning and asked management and the company’s financial advisors to study Comcast’s proposal and make a recommendation to the studio’s board.
Comcast on Wednesday made an unsolicited offer to merge with Disney, which owns broadcast network ABC as well as cable channel ESPN, to create an entertainment giant with $45 billion in revenue and a market capitalization estimated to be $125 billion and cable systems, cable channels, a film studio and broadcast network among its many assets.
Under the terms of Comcast’s proposal, the cable operator, which has 21.5 million subscribers, would issue 0.78 share of Comcast class A common stock for every Disney share. Comcast would also assume Disney’s $11.9 billion in debt and control 58 percent of the new company.
Meanwhile, Disney reported a fiscal first-quarter profit of $688 million, or 33 cents a share, up sharply from a profit of $36 million, or 2 cents a share, in 2002, when the company booked a charge related to an accounting charge. Revenue advanced 19 percent to $8.5 billion.
At the company’s media networks division, which includes ABC as well as the cable networks, operating income came in at $344 million, compared with an operating loss of $71 million a year ago, on a 6 percent increase in revenue to $3.1 billion.
Disney said its cable operations saw higher operating income due to higher affiliate revenue, a strong advertising market and lower cost amortization for ESPN’s coverage of National Football League games due to the channel’s entering the final three years of its carriage contract with the league.
Broadcasting, meanwhile, saw its programming costs fall due to fewer NFL games being broadcast on ABC and cost cuts in prime-time programming. ABC also got a boost from higher advertising revenue. Those factors were offset by the lower ad revenue created by the broadcast of fewer NFL games and the decline in political advertising revenue.
NAB Announces Programming Standards Summit: Amid a growing barrage of criticism about off-color broadcasts, the National Association of Broadcasters today announced plans to convene an industry-wide summit on programming standards this spring. “The time has come for a full and frank dialogue with our media colleagues on voluntary programming responsibility,” said Eddie Fritts, NAB president and CEO, in a statement. In a letter dated today to Federal Communications Commission Chairman Michael Powell, Mr. Fritts said NAB members share the chairman’s concerns about broadcast programming. “Even before the recent incidents, our members were engaged in extensive discussions about indecent programming and what role NAB should play in the growing debate over broadcast programming,” said Mr. Fritts in the letter, in an apparent reference to the flap that Janet Jackson’s Super Bowl halftime performance has aroused at the FCC and on Capitol Hill. As a partial cure, some federal officials are advocating that broadcasters and the cable industry adopt a single code aimed at toning down sex and violence on TV. But at least initially, the NAB summit will be limited to broadcasters. “It would be difficult to ignore the role of cable and satellite in prurient programming,” said NAB spokesman Dennis Wharton.
Karmazin, Tagliabue Testify on Indecency: In the wake of Janet Jackson’s Super Bowl flash dance, Viacom President and Chief Operating Officer Mel Karmazin told federal legislators today that he has directed all of the company’s owned-and-operated TV stations to install equipment enabling them to bleep offensive material from live programming.
At hearings before the House telecommunications subcommittee, Mr. Karmazin also said that a Viacom investigation-the results of which were turned over Tuesday to the Federal Communications Commission-indicated that no one at any Viacom-owned company, including MTV, had advance notice about Ms. Jackson’s stunt.
In addition, the Viacom chief said he has found no major wrongdoing by a company employee. “I’m not going to find a scapegoat so I can say somebody’s head rolled,” Mr. Karmazin said.
In his own testimony, NFL Commissioner Paul Tagliabue said the league also had been blindsided. “I felt like I was kicked in the stomach,” he said, when he saw the halftime show in progress. Nonetheless, lawmakers said pending legislation to increase indecency fines might be beefed up Thursday morning when it is scheduled for a subcommittee vote. As it stands, the legislation would raise the maximum fine for an indecency violation from $27,500 to $275,000. Rep. John Dingell, D- Mich., suggested an amendment that would raise the fines even more by putting them on a sliding scale based on the ad revenues generated by an offensive broadcast.
Rep. Gene Green, D-Texas, said he would propose an amendment to shift the fine from affiliates to the offending network. Mr. Karmazin indicated he wouldn’t oppose such an amendment.
“I would have no trouble being responsible for what we air on our broadcast networks,” Mr. Karmazin said. Nonetheless, he said he believes it would be helpful if the FCC would first define clearly what it means by “indecency.” “When you are dealing with the First Amendment you have to be very, very careful,” he said. He added that CBS standards-and-practices people will examine the commercials that the network airs.
Mr. Tagliabue said the NFL might reconsider its sponsorship relationships with some advertisers, particularly with pharmaceutical advertisers.
Mr. Karmazin said he would “be very open to participating” in discussions about possibly resurrecting a code for broadcasting.
Barton Gets Key Endorsement: A steering committee headed by House Speaker Dennis Hastert, R-Ill., today recommended that Rep. Joe Barton, R-Texas, be named chairman of the House Energy and Commerce Committee, effective Feb. 16. Rep. Barton is slated to succeed Rep. Billy Tauzin, R-La., who has stepped down to consider a lucrative offer to head a trade association for the pharmaceutical industry.
Comcast Makes Bid for Walt Disney Co.: Cable giant Comcast on Wednesday made an unsolicited bid for Walt Disney Co., proposing to merge the two companies in a tax-free stock swap that puts the value of the film studio at $54.1 billion and gives Comcast control of 58 percent of the combined entity.
The No. 1 multiple-system operator, boasting 21.5 million subscribers, said it would issue 0.78 of a share of Comcast Class A common voting stock in exchange for each Disney share, giving Disney shareholders a $5 billion premium based on Disney’s closing price Tuesday of $24.08 a share. In addition, Comcast said it would assume $11.9 billion in Disney debt.
News of a proposed deal sent Disney shares soaring nearly 15 percent to $27.60 a share in extremely heavy trading, while Comcast’s shares fell 8 percent to $31.27 a share.
Philadelphia-based Comcast decided to go public with its desire to merge with Disney after Disney Chairman and CEO Michael Eisner earlier this week rebuffed Comcast CEO and President Brian Roberts’ offer.
“We have a wonderful opportunity to create a company that combines distribution and content in a way that is far stronger and more valuable than either Disney or Comcast cane be standing alone,” Mr. Roberts wrote in a letter to Mr. Eisner following their meeting.Ocom President and Chief Operating Offic
A Disney spokesman did not return a call seeking comment, however the company issued a statement later Wednesday morning, saying that the company’s board of directors “has received and will carefully evaluate the unsolicited offer from Comcast Corp.”
While many in the industry had expected Comcast eventually to make a play for Disney, some were surprised by the timing. Comcast
is just now completing the integration of the cable systems it acquired for $54 billion from AT&T Broadband.
However, Comcast officials said the timing is ideal, given the cable operator’s financial strength and the fact that it has sharply trimmed its debt levels to nearly $23 billion from a year-earlier level of nearly $35 billion. Also, Comcast and Disney jointly own cable channel E! Entertainment, with Comcast holding a 50.1 percent stake, while Disney owns the rest.
Comcast’s decision might also reflect the state of flux that Disney in as Mr. Eisner endures criticism from former board members Roy Disney and Stanley Gold over the chairman’s leadership and the direction of the company.
Indeed, Comcast officials said one of the main attractions to wanting to do a deal with Disney is to attempt to regain some of the luster lost over the past six years.
“We have two areas that we think we can improve,” said Comcast Cable President Stephen Burke, a former Disney executive. “One, restoring Disney’s operating results to where they were a number of years ago, getting them back to where they were. The second area is realizing opportunities [created] when putting these two companies together.”
That announcement came as Comcast reported fourth-quarter and full-year earnings. The company said swung to a fourth-quarter profit of $383 million, or 17 cents a share, vs. a year-ago loss of $51 million, or 3 cents a share, as revenue jumped 58 percent.
For the year, Comcast also swung to a profit of $3.2 billion, or $1.44 a share, after posting red ink of $274 million, or 25 cents a share, a year ago. Revenue has more than doubled to $18.3 billion.
Cartoon Net Makes Video Distribution Deal: Cartoon Network announced a long-term deal giving Take-Two Licensing first-look rights to publish and distribute video games based on Cartoon Network properties targeted to kids ages 6 to 11. As part of the deal, Cartoon Network will present new properties to Take-Two at the earliest stages of series development. Take-Two will begin the partnership by producing games based on Cartoon Network’s top-rated program for 2003, “Codename: Kids Next Door,” with a Game Boy Advance title available at retail for Christmas 2004. “Codename: Kids Next Door” games for other platforms will be available in 2005.
Brian Williams to Speak at TVB Luncheon: NBC’s Brian Williams, designated to take over the anchor chair at “NBC Nightly News” later this year, will be the luncheon speaker at Television Bureau of Advertising’s Annual Marketing Conference April 15. “I’ve had the pleasure of hearing Brian speak at a number of industry events over the years,” said Chris Rohrs, TVB president. “Besides having a unique perspective on world and national events, he is great fun. Our attendees are in for a treat.”
‘Idol’ Fuels Fox Nightly Win: Fox’s “American Idol” continued its dominance and drove Fox to a nightly victory in adults 18 to 49 and total viewers. “Idol” scored a first-place 11/28 in adults 18 to 49 and 26 million total viewers, according to Nielsen Media Research fast affiliate data. At 9 p.m. “24” finished second in adults 18 to 49 with a 4.3/10; it was beat by NBC’s combination of “Will & Grace” and “Scrubs,” which pulled a 5.5/13. The two sitcoms also won the hour in total viewers with an average 11.6 million.
UPN continued to get traction on the night with “America’s Next Top Model.” It finished fourth in adults 18 to 49 with a 3.4/8, beating out CBS and The WB and drew 7 million viewers.
ABC’s “NYPD Blue” returned last night and boosted the network’s 10 p.m. time slot, which had temporarily been home to freshman drama “Line of Fire.” “Blue” scored a second place 4.1/11 in adults 18 to 49 and 11.3 million total viewers. NBC’s “Law & Order: SVU” won the time slot in both measures with a 5.5/14 and 12.9 million viewers.
For the night, Fox finished first in adults 18 to 49 with a 7.7/19, followed by NBC (4.9/12), ABC (3.4/9), CBS (2.6/7), UPN (2.3/6) and The WB (1.7/4). In total viewers, Fox finished first with 18 million, followed by CS (11.7 million), NBC (11. 1 million), ABC (9 million), UPN (5 million) and The WB (4.4 million).
Fox Reports Higher Profits: Fox Entertainment Group on Wednesday reported a 17 percent increase in fiscal second-quarter profit to $330 million, or 36 cents a share, from a year-earlier figure of $283 million, or 32 cents a share, propelled by growth at the company’s cable properties and increased market share at the company’s television stations.
Fox Entertainment, which is 82 percent controlled by Rupert Murdoch’s News Corp., posted a 7 percent revenue increase to $3.4 billion.
The broadcast network narrowed its operating loss to $133 million from $154 million a year ago, as sports-related advertising related to Major League Baseball helped offset a 10 percent decline in ratings and higher promotional costs.
The company is expecting the fiscal third quarter to register marked improvements, as “American Idol” has become a ratings juggernaut that is surpassing year-ago ratings and helping Fox improve its overall prime-time ratings on Tuesdays and Wednesdays.
Fox’s cable division, which includes FX and Fox News Channel, saw its operating income surge 74 percent to $155 million. The growth was driven by operating income growth of 89 percent at Fox News Channel, which was fueled by a surge in ad sales that offset increased operating costs associated with covering the war in Iraq. Its other cable properties — FX, Speed and the Regional Sports Networks — reported a 61 percent improvement in operating profit thanks to higher affiliate rates, subscriber growth and increased ad sales.
Officials at the company are expecting affiliate fees to increase in the coming years, particularly at FX, which has carriage agreements up for renewal in the near term.
At the television stations unit, operating income fell to $276 million from a year-ago figure of $305 million as a slowdown in political advertising revenue more than offset any benefits realized from the increase in market share.
The results helped News Corp. post a 28 percent increase in fiscal second-quarter profit to $410 million, or 30 cents a share, from a year-earlier level of $320 million, or 24 cents a share. Revenue rose 19 percent to $5.6 billion.
Showtime Offers ‘L Word’ Sweepstakes: To promote it’s new show, “The L Word,” Showtime Networks is running a “L is for Everything Women Love” Sweepstakes with a top prize of $10,0000. The sweepstakes appears on Woman.com through March 8 and will promote through banner ads, tune-in e-mails and feature articles and interviews with “The L Word” cast on Women.com and on select areas of the iVillage network of sites. It will also be showcased in broadcast promos on Showtime, in the network’s online campaign for “The L Word” and on SHO.com.
ABC Announces Oscar Sponsors: ABC today released a list of advertisers for its broadcast of the “76th Annual Academy Awards.” They include Procter & Gamble, MasterCard, America Online, Washington Mutual, Allstate, McDonald’s, Pepsi, Cadillac, Kodak, Hewlett-Packard, Home Depot, Charles Schwab and JCPenney. The Oscarcast will air Feb. 29 from the Kodak Theater in Hollywood.