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Last Updated: Friday, 13 February, 2004, 08:25 GMT
Can Disney be Comcast's treasure island?

Analysis
By Stephen Evans
BBC North America business correspondent

When AOL merged with Time Warner, Ted Turner said it was as good as making love for the first time.

Some of the press coverage was breathless: "The visionaries were right: the future is about convergence. And for many observers, the exciting thing about the AOL Time Warner merger is its sheer size," said one magazine.

The word "synergy" was everywhere. Mega-deals, bringing together both ends of the media industry - programme-making and programme-delivery to homes - was the dream come true.

As we now know, it was a dream that turned into a bit of a nightmare.

AOL, the upstart new-tech predator which gobbled up the rather large prey, has now been dropped from the merged company's title, so ill-fitting was the match.

Comcast executives pointed out that Disney was now what one called 'talent repellent'
So when Merrill Lynch calls a merger of cable TV operator Comcast and Disney "a perfect, brilliant combination", we must take a breath, take another breath and do a lot of thinking.

We might also ponder the unhappy experience of DaimlerChrysler as we scratch our heads. Mega companies can be an amalgam of cultures that clash.

Bitterness

Comcast, however, does have some persuasive arguments.

Its top executives pointed out when they announced the proposed deal that their management - that is, er, themselves - were tried and tested and found sound.

The company had taken over AT&T's cable business and integrated it smoothly into its operation.

They also pointed out that Disney was now what one called "talent repellent".

There does now seem to be an unanswerable imperative towards merger
That may be taking it too far, but there's no doubt that Disney is not a happy place and talented people have left with some bitterness.

Ironically, one of those people is Stephen Burke who runs Comcast's cable business after working in three different divisions of Disney over 12 years.

Comcast knows how Disney operates because Comcast executives have worked there.

On top of that, AOL Time Warner may not be the best template.

Flak

Perhaps, News Corporation's takeover of DirecTV is a happier precedent. Rupert Murdoch has merged two ends of the media business seamlessly without drawing much flak.

Arguably, Comcast and Disney ought to be a better fit because cable rather than the satellite, which DirecTV uses for its network, seems to be the better medium for conveying programmes to homes.

Whatever the doubts about size, there does now seem to be an unanswerable imperative towards merger: technology has changed and so, therefore, has the natural configuration of industries.

Where programme-making and programme-distribution seemed to be worlds apart now they are clearly part of the same business, so the logic is to create companies that cover the whole patch.

Mr Murdoch knows that; Mr Roberts of Comcast knows that; Richard Parsons of Time Warner knows that.

Michael Eisner of Disney may know that, but is unlikely to admit it.

He may draw comfort from an anecdote of nearly a century ago. In 1911, the Supreme Court of the United States ruled that the 90% share of the US market held by Standard Oil was monopolistic and the company should be broken up.

John D Rockefeller who had spent his life building the company advised his friends to buy shares in the components of the broken giant. The sum of the parts was greater than the whole.



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