Imagine a tail of woe. One wagging sadly as it comprises: hostile takeovers, riches beyond your wildest dreams, big business, poor management, SEC investigations and intellectual property rights. The lurid story behind Disney is far darker and more sordid than just a hostile bid proposed by Comcast yesterday morning. Perhaps it’s better to say that it’s impossible to find �copyright’ or �content’ issues sexy, however at the intersection of ownership and intellectual property lays the recumbent chanteusse of the Disney company.
“Dear Michael”
Comcast, the largest cable company in America, announced yesterday an “unsolicited” bid to take over Disney, with a tax-free stock swap offer to Disney shareholders — a corporate raid with the bravado and swagger of 1980s proportions, and a shrewd maneuver that you think Michael Eisner would approve of if it weren’t so … personal.
Disney’s grueling failures have only been recently rebutted by an early first quarter release that enjoys the success of movie and video revenues generated from Pirates of the Caribbean and Finding Nemo.
This hostile bid comes at a time when Eisner and Co. are enmeshed in another difficult fight already: spinning against another campaign set off around the acrimonious resignation by board members Roy E. Disney, nephew of Walt and Chairman of Disney’s feature animation division, and his fellow director and investment manager, Stanley Gold.
“I find this intolerable… Michael, I believe your conduct has resulted from my clear and unambiguous statements to you and the Board of Directors that after 19 years at the helm you are no longer the best person to run the Walt Disney Company. You had a very successful first 10-plus years at the Company in partnership with Frank Wells, for which I salute you. But, since Frank’s untimely death in 1994, the Company has lost its focus, its creative energy and its heritage.” — from Roy Disney’s resignation letter, courtesy of Slate.com
Disney’s sentiment was immediately underscored the following day by Stanley Gold’s resignation, where he offers: “It is clear to me that this Board is unwilling to tackle the difficult issues I believe this Company continues to face — management failures and accountability for those failures, operational deficiencies, imprudent capital allocations, the cannibalization of certain Company icons for short-term gain, the enormous loss of creative talent over the last years, the absence of succession planning and the lack of strategic focus.”— from Stanley Gold’s resignation letter. Courtesy of PR Newswire.
Both men think that Eisner’s stewardship reflects strongly in big losses for the company’s theme parks, ABC television, ESPN, broadcasting, etc. If the first quarter financials are correct, as prematurely released, most of these divisions, film included, have enjoyed a 5 — 6% increase over this same period last year. Though the market has corrected up that much over last year on its own.
In the most recent �Dear Michael Letter’, Brian L. Roberts, President and CEO of Comcast addresses their intent, “I am writing following our conversation earlier this week in which I proposed that we enter into discussions to merge Disney and Comcast to create a premier entertainment and communications company. It is unfortunate that you are not willing to do so. Given this, the only way for us to proceed is to make a public proposal directly to you and your Board.
“The combined company would be uniquely positioned to take advantage of an extraordinary collection of assets. Together, we would unite the country’s premier cable provider with Disney’s leading filmed entertainment, media networks and theme park properties.” — courtesy of U.S. Business news, Feb 11th.
Comcast is geared up for a fight as they only recently emerged on top of the domestic cable market after a heavy acquisition of AT&T Broadband in 2002. As the market netted out yesterday, The Comcast offer has fallen slightly below Disney market value. A counter-offer will likely follow. What has them, and Disney, concerned is that Disney is relatively open to hostile bids. Other media merger giants are likely to emerge in the bidding war including: News Corp., Viacom, Time Warner, Liberty Media, Microsoft and even possibly Disney itself with a write-in vote to evict Eisner and the current board.
It’s all about the content. For the last five years, cable has run past nearly 90% of the homes in America and the subscription rate has been flat at 60%. The way to push their business model forward is for Comcast to add content. Disney’s extensive library would provide a goldmine to Comcast’s cable and broadband needs. The combined company would be valued at $125 billion dollars.
In what is likely to be a very busy year for mergers and acquisitions, perhaps it is time again to ask should our major content creators, Disney, be allowed to be controlled and distributed solely by major content providers?
Dial M for Mouse
Unfortunately for the Disney, Its animated success has come to a quick halt — not marked merely by the departure of Roy E. Disney, their pre-tax loss of 74 million on Treasure Planet, or — say — the recent closure of its Animation Studios in Orlando. In January, Steve Jobs, chief and owner of Pixar Animation Studios (the privately held company that created Finding Nemo, Toy Story, Bug’s Life, Monsters Inc) sharply ended its contract talks, thus severing a lifeline to Disney. From 2000 through 2005, Pixar comprises approximately 45% of the operating income of Disney’s film studio — or 7% of Disney’s earnings per share.
“After 10 months of trying to strike a deal with Disney, we’re moving on. We’ve had a great run together — one of the most successful in Hollywood history — and it’s a shame that Disney won’t be participating in Pixar’s future successes.” — Steve Jobs, as reported by the PR Newswire.
The �buzz’ is that after a strong showing with entertainment and family values in successes at Pixar and with triumphant new life at Apple Computers, that Jobs is making a bid as Eisner’s heir to the Disney throne. The lack of an obvious successor had been a major point of contention with Messrs. Disney and Gold.
The Dow of Pooh
On January 21st, Disney lost its appeal in Federal Court to recapture rights to “Winnie-the-Pooh.” In a case set for this March, the Slesinger family, which licensed the rights to A.A. Milne’s Pooh characters in the 1930s, contends that Disney owes them hundreds of millions of dollars for failure to make payment on commercial usages of the characters including royalties based on gross sales. The Slesinger family attorney Johnie Cochran said, “Hopefully Disney is done delaying and is ready to go to trial.”
Pooh is the most profitable of all of Disney character franchises, eclipsing Mickey, Minnie, Donald and Goofy combined. It is estimated that Pooh property is worth between $3 to $6 billion to Disney. The Slesinger family is asking for $700 million, compensatory damages and the right to terminate all future rights to Disney.
M — I — C …� you real soon …K — E — Y
Perhaps its best to say that Copyright law isn’t a difficult topic: It’s an impossible topic. It is that invisible little �c’ that is the arbiter of your media.
Walt Disney was no saint. The artists that worked for him were under strict contractual obligations that all works were property of Disney. He also took most of the credit for the creative achievements. Shrewd Businessman.
Most of the Disney characters were created in the 1920s. Steamboat Willie, the debut vehicle for Mickey appeared in 1928. Disney lobbied congress in 1998, the (Sonny Bono) Copyright Term Extension Act, so that Corporate works created or published prior to 1978 continue to be held privately for the life of the creator plus 95 years. Per CTEA, individual rights prior to 1978 are life plus 75 years.
This was changed because many of the early Disney films would have entered into the public domain… right now. At present, Disney’s property is covered until 2019. CTEA was put into law in 1998. There has been no attempt to justify this 20 year extension. Coincidentally, for the year 1997-98, Disney made 6.3 million dollars in political campaign contributions.
The issue seems to be, as was addressed by the case �Eldred v. Ashcroft’, as to whether or not Congress has the right, under the Constitution’s Copyright Clause, to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Key here are the phrases limited Times and Progress.
“Seen in this light, the CTEA cannot survive. Because already existing works cannot be created anew, extension of subsisting copyrights does not promote progress. Congress is not empowered merely to provide copyright holders with an additional boon — that is not progress, but corporate welfare.” — Chris Sprigman, Council to the Antitrust Group in Washington DC. For more on this please read his article.
As Sprigman continues to illustrate, the public domain is necessary for the arts to flourish. Leonard Bernstein’s �Westside Story’ would not exist without Shakespeare’s �Romeo and Juliet’ which would not exist without Arthur Brooke’s poem �Romeus and Juliet’.
“Dead Men Tell No Tales.” —Pirates of the Caribbean ride at Disneyland.
“A vista into a world of wondrous ideas signifying man’s achievement. A step into the future with predictions of constructive things to come. Tomorrow offers new frontiers in science, adventure and ideals: the atomic age, the challenge of outer-space, and the hope for a peaceful and unified world.” — Walt Disney inaugurating Tomorrow land, c.1967.
Two men, one mouse. Last week, John Hench passed away. Who, you may ask? Martin Sklar, vice president and principal chief executive of Walt Disney Imagineering has to say, ”He was a supreme designer. He had an exquisite aesthetic sense. He was the essence of the Disney Brand itself.”
John Hench was a career Disney artist and the official portrait painter of Mickey Mouse. His career began with Fantasia, continuing through many film projects and on to creating much for the Disney resorts and theme parks around the world. Space Mountain was his design. He oversaw the creation of Disney World, the addition of the Epcot Center and Tokyo Disneyland. Hench also won an Academy Award for special effects in 20,000 Leagues Under the Sea.
At the park, He was often mistaken for Walt. Sometimes in Walt’s company.
I still can’t help but be saddened that we haven’t heard more of this man that his peers consider “the essence of the Disney Brand itself.”
Epilogue
There are Mouse drawings in my past. Still my mother proudly displays a batik I made of Mickey when I was five. Conveniently, I keep forgetting, an offer made to me in the late 1980s to help start-up Disney Interactive, their gaming company. I have no outright hostility towards the Mousers. A great number of people I started with, at Art Center College of Design, got funneled into that program.
It amazes many that Eisner’s grip on Disney seems to tighten after twenty years at the helm and no chosen successor. In 2003, the Securities Exchange Commission began investigating whether Disney failed to disclose payments made by the company to directors and their families. That year too, Eisner awarded himself a 25% increase to his annual bonus, a total of $6.25 million.
My libertarian friends will make a firm footing on the grounds of the Freedom of Speech and the right for intellectual property to be shared to promote the arts. Yet, copyright is as old as our Union itself. At present, There is a greater and greater trend in intellectual property for rights to be owned by larger conglomerates. It is wise to remember that it’s not in the public interest to get rich — only in the private interest.
Damn you Eric! You beat me to it and it's oh so much better. You are crazy...
On Feb.12.2004 at 11:10 AM