Comcast: New Technologies Can Spur Disney Deal

If Comcast’s $66 billion hostile takeover of Walt Disney Co. is approved, the company plans to leverage its position as a broadband Internet service provider in order to make the most of the deal.

Ever-growing broadband demand “proves that consumers want to control what content they get and when they get it,” Comcast CEO Brian L. Roberts said after the deal was announced Wednesday.

Building on that principle, Roberts said Comcast could deliver content from Disney’s networks — ABC, ABC Family and ESPN — in two ways: online, through portals or streaming media; or on digital TV, via video-on-demand or personal video recording, akin to the TiVo offering.

For example, the Philadelphia cable operator could offer a library of Disney movies or programs as a premium service for an extra $9.95 per month, Stephen B. Burke, Comcast’s president of cable operations, said.

Burke, who spent 12 years as a Disney executive before joining Comcast in 1998, said the content “could be tremendously valuable on these new platforms.”

And the platforms already have impressive reach. The company boasts more than 21 million cable customers, the largest base in the country, and 5 million high-speed Internet subscribers.

Roberts and Burke said the marriage of content and new technologies is inevitable, but the combination of Comcast and Disney would put them in the homes of users faster.

No matter how logical Comcast’s argument, there are obstacles to closing the deal.

First, is resistance from embattled Disney boss Michael Eisner, who rebuffed the offer over the phone on Monday, prompting Roberts to make a direct appeal to directors and shareholders. Many of those who would vote have been unhappy with Eisner’s performance recently.

Roberts declined to say whether the company was willing to increase its bid, saying that he thought the offer, which represents a $5 billion premium on Disney shares, was “fair.” Comcast has walked away from deals in the past, said Roberts, who is regarded as a smart dealmaker.

Regulators would also have to decide whether the merger would hurt competition because of the control Comcast would have over cable and network programming, the Internet and its cable TV.

If consummated, mergers of this size require a deft touch in merging offices, workforces, IT systems, back-end systems and the harder-to-define “corporate cultures.”

Comcast said it could save $300 million to $400 million a year because of increased buying power and cutting redundancies. It did not offer information on potential job losses or gains, or specfics about ways to boost performance in lagging Disney units.

Roberts is mindful of the pitfalls of mega-mergers such as the AOL and Time-Warner marriage, which never lived up to its hype. “There are some good examples and some bad examples,” Roberts acknowledged.

So why wouldn’t it happen in this case? Comcast is confident it can pull off the massive integration because it has done so before. Over the last year, it brought AT&T Broadband’s cable operation, which was twice the size of Comcast, into the fold.

Comcast has worked to upgrade AT&T Broadband’s network and facilities so that if could handle broadband and other revenue generating services and cut its debt load. It also convinced regulators to sign off on the agreement.

And with Burke, it has a manager with first-hand knowledge (albeit a few years removed) of Disney’s strengths and weaknesses, Roberts said. Burke joined Disney in 1986 and rose to become president of ABC broadcasting group.

“It comes down to people, execution and not getting ahead of yourself,” Roberts said.

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