Entertainment Goliath


Nothing better illustrates today's vast changes in electronics and entertainment than the mega-merger of Disney and ABC. The $19 billion acquisition of Capital Cities/ABC by the Walt Disney Co. is revolutionary in terms of pop culture and home entertainment. In retrospect it should not have been a surprise, because its attractions are so obvious. Strategically, the two giants are a perfect fit: They complement each other with little duplication. Mergers like this are a tycoon's dream.

But is this a dream or nightmare for everyone else? A little of both. To competitors, including the new combination of Westinghouse and CBS, the merger creates a formidable foe with dominant positions in film-making and network TV. It's comparable to the vertical integration of the oil industry by John D. Rockefeller. A decade ago a proposal like this one would have drawn roars of outrage from anti-trust officials in Washington. This deal requires federal approval, but there has been hardly a peep from the capital.

The synergism is so great that Disney's Michael D. Eisner described it as one plus one adding up to four. But it might turn out to be one plus one equals one. Where there were two Goliaths in separate but adjacent rings, now there is one in both. But the nature of the electronic communications and entertainment businesses these days is that Goliath, in confronting Davids, will stimulate the growth of other Goliaths. Merger rather than competition is the hallmark of telecommunications these days, particularly with a Congress eager to dismantle the regulations that have kept competitors apart. The remaining Davids will not fare well.

Not until the repositioning of the television networks and entertainment producers is complete will it become clear how this will affect the consumer. Disney will have a readier market for its entertainment wares. ABC, already the dominant network, will have first crack at more Disney-produced programs. Profitable TV companies tend to be more open to quality programming, so the viewer may benefit. Given the economics of electronic entertainment, the efficiencies of concentration appear inevitable. But that's what they said about Standard Oil, too.

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