Comcast has made a surprise $66 billion bid for Disney. That match makes no sense to me.
very quickly - since i'm on my way to wd - i haven't read the analyst coverage, but a quick take on the benefits to comcast would include:
- guaranteed access to content and leverage over content costs in general (once you own a studio and a network, you're part of everyone else's value chain and you can exert a lot of influence at a high level)
- ad sales synergies through cable/broadcast duopolies (ie now they'll own both the cable company and the ABC station in a given local market...could be pitched as a "must-buy" ad package...at the very least they can bundle enough to clear more inventory on the cable side)
- higher margins in content business vs. cable business -- potential creating a "rub-off" effect on comcast's overall P/E over time
- i suspect disney's balance sheet is quite strong given all their real estate holdings...which could also make them attractive from an overall corporate finance perspective (cable companies are typically highly leveraged and the AT&T merger cost bucks...so adding blue-chip assests should help raise comcast's bond ratings and lower their cost of capital)
and finally
- kicking eisner's ass out of pure spite ; )
so basically, they would make more, spend less, and borrow cheaper. not a bad package at current prices ; )
The vertical integration aspect is increasingly important. A cable company without content leverage can be more easily screwed by their vertically integrated competitors. For example, ESPN (a Disney property) is a must have for cable and satellite operators. This deal gives Comcast leverage in discussion about what content from Viacom, Warner, Fox, etc. that Comcast will carry on their systems vs. what Comcast content that Viacom, Warner, Fox, etc. will carry on their systems.
exactly. that's what i mean by "leverage" over the whole content space. video on demand seems to be a key issue for comcast - they'd like to use disney as a model for everyone else.
one note is that viacom doesn't have "systems" any more...just content...but the point certainly applies to TW and to News Corp now that they're taking over Direct TV.
i should also add that my post was trying to explain why the deal made sense from COMCAST'S perspective.
as far as why it would make sense from DISNEY'S perspective -- I'm not sure it does.
what Viacom shows, IMHO, is that a distribution-less content strategy can work just fine -- you don't need to own the pipes if you have must-carry brands. I think the same thing applies to Disney.
I guess I'm out of date on Viacom. I thought they were an MSO. They do own some pipes ... CBS and UPN and some owned & operated affiliates. But broadcast channels and over-the-air signals are becoming less and less important as delivery channels.
By the way, Disney rejected the bid. They want more money.
a good article on the topic
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- jim 2-11-2004 6:58 pm
very quickly - since i'm on my way to wd - i haven't read the analyst coverage, but a quick take on the benefits to comcast would include:
- guaranteed access to content and leverage over content costs in general (once you own a studio and a network, you're part of everyone else's value chain and you can exert a lot of influence at a high level)
- ad sales synergies through cable/broadcast duopolies (ie now they'll own both the cable company and the ABC station in a given local market...could be pitched as a "must-buy" ad package...at the very least they can bundle enough to clear more inventory on the cable side)
- higher margins in content business vs. cable business -- potential creating a "rub-off" effect on comcast's overall P/E over time
- i suspect disney's balance sheet is quite strong given all their real estate holdings...which could also make them attractive from an overall corporate finance perspective (cable companies are typically highly leveraged and the AT&T merger cost bucks...so adding blue-chip assests should help raise comcast's bond ratings and lower their cost of capital)
and finally
- kicking eisner's ass out of pure spite ; )
so basically, they would make more, spend less, and borrow cheaper. not a bad package at current prices ; )
- big jimmy 2-17-2004 2:21 am
The vertical integration aspect is increasingly important. A cable company without content leverage can be more easily screwed by their vertically integrated competitors. For example, ESPN (a Disney property) is a must have for cable and satellite operators. This deal gives Comcast leverage in discussion about what content from Viacom, Warner, Fox, etc. that Comcast will carry on their systems vs. what Comcast content that Viacom, Warner, Fox, etc. will carry on their systems.
- mark 2-17-2004 3:23 am
exactly. that's what i mean by "leverage" over the whole content space. video on demand seems to be a key issue for comcast - they'd like to use disney as a model for everyone else.
one note is that viacom doesn't have "systems" any more...just content...but the point certainly applies to TW and to News Corp now that they're taking over Direct TV.
i should also add that my post was trying to explain why the deal made sense from COMCAST'S perspective.
as far as why it would make sense from DISNEY'S perspective -- I'm not sure it does.
what Viacom shows, IMHO, is that a distribution-less content strategy can work just fine -- you don't need to own the pipes if you have must-carry brands. I think the same thing applies to Disney.
- big jimmy 2-17-2004 7:54 pm
I guess I'm out of date on Viacom. I thought they were an MSO. They do own some pipes ... CBS and UPN and some owned & operated affiliates. But broadcast channels and over-the-air signals are becoming less and less important as delivery channels. By the way, Disney rejected the bid. They want more money.
- mark 2-17-2004 9:29 pm
a good article on the topic
- mark 2-24-2004 1:24 am