and foremost, the two companies' share prices were affected after
the announcement. While the share prices of Comcast fell ; that of
the Walt Disney Company saw a rise on the stock market.
The deal, if it comes through, would create a new rival to Time
Warner and also to Rupert Murdoch's News Corp. In a separate conference
called yesterday, Murdoch was asked if the regulatory approval of
a Comcast-Disney merger would clear the path for him to go after
EchoStar Communications Corp. Murdoch replied in the negative and
was quoted in media reports saying that he was not interested in
making a bid for Walt Disney.
Comcast president and CEO Brian Roberts said at a news conference
in New York yesterday that he had not talked with any Disney board
members or shareholders, including Roy Disney. Roberts further said
that the ball was in Disney's court and they had to take a call
on it. Disney chief executive Michael D Eisner, who rebuffed Roberts'
request for merger talks earlier, had no comment on the offer, which
the company said it would "carefully evaluate." The directors
of Disney further said that there was no action for shareholders
to take in the meanwhile.
The possible merger would also face intense regulatory scrutiny
from the Federal Communications Commission (FCC) because of the
combined company's potential to squeeze customers. The FCC's longstanding
rules on media ownership were meant to guard against such threatening
combinations. The perceived danger was that the gatekeepers for
the viewer's television screen could be in a position to dictate
information and entertainment choices.
Keeping this in mind, the federal government barred any company
from owning more than one broadcast network and barred networks
from owning cable systems, or too many stations, either nationally
or in a single market. But reports say that because both companies
have little overlap, the deal was likely to be approved by the FCC.
FCC chairman Michael K Powell promised that "a merger of that
magnitude will undoubtedly go through the finest filter at the commission
as is possible."
One media report quoted the Center for Digital Democracy executive
director Jeff Chester as saying, "It's clear that Brian Roberts
knows no limits to his media ownership ambitions. That Comcast would
make the announcement the same day that a federal Court of Appeals
in Philadelphia is holding a crucial hearing on new FCC media ownership
policies suggests that they are out of touch with how millions of
Americans - who opposed the recent ownership changes - feel about
further media consolidation."
According to a media report, a Comcast-Disney merger would need
regulatory approval on two fronts. One is an antitrust review, conducted
either by the Federal Trade Commission or the Department of Justice.
The second review will be conducted by the FCC on the more nebulous
ground of the public interest.
Owing to all this, the Walt Disney Co. reported improved fiscal
first-quarter earnings that exceeded Wall Street expectations on
the strength in its film business and improved TV networks and theme
park trends yesterday following the announcement of the bid. Disney's
net income for the fiscal first quarter rose to $688 million from
$36 million a year ago. Excluding the effect of an accounting change,
the year-ago figure would have been $107 million. The revenue rose
19 per cent to $8.55 billion. The results were declared by the company
yesterday morning rather than after the market close -- as originally
planned -- as investors started the day focusing their attention
on Comcast's unsolicited bid for the Mouse House.
In another development, Comcast struck a deal with programming
guide provider Gemstar -TV Guide International Inc. worth $250 million
for licensing its program-guide technology on account of which Gemstar's
shares soared yesterday. The deal includes a one-time $250 million
cash licensing payment from Comcast to Gemstar, as well as the creation
of a joint development group controlled by Comcast to develop interactive
programming guides for cable operators.
Comcast makes $66 billion bid for Disney