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By Paul Kagan
By the time you read this, Mickey Mouse may still be a solo act in Hollywood. Regardless of the result of Comcast's Feb. 11 bid for the Walt Disney Co., the underlying attempt is part of a pattern of media consolidation that began more than 18 years ago with the first sale of the ABC-TV network and stations to Capital Cities. It is a trend that, as they say in the movies, has legs.
The Monday-morning quarterbacking was no different this time, with the age-old claim that operating synergies were not readily apparent, and that both sides could lose their respective negotiating edges if they were owned by one party. That concern has been debunked by all prior mega-media deals, especially the monumental Time/Warner and Disney/ABC marriages. And it certainly didn't slow down Rupert Murdoch's acquisition of DirecTV.
Before Brian Roberts' latest daring move, there were no fewer than seven mergers-with government approval-that brought video content together with at least one national video network and local TV stations or digital video (cable or DBS systems). In the order formed: Cap Cities/ABC (1985), General Electric/RCA (1986), Time/Warner (1989), Viacom/Paramount (1994), Disney/Cap Cities/ABC (1995), Viacom/CBS (1999) and News Corp./DirecTV (2003). Comcast just wants to be No. 8.
The first two deals, for ABC and NBC, seemed like "broadcast plays" at the time. But when Time and Warner fought off an unwanted approach by Paramount's Martin Davis, I said then that the significance was the FCC's approval of a fully integrated media giant far larger than all of its peers. "Rivals," I said, "won't allow it to be the only one, and there is nothing the government can do to stop it, now that it has let the media merger cat out of the bag."
Each successive deal has brought more howling from those who liked the provincial past of thousands of tiny radio stations, hundreds of struggling UHF stations and maybe millions of starving actors, directors, writers and-yes-ballplayers, all trapped in a sea of undervalued, competing license holders.
But time has borne out the natural progression of multiple media, encouraged (required?) by the government that regulates them to use ever-better technology to improve the home entertainment experience. Most of the small independents that expanded the broadcast and cable viewing of the 1970s-1990s had to flee from the prospect of going digital and taking their equipment, in Disney's (OK, Pixar's) own words, "to infinity...and beyond."
At a level to which any sports fan can relate, the explosion in sports coverage (I'm thinking NFL Sunday Ticket, multiple camera angles and glitzy halftime shows) would not be possible without the deep pockets of media giants. As Frank Sinatra sang in the 1960 recording of Carolyn Leigh and Cy Coleman's "The Best Is Yet to Come": You ain't seen nothin' yet!
To some, the old, simpler heroes were more endearing than today's mega-paid, muscled-up sports celebrities. But there isn't one fan I know who's rooting for fewer home runs or slower track times. To oversimplify, fans who want clean, modern stadiums, new records set and still more camera angles are either rooting for more media mergers, or, at least, richer media companies. In the wake of Alex Rodriguez going to the Yankees, ask any Red Sox fan if he'd prefer that his team had its own TV network. The answer, of course, is: YES.
So, what to look forward to? Numerous media will find ways to remain independent, and still grow large. But there will continue to be some players who can grow richer by selling out to one of the giants. In the cell phone world last month, AT&T Wireless found its Cingular. In media, as free cash flow grows and stock prices once again blossom, content producers, networks, systems and stations will find their Comcast or Time Warner, and one or two other giants yet to be formed.
Analyst Paul Kagan is an investor and money manager. He owns shares in Comcast, Time Warner, Viacom and News Corp. Information in his columns is not intended to be a recommendation to buy or sell securities.
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