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Feb 17, 2004  •  Post A Comment

Disney, Ex-Board Members Cross Swords in Letters to Shareholders

The back-and-forth between The Walt Disney Co.’s leadership and former board members Roy Disney and Stanley Gold continued Tuesday as both sides traded barbs in letters sent to shareholders further explaining the feuding parties’ respective positions.

The letters further set the stage for a showdown between Disney management and Mr. Disney and Mr. Gold at Disney’s annual shareholders meeting March 3 in Philadelphia.

Claiming that the recent Comcast merger offer supports the view that Disney needs change at the top, Mr. Disney and Mr. Gold charged in their letter that “the many strategic failures of [Disney Chairman and CEO Michael] Eisner, senior management and the board have made Disney an attractive target for those who recognize, as we do, that with the right leadership the extremely valuable assets of Disney can be properly utilized to create lasting and significant value.”

The letter cited the recent recommendation of the influential proxy voting advisory company Institutional Shareholder Services, which called for shareholders to withhold their votes for Mr. Eisner’s re-election to the board, and accused the chairman of having forgotten the “creativity and cooperation [that] have always been the lifeblood of Disney.” Mr. Disney and Mr. Gold are urging shareholders not to re-elect Mr. Eisner and three other board members.

Meanwhile, Disney sent out its own letter accusing the Disney-Gold team of being disingenuous when it comes to calls for improved corporate governance and for “waging their distractive propaganda campaign” against the company, which in management’s view has staged a “significant recovery.”

The Disney company letter pointed out that eight of the 11 board nominees are independent and that the company created the position of presiding director for board member George Mitchell to review issues such as the company’s CEO succession plan.

Daytona 500 Coverage Gets Strong Ratings: NBC’s coverage of the Daytona 500 was watched by 33.5 million viewers and earned a 10.6 national rating/24 share, making this year’s broadcast the second-most-watched and second-highest-rated in the 26-year live television history of the 46-year-old event. This year’s rating represents an improvement of 8 percent over the 9.8/21 rating for Fox’s rain-shortened broadcast last year. NBC’s two Daytona 500 broadcasts are now the two most-viewed and highest-rated in history. In 2002, NBC’s inaugural Daytona 500 set a record with 35 million viewers and a 10.9/26 national rating during the middle Sunday of NBC’s coverage of the Salt Lake Olympics.

Walt Disney Co. Acquires ‘Muppet’ Assets: Mickey Mouse has found Miss Piggy’s price. The Walt Disney Co. has acquired the “Muppets” and “Bear in the Big Blue House” properties from The Jim Henson Co. The deal will include all Muppet assets, including the characters Kermit, Miss Piggy, Fozzie Bear, Gonzo and Animal, the Muppet film and television library, and all associated copyrights and trademarks, as well as all the “Bear in the Big Blue House” characters, television library, copyrights and trademarks.

The two companies announced Tuesday they have signed a binding purchase agreement and expect the transaction to close within two months. The deal does not include the “Sesame Street” characters, such as Big Bird and Elmo, which are separately owned by Sesame Workshop. The deal also includes non-exclusive production and consulting agreements under which Henson will develop potential new programming featuring the “Muppets” and “Bear in the Big Blue House” for Disney.

“This new and very important relationship will enable our two companies to combine our respective talents and resources in ways that will fully realize the tremendous potential of the Muppet and Bear franchises,” said Brian Henson, co-chair and co-CEO of The Jim Henson Co. along with his sister Lisa Henson. “Michael Eisner’s longstanding passion and respect for the Muppets gives me and my family even more confidence in Disney as a partner.”

“In the months before his death in 1990, my father … pursued extensive discussions with The Walt Disney Co. based on his strong belief that Disney would be a perfect home for the Muppets,” Lisa Henson said. “As such, the deal we announced today is the realization of my father’s dream, and ensures that the Muppet characters will live, flourish and continue to delight audiences everywhere, forever.”

Michael Eisner, Disney chairman and CEO, said, “Since the time I worked with Jim Henson on the first Muppets TV special in the 1960s, it was obvious to me that his characters would make a deep imprint on the hearts of families worldwide, and this announcement is the culmination of a long-time desire to welcome them into The Walt Disney Co.”

The Jim Henson Co., which was purchased by the Henson family in July 2003 from the German media company EM.TV, will retain all other assets of the company, including Jim Henson’s Creature Shop and ownership and rights to all other characters and entertainment properties in The Jim Henson Co.’s extensive film and television library, including “Fraggle Rock,” “Farscape,” “Dark Crystal,” “Labyrinth,” “Storyteller,” “The Hoobs” and other properties.

Disney Board Rejects Comcast Bid: In a move anticipated by Wall Street, The Walt Disney Co.’s board of directors late Monday unanimously rejected Comcast’s $54.1 billion merger offer, saying the bid was too low, and offered a vote of confidence for embattled Disney Chairman Michael Eisner.

Disney’s rejection of Comcast’s bid sets the stage for a battle of wills between Comcast and the troubled Disney, which has only now begun to recover from years of declines. It also raises the possibility of another bidder coming in to acquire Disney.

The board said as much in its statement: “We are committed to creating shareholder value now and in the future and will carefully consider any legitimate proposal that would accomplish that objective.” Board members also said they continue to have faith in Mr. Eisner and his leadership.

For its part, Comcast said its offer represents “a full and generous valuation based upon Disney’s prospects and performance over a long period of time.”

Comcast’s next move will take place against the backdrop of Disney’s annual shareholders meeting March 3 in Comcast’s hometown of Philadelphia. The meeting promises fireworks: In addition to any takeover discussions, former board members Roy Disney and Stanley Gold are expected to call for shareholders to withhold their votes for several board members, including Mr. Eisner, in protest of the company’s direction.

Young Broadcasting Reports Q4 Loss: Television station company Young Broadcasting on Tuesday reported a widened fourth-quarter loss of $13.2 million, or 67 cents a share, compared with year-ago red-ink of $582,000, or 3 cents a share, on a 17 percent decline in revenue to $55.1 million, as the 11-station group posted gains in local and national advertising revenue, which helped offset declines in political advertising.

For the year, the New York-based owner of KRON-TV in San Francisco reported a full-year loss of $49.1 million, or $2.48 a share, compared with year-ago red ink of $66.5 million, or $3.48 a share. Revenue slipped 8 percent to $207.7 million.

Young said it restated its earnings for 2002 and the first three quarters of 2003 following an inquiry by the Securities and Exchange Commission on how the company recognizes the useful lives of its network affiliation agreements. After previously accounting for these agreements as having an indefinite life, Young said it now will account for the agreements as having a 25-year life, during which the agreements’ income will be amortized.

The fourth-quarter and full-year results reflected a sharp drop in political advertising spending, which fell $12.1 million in the quarter, and $22.5 million for the year. However, the company was able to make up some of the lost revenue with increases in local and national advertising revenue, up 3 percent for the quarter and 5 percent for the year.

Its independent statio
n KRON-TV saw its local and national advertising revenue surge 12 percent vs. the San Francisco television advertising market, which rose 2 percent. The company attributed the growth to the continued increase in ratings.

Akimbo Service Offers Nontraditional Content: A new TiVo-esque service that launched Monday will deliver additional content not found on traditional TV channels. Called Akimbo, the service sends the content to the television via broadband Internet connections. Akimbo works directly with video providers to host and deliver content, including independent films, foreign language content, news and health and fitness videos. More than 10,000 hours of content was expected to be available to Akimbo subscribers at launch. The service is initially designed to deliver unique content that is hard to find.

Content partners include Africa Movies, Billiard Club Network, CinemaNow, DanceScape, Danni’s Hard Drive, GolfSpan, IFILM, Naked News, and StepOutdoors. Users must access the content through the Akimbo Player set-top box, priced at $199.

Tumulty Promoted at The WB: Elizabeth Tumulty has been promoted to senior VP of affiliate relations and communications for The WB. The three-year veteran of the department will continue to report to Ken Werner, executive VP of distribution for The WB.

Mr. Werner also announced the hiring of Marco Williams and Jamie Barton as affiliate relations station representatives and the promotion of Tony Young to station rep.

Kaplan Named MSNBC President: Rick Kaplan, who interrupted his long run at ABC News to take a quixotic tilt at fixing CNN from 1997 to 2000, has accepted another daunting cable news challenge. He has been named president of MSNBC, the perpetual also-ran in the three-network cable news race.

The change takes place immediately for Mr. Kaplan, whose award-winning run at ABC News started in 1979. He returned to ABC News last year without a long-term contract to oversee coverage of the war in Iraq and was named senior VP in charge of ABC News’ hard news and political programming last June.

Erik Sorenson, who has run the Secaucus, N.J.-based MSNBC since August 1998, will help with the transition and then join NBC News at NBC headquarters in Manhattan, where Mr. Sorenson’s perseverance and articulateness have earned him well-positioned fans.

Mr. Sorenson is expected to be assigned to long-term projects under the direction of NBC News President Neal Shapiro, to whom Mr. Kaplan also will report as top executive of MSNBC, the 71/2-year-old joint venture between NBC and Microsoft.