Editorial: Can Comcast Build a Better Mouse House?

Feb 23, 2004  •  Post A Comment

As mega-mergers go, Comcast’s proposed takeover of Disney is less frightening than most. Disney has been one of the more dysfunctional media giants in recent years and may well benefit from the new, more focused priorities the Comcast management team would bring to the table.
Still, a move of this size and potential impact warrants a wary eye by media watchers, government regulators and the industry as a whole. Consolidation has been speeding ahead at an alarming pace in recent months, with the GE-Vivendi Universal combination pending and News Corp.-DirecTV already a done deal. We now have more than enough evidence of the impact of such mergers. AOL and Time Warner are an example of the consequences when a merger doesn’t work. Media concentration in general has produced a less competitive marketplace and a loss of industry jobs. Consumers have been hurt by higher prices and a move toward more formulaic programming. Diversity efforts, local news, community involvement and other public service commitments have also suffered.
But the proposed Comcast-Disney deal is one case in which bigger may not necessarily mean worse. Disney remains a great company in many ways but has suffered from one management crisis after another in recent years. The problems have been particularly obvious in broadcast, where the ratings woes of the ABC Network are well documented. In cable, ESPN is a top performer but has been in a public dispute with several top cable system operators over its efforts to raise rates, apparently in an effort to pass on higher costs. And the $5 billion acquisition of ABC Family has never lived up to its promise. The current power struggle between Roy Disney and Michael Eisner remains a very visible reminder of the problems that have plagued The Walt Disney Co.
It is this internal turmoil and a low stock price that made Disney vulnerable to a takeover. Enter Comcast, the biggest gatekeeper in cable, with an eye on creating an integrated mega-corporation that would control both content and distribution. Unlike other recent mergers, this combination presents a minimum of overlapping businesses and a vision of how technology and programming can be integrated. That vision may be just what’s needed to turn Disney into a success story again.
The move is fraught with possible pitfalls. If Comcast makes the same mistakes Disney has made, such as relying too heavily on in-house productions for its broadcast and cable outlets, it is unlikely to turn things around. If, however, Comcast avoids the rigid bottom-line-oriented mentality and puts long-range thinking ahead of a narrowly defined push for profits, it has an opportunity to create a successful model for future integrated media giants.