Comcast, the nation's largest cable company, announced a $56 billion proposal to merge with the Walt Disney Co. Comcast has 21 million cable customers and 7 million Internet broadband customers. Comcast would have to convince shareholders that they are getting the best possible share price, better than they can do in the long run by sticking with Eisner. This comes at a time when Eisner has been criticized for his management style and handling. Just recently, Pixar Animation Studios announced that it was dissolving its partnership with Disney.
Post staff writer Eve Zibart, author of "Inside Disney: the Incredible Story of Walt Disney World and the Man Behind the Mouse," will be online on Thursday, Feb. 12, at 11 a.m. ET to discuss Comcast's bid and the future of Eisner and The Walt Disney Company.
The transcript follows.
Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
________________________________________________
Southern Maryland:
Have you been following the story about Roy Disney's bitter departure from the Disney board of directors? He was the one who installed Eisner 20 years ago, and now blames Eisner for the company's recent troubles.
I think there may be some truth to Roy's allegations. Disney's animation unit did very well under Roy's leadership. The films produced since his departure have done poorly, except for the Pixar ones.
washingtonpost.com: Comcast Makes Mega-Bid for Disney (Post, Feb. 12)
Eve Zibart : Hi! I've followed it mostly on a sort of gut-distress level, if you know what I mean, because many of the directors, Roy in particular, seem to wax and wane on Eisner depending on annual returns, and with Roy--a Disney, vs. Eisner the pseudo-Walt--it can have, or at least appear to have, a personal edge to it. Roy (I'm calling him that to avoid confusion with the company, not out of disrespect) has a point about animation successes dropping off to some extent, although "Lion King" grossed $1 billion in the US alone, and even "Mulan" made $110 million or more. But on the other hand, "cartoons" are an evolving medium anyway. What with "Simpsons" and "B&B" (that's Butthead, ofo course, not inns) and such rougher styles, the look is unpredictable. Nobody would have guessed "Nemo" would be so amazingly popular. And it's not as all the other studios' attempts, such as "Prince of Egypt" (am I remembering that name correctly?) were blockbusters. In fact, DreamWorks has been hoping to rub Disney's nose in their animated films all along, though "Shrek" was the best. Also, while "Lilo and Stitch" "underperformed," in the jargon, it was also made for a lot less money...It's a complicated argument. To be honest, I also wonder how much has to do with the personalities behind the films, the voices, I mean. "Emperor's New Groove" didn't do all that well, not that $175 million is bad, but then Eddie Murphy films live seem to be underperforming, too, don't they? And to tell the truth, I used to think that when you hire the golden oldies like Elton John and Phil Collins to do the music, it kept the title tracks on the radio, but didn't do anything for the kids who are supposed to be the audience. But then you go to the live-stage versions of these movies, and the audience is all-ages, so who knows? (a little off the subject, sorry, but audience is the issue.)
_______________________
Washington, D.C.:
Will there be any antitrust concerns from the FTC or DOJ concerning this acquisition?
Eve Zibart : Lord, I would think so. Even if they have some U.S.-first ideas about outdoing Murdoch! There is differentiation between content and delivery, of course, but this is potentially a mega-corporation that would own sports teams, broadcast them, market the channel, etc--and that's the smallest part! And while I DO NOT! pretend to be any sort of financial expert, not even a good checkbook balancer, I have to think there is a point where a corporation that has too any irons in its own fire is going to get scorched. In fact, I think that's been one of Eisner's problems over the last decade; when things were going well for expansion, and Disney picked up TV channels and movie studios (and isn't Miramax looking like a smart bet still!) and merchandising deals, etc.--the sort of shopping spree a lot of big companies were into--the company found it was running madly in all directions.
_______________________
Greenbelt, Md.:
Great. Like we need more media consolidation. If this truly is a hostile bid (and not some spin campaign) I hope Disney is hoisted on its own petard and becomes just another unit of some conglomorate.
It would be amusing though if Disney's lobbying armada suddenly developed a conscience and started pushing for controls over media concentration.
washingtonpost.com: The Mouse That Reeled (Post, Feb. 12)
Eve Zibart : Oh, I think it's hostile, all right. And I doubt it's anywhere near the last one you'll see in the next few months. But I'm not for bigger and bigger; I think a company needs a personality to succeed. If "personality" is the wrong word, maybe "animating spirit" is better. Something has to hold together the impression a logo makes on the public, and the bigger and more diffuse a company gets, the less personality--maybe it's character I mean--it has. Say what you will, Eisner has been the animating spirit of Disney for 20 years. I mean, who's the face of Engulf and Devour?
_______________________
Gaithersburg, Md.:
Comcast and Disney!! The two companies I hate most could soon be one! Seems like a natural fit to me. They are both evil, life-draining forces. Together they would qualify to be part of the "axis of evil".
washingtonpost.com:
Analysis: An Audacious Attempt at Media Giant Status (Post, Feb. 12)
Eve Zibart : Woooof! I take you didn't buy in when the buying was good! But then, you're talking to someone who refused to get cable....
_______________________
Mt. Lebanon, Pa.:
I've been watching the drama play out thanks to your stock calculator feature this morning. As the morning progresses the Disney stock holder must be antsy as the price of his stock rises in comparison to what he's going to get after the deal is done. It's not even a 1:1 trade and with CMCSK dropping, the deal gets worse for him.
At what declining CMCSK price does the Disney board and stock holders say: Fugitaboutit?
Glad to be on the sidelines on this one. Thanks much. Former CMCSK stock holder.
washingtonpost.com: Calculator: How Much Is the Comcast Offer Worth to You? (washingtonpost.com, Feb. 11)
Eve Zibart : Now you're getting into finances much higher than I go, but I doubt anyone thought this was going to be Comcast's final offer. And as I said before, there are a lot of other sharks circling; Comcast may find it's become the stalking horse for some other company.
_______________________
Washington, D.C.:
How come this won't turn out like AOL-Time Warner?
Eve Zibart : You mean, can you say overshooting? It's certainly a possibility. And it reminds me that one of the reasons the AOL-Time Warner marriage went so very sour is that there were personality clashes all along--and that was supposed to be a mutual agreement; can't think that's going to be any smoother here. I'd be surprised if some of those dissident directors weren't harboring fantasies of being CEO themselves, and it might not pan out that way.
_______________________
Washington, D.C.:
Are other media titans eyeing Disney now? Time Warner in particular?
Eve Zibart : Well, there are rumors and speculation. One possibility might be Liberty Media (John Malone). Another is Barry Diller, which might be good news for Eisner, as Diller was his mentor, first at ABC and then at Paramount Pictures, where he installed Eisner as studio president. I would think Time Warner's other media connections would block it specifically via anti-trust regs.
_______________________
Washington, D.C.:
Would Roy Disney be for a merger or against?
Eve Zibart : depends on what he gets out of it. Well, that might be a little flip, but not altogher. And probably the amount of independence the Disney "subsidiary" would have. He'd obviously like to replace Eisner, but it is his family baby, and I don't think he'd be in a rush to lose it.
_______________________
Lansdowne, Va.:
You mentioned that it would not be surprising to see additional mergers in the media space. Would care to share your thoughts on who some of these might be?
Also, how does Microsoft/Gates fit into the Disney picture?
Eve Zibart : "My thoughts" is glorified on this area of expertise, but certainly AT&T Wireless has been spoken of as a target; and there seems to be a fairly constant number of lower-level nibbles at individual parts of these big companies--this cable network for that, this portal--but I didn't mean to suggest I had inside insight. Microsoft wouldn't seem to be a major possibility, at least not right off the bat, because MS was Roberts' ally (sorry, Comcast CEO Brian Roberts) in getting the AT&T cable assets a couple of years ago. He might kick in later if the going got rough.
_______________________
Somewhere, USA:
What role will the FCC play in this merger? And will they impose indecency standards on the new company?
washingtonpost.com: Get Tough on TV Indecency, Lawmakers Urge (Post, Feb. 12)
Eve Zibart : Well, with a few exceptions, and maybe a little daytime drama steaminess, I wouldn't say indecency was a major Disney problem. (After all, Janet Jackson was on CBS.) Miramax owns Dimension Films, which releases some of those masked serial murderer things, but the company by and large sticks to the family image. I'd think the issue is more antitrust or monopoly problems. Besides, indecency is on the Hill, so to speak, so everybody's going to be on guard.
_______________________
Washington, D.C.:
If Eisner would leave Disney would that make the company
(which is what I would think a lot of people besides Roy
Disney would like to see) even more vulnerable to a
takeover or would the board just agree to a restructuring,
giving the new CEO (he would have to be someone who
could pack a punch, though) a chance to establish a new
direction, than a merger.
Eve Zibart : Several of Eisner's critics would certainly settle for a new head, at least for a while. But as you say, it would have to be someone with clout. The other possible tactic, on Eisner's part or someone else's, would be to continue divesting some of the parts of the pie (the Angels, etc.) that are not as profitable. Several of the company's divisions are making headway, "the recovery is underway," etc; so it isn't as black and white as it sounds. Maybe there could even be some sort of smaller stock swapping; Comcast owns the Golf Channel and a few things like that that would work with ESPN.
_______________________
Lyme, Conn.:
Why did Pixar separate from Disney? Will they continue to colloborate, and, if so, what will their financial arrangements be?
washingtonpost.com: Pixar-Disney Partnership to End (Post, Jan. 30)
Eve Zibart : For several years, Disney and Pixar have been wrangling over the specifics of their arrangement. Originally Disney funded Pixar for five films, with Disney, as the bigger investor, getting the lion's share of the profits and virtually a half-partner in the studio. By the time they were talking about "Toy Story 3," which Pixar said would end the arrangement, Disney was saying that wasn't an option, that "Incredibles" and "Nemo" were four and five. (in fact, No. 5 is "Cars," due out next year.) So then they began talking about shifting profit ratios. Jobs wanted Pixar to make its own films and keep the ownership and have Disney just distribute them. It actually looks a while ago as if Eisner had managed to make it up with Jobs, throwing him this elaborate birthday party for Pixar at the Bel-Air country club, etc. but no go, at least for now. Disney will undoubtedly make another pitch to get those distribution contracts, but so will every other studio.
_______________________
Anaheim, Calif.:
Disney owns an NHL franchise - the Mighty Ducks. Comcast owns the Flyers. How does that work?
Eve Zibart : If the deal goes through, one goes out. However, Disney has already sold the Angels, and may be shopping the Ducks anyway.
_______________________
Baltimore, Md.:
Do you think at any point they hesitated in following through with this knowing that people would question how much they were paying for their cable?
If Comcast can afford Disney, we are paying too much.
Tom
Eve Zibart : oh, they'd more likely argue that owning Disney will allow them to offer you more programming. Your subscriber fees, in other words, are your investment in this process. Many happy returns.
_______________________
Bethesda, Md.:
As a former TCI employee, my stock, which was AT&T Broadband, is now Comcast. If this were to happen, do you have a calculator to show what my Comcast stock would be worth after Michael Eisner takes his multimillion dollar bonuses and deferred compensation packages and runs Disney into the ground? I think bonuses should be paid on the basis of performance, not negotiation. Ugh
washingtonpost.com: Calculator: How Much Is the Comcast Offer Worth to You? (washingtonpost.com, Feb. 11)
Eve Zibart : I wouldn't dare guess, not only because the figures will change but because he's certain to get some other forms of parachute as well. Here's an idea--why not let him buy a part of the pie and carry it off on his own? (sorry, just fantasizing.) But as a TV programmer, he was really, really hot. Maybe he could get ABC back on track. (You notice he's sort of a sentimentalist, don't you? ABC was his former home, and as one of the creators of ABC's most popular soap operas, his idea for SoapNet also had old-flame context.)
_______________________
Washington, D.C.:
What about Disney makes it a sitting duck at this point in time? Why now are they the target of a hostile takover? Is because of all the controversy surrounding Eisner coupled with the dead deal with Pixar?
Eve Zibart : That's certainly a big part, but Eisner has been the target of complaints for some time, for a lot of reasons, not all of his making. Obviously a lot of Disney's assets--TV stations, Internet portals, souvenir/merchandise stores--lost money because all such businesses were suffering, but it did seem as if he went too big too fast. ABC is tops in many of its local markets, but last in the nationals. The theme parks are down, like all post-9/11 attractions, but still doing better than a lot of their competitors. The non-Pixar animations didn't do as well, but neither did a lot of other films elsewhere, and the theatrical spinoffs of "Beauty" and "Lion" and so on are rather amazingly profitable. One might also note that a lot of the company's expenditures in recent years have been in what might be called infrastructure; remaking or restoring theme park attractions, building resorts and expanding hotels--stuff some "conservative" advisors have to applaud. Disney has made a lot of small investors pretty comfortable over the years; I don't think it's as unmixed a situation as it seems. And if you think about it, it's those very long-term kinds of attractions that make it worth taking over, right?
_______________________
Washington, D.C.: So, Comcast and Disney today, what's next? McDonald's and Starbucks?
Oooh, so Comcast gets the go ahead and buys Disney, then they buy TicketMaster, that my friend, would be the entertainment access of evil.
Eve Zibart : boy, that is a scary thought. And you know that Disney has a special relationship with McDonald's already--not just those happy meals, but a whole section of Animal Kingdom and so on--so don't laugh.
_______________________
Falls Church, Va.:
I'm concerned with what will happen to the theme parks if Comcast gets control. The Disney parks are already becoming watered down with Eisner in charge. Imagine what will happen if you have Comcast running the show! Mike
Eve Zibart : I wouldn't agree the parks are being watered down, but maybe I don't understand in what fashion you mean that. Come again?
_______________________
Oakton, Va.:
I have to think that if the buyout were to occur, the Disney Branding would be diluted, particularly in relation to the core pieces of Disney (theme parks, animation, even movies).
The other segments of the Disney group such as ABC and the other Cable Channels probably wouldn't suffer quite as much as their customer loyalty base shifts depending on the programming offerings. Comcast already has a built in system to handle the television and related media areas.
But for the life of me, I can't imagine a Comcast Walt Disney World. And while Eisner has died a couple times based on a management style which at time is autocratic, over the long haul he's performed well for both stockholders and the customer base. So well in fact, that for years the only fear has been when he will pick someone to groom for succession and when will it be. Brand Loyalty - Jeff
Eve Zibart : As I said, it's been a boon to many people. And as I wrote in one of my books, Disney World (in the great sense) is many silly things, but better than a lot of the alternatives.
_______________________
Washington, D.C.:
Is the deal 10 percent premium that Comcast is offering to Disney shareholders a fair deal?
Eve Zibart : sorry, didn't mean to skip you. I think it's just an opening bid.
_______________________
Washington, D.C.:
What's the unrealized potential of Disney that makes it worth a hostile or friendly takeover? Or, put differently, can Comcast describe in 25 words or less how shareholders will profit from the transaction?
Eve Zibart : We've sort of covered that, I think, but Disney's strengths are many. It has vast holdings in TV/radio and cable and movie studios (Disney, Buena Vista, Touchstone, Miramax, Lifetime, ESPN, ABC, blah blah). The parks are the standards in their field. And to the greater public, it has a long and reliable family-friendly image. And that, a good name, is an asset hard to place a value on.
_______________________
Langhorne, Pa,:
Hi Eve,
My feelings towards these two companies and the prospect of them merging are similar to some of the other readers': terrible. Comcast because of its seemingly monopoly status, and although I'm not absolutely sure about this, I was told that Comcast pays obscenely excessive compensation to their top executives, while paying very low wages and benefits to the folks out in the trucks doing work in all sorts of weather. I too, have no intention of subscribing to their service, and plan to obtain Verizon DSL as an alternative to their high-speed cable ISP service. Although I'm sure that Verizon probably pays its' executives obscenely, at least they have a unionized workforce, making fair wages and benefits, so I feel I can better reconcile this choice with my conscience.
I think Disney is horrible because of Eisner's virtual pioneering history of taking excessive compensation, and for the nature of their pervasive marketing of needless, and superflous toys and media content. I know that they are a for-profit corporation, but feel that developing minds and characters are much more important, and deserve better. I can't help but feel that they continually squander the potential to be so much more constructive, for the quick profit. Personally, I have use for neither company, but feel that a merger can only be worse, with much negative potential because of even more media concentration.
Eve Zibart : That's a good summary of the way a lot of Eisner's critics feel. I will say I think the compensation thing may be a little exaggerated, especially when you look around; and a couple of years he didn't take the "earned interest" part, so to speak, but sure, it's a corporate mentality.
_______________________
Ithaca, N.Y.:
Boy this is a lot simpler than people are making it out to be.
First off, they aren't buying Disney using profits from subscribers, at least not directly. It's a stock for stock deal, essentially saying that disney and comcast would be thrown in a big pile. Comcast is worth a bit more so they'd be in charge.
And that's the other piece - regarding what might happen to the combined company, the theme parks, etc... the reason Disney is vulnerable is that the investor community (largely made up of the people who run the mutual funds in your 401(k) portfolio) believes Eisner et al have done a C+ job running the company. They believe that by getting lots of subscribers to pay top dollar for so-so service, Comcast has done an A- job. Therefore if Comcast can do an A- job running Disney assets, value is created.
And if you (and everyone else) don't like the theme parks anymore and don't go, Comcast won't have done an A- job, will they?
Eve Zibart : But there is widespread debate in the "investor community" about whether or not Disney is making a comeback. Many advisors think it is. They'll be waving quarterlies around like Monopoly money (sorry) for weeks.
_______________________
Laurel, Md.:
Would Comcast be able to prevent DirectTV from carrying ABC stations?
Eve Zibart : Similar things have been tried, but there's usually so much public outcry the provider backs off.
_______________________
Washington, D.C.: What comparisons do you see between Disney's situation now and its position in the mid-1980s, when one Roy Disney brought in a certain Mr. Eisner to keep the company in one piece. What are the chances that Disney survives on its own, and what are the chances that any suitors look to dismantle the company's assets?
Eve Zibart : I think it's inherently different, in that 20 years ago, the problem was that the company had fallen asleep, so to speak--not expanding, not merchandising, not building much. So Eisner was the new Walt, the new visionary, and in that sense seen as a worthy successor. Now, if anything, it's that he's moved too far, taken Disney in too many directions, wanting to keep to much control and NOT been willing to "outsource" enough. It's a question of changing times and a huge and unexpected revolution in media, financial and consumerist. And then there's deregulation/reregulation....
_______________________
Harrisburg, Pa.:
I own Disney stock and plan on attending the upcoming shareholders' meeting. Which are the pros and cons for deciding which side to vote for?
Eve Zibart : Hope we gave you some ideas on that; but there will lots and lots written about it in the meantime. And you should consult your financial advisor if you have one; all stocks depend on the blend.
_______________________
Clarksburg, Md.:
Can't talk trash about Disney, but Comcast is the worst business I've ever had to deal with, ever. I had their cable service for 8 months, and it went out, on average, every 2 weeks. Their customer service department was an absolute joke. I'd hold for 20 mins for a manager, and 75% of the time they'd hang up as soon as I was connected. Honestly, Comcast is an argument against regulated monopolies. I've had my satellite dish for 3 years, and I never have issues. Plus, satellite only goes out during the worst storms. I've lost transmission for maybe 30 minutes over the last 3 years. Never lost it during last year's blizzard. Dump Comcast, get a dish. You'll never look back....
Eve Zibart : Didn't want to stop to talk on the side until we'd cleared away some questions, but you remind me why I don't subscribe! Thanks
_______________________
Eve Zibart : Hope I got everyone in. This is really a breaking story, and I'm sure you'll be hearing a lot from all sides. C you real soon, as they say.
_______________________
