What’s important when it comes to Hollywood isn’t the financials but the friendships, foes and families. So, while Wall Street analysts crunch numbers about cable-giant Comcast’s hardball pitch for Disney, we only have to look at the relationships to see what’s really going on.
This isn’t a battle between Big Media as much as it is between Brat Media. How come no one has noticed that the major combatants in this fight are all rich kids, specifically sons of fathers with wealth and influence and power? It’s their playground brawls that usually spell bad news for poor shareholders — not to mention the addition of humongous debt on corporate books and the loss of millions of dollars in goodwill write-downs. Disney chairman and CEO Michael Eisner has riches on both sides of his family. Comcast president and CEO Brian L. Roberts’ father founded the cable giant. Steve Burke — Roberts’ No. 2, the former ABC broadcasting president and the architect of this revenge bid offer (his loathing of Eisner is an open secret) —is the son of the former president of Capital Cities/ABC before it was bought by Disney.
For that matter, considering TV’s hottest star right now is that other spoiled scion, the unbe-weave-able Donald Trump, maybe he should preside over this schoolyard spat. Since Comcast shareholders are mad at Roberts and Burke for bringing down the company’s stock price with their bid, and Disney shareholders are fed up with Eisner, period, let Trump decide who to stare down and declare: “You’re fired!” (Better yet, give the trio all trying to “do one for Dad” lots of therapy, and a long spanking.)
Just the phrase hostile takeover attempt juices everyone in Hollywood who, at one time or another, has fought mano a mano with Disney and harbored hatred of Eisner because for 20 years he has infused the cuddly-character company with his own inimitably vicious corporate style. [Full disclosure: I am in a legal dispute with Disney over the news media’s right to truthfully report on the entertainment giant’s business activities.]
All of a sudden, the Comcast offer — though rejected Monday by Eisner’s minions on the board — meant it was open season for the media on MDE, as Eisner calls himself. Even the usually Disney-cheerleading Wall Street Journal and Los Angeles Times were penning Eisner’s obit. And that shrieking sound from the direction of Burbank was Disney’s harpy, Zenia Mucha, insisting to reporters that Eisner is not yet six feet under.
No longer was the kvetching just by dissident board members Roy Disney, Stanley Gold and Andrea Van de Camp. Even Institutional Shareholders Services recommended last week that Disney stockholders not re-elect Eisner to the board because, when it comes to the company’s troubles, ISS complained “all roads lead back to Eisner.”
Of course, no one was loving Eisner’s fall into disgrace more than Roy and Stanley. Their Web site, SaveDisney.com, kept track of every attack on the company and, seemingly, every shareholder as well. They instructed Eisner’s unfaithful how to “vote no” against the CEO and even provided the required forms. They arranged for special discount travel arrangements so shareholders could go to the annual meeting on March 3 in Philadelphia (coincidentally, Comcast’s headquarters city). And they’re hosting a briefing and reception in that venue a day before the official company conclave.
Though Roy and Stanley say they had nothing to do with Comcast’s bid — yeah, sure, it was just kismet — Burke did tailor his remarks to appeal to them by pledging to return Disney’s animation to its former glory. No doubt, Pixar’s Steve Jobs was listening, too, since his decision not to re-up with Disney helped spark Comcast’s attempted coup. Which is why Comcast reached out to Jobs last week for support of a Disney takeover and announced that bringing back Pixar was one of its “first” goals. It’s as if all Eisner’s enemies are ganging up on him en masse. Little doubt that Disney’s deal to buy a few over-the-hill Jim Henson characters (but not Big Bird or Elmo) on Tuesday was Eisner’s feeble attempt to show he’s not been paralyzed by this talk of the takeover or his possible exit.
If his removal is such a slam dunk, why, then, are financial analysts one after the other going on CNBC and opining that Eisner won’t be toast?
Sadly for the company and its shareholders, it seems Eisner will survive this latest crisis for the very reason he deserves to be shown the door: He’s a nasty piece of work.
How nasty? Well, just the fact that his new best friend is Barry Diller should say it all. (The folks at Vivendi Universal are still seeing psychiatrists due to the months spent with him as their boss.) Though Park Avenue born and bred, Eisner battles like a street thug. In turn, Disney is regularly accused of a near-pathological willingness to lie, cheat and steal as it conducts its business. Want evidence? Just look within Disney’s 101 Litigations and the many letters and depositions on file with the courts.
Roberts is no day in the park, either. But the steely cable magnate is still at least human. Eisner, by contrast, is the beast that walks. Make no mistake: Eisner intends this fight to get dirtier than Bush vs. Kerry. He’s the Karl Rove of Corporate America, and it’s Florida 2000 all over again. He’s hired the sharpest lawyers and the savviest bankers and the stealthiest lobbyists to slug it out with Comcast. He’s disingenuously whipping up anti–Bigger Media frenzy against the cable giant. And he’s got myriad defenses at his disposal, all perfectly legal.
On Monday, Eisner’s still shamelessly insider board employed the Nancy Reagan defense — “Just Say No!” — when it unanimously rejected Comcast’s $48.8 billion offer as too low and reiterated blind support for Chairman Mao . . . er . . . Chairman Michael.
Next could come the Pac Man defense — “You gobble us? No, we gobble YOU!” — since right now the two companies’ stock prices are nearly equal. Then, there’s the Poison Pill defense (conceived by New York corporate lawyer Martin Lipton, whom Eisner just hired) — creation of a special class of stock designed specifically to ward off hostile takeovers by making the ultimate price tag much higher. Such a pill can both save a company and be deadly to it because it protects bad managers from shareholders.
It’s possible that Eisner may try a leveraged buyout. But everyone knows that Eisner is allergic to debt and had to be dragged kicking and screaming into the ABC deal back in 1995. He can look for a White Knight like Microsoft or Coca-Cola to come to his rescue, but help like that involves giving up control, which Eisner won’t tolerate.
Or he can just lay low. Conventional wisdom has it that, once a company is in play, it usually gets bought. But that may not hold true this time. The other infotainment companies, like Viacom, NewsCorp, and Time Warner, have too much debt on their books so they’re not in any position to put in a competing bid. Meanwhile, Congress and consumer groups (not to mention European regulators) are in no mood to see Big Media become Humongous Media so soon after the FCC’s media ownership expansion brouhaha, not to mention Nipplegate.
Then there’s Roberts’ own obsessive need not to be seen overpaying for any acquisition, even Disney. Hey, Wall Street still makes fun of Eisner for overpaying for the Fox Family Channel. That was only $5 bil.; now, multiply that 10 times, and you can sense Roberts’ dilemma. As long as Disney’s stock stays high, Roberts’ acquisition fever may cool. On Tuesday, Reuters quoted an anonymous source saying that has already happened: Comcast is not interested in sweetening its bid for Disney to match the current share price. The same source said Comcast is also leaning against running a shareholder-consent solicitation to replace all or part of Disney’s board while Disney’s stock price continues to trade at these higher levels.
On the other hand, this may also be just a tactical maneuver by Roberts knowing such news would bring down Disney's stock price and move up Comcast's. Which it did, predictably. Oh, the high-stakes games these rich kids play.
No matter what happens to Disney, and to Eisner, Disney President Robert Iger is the biggest loser of all no matter if the Comcast deal does, or doesn’t, go through.
Eisner is notorious for blaming everyone else except himself when things go sour. Just ask the long list of displaced persons among Disney’s executive ranks. So who’s to say that Eisner, and the board, aren’t going to look for a scapegoat and turn on “Teflon Bob”? If only Iger had turned things around at ABC, that money pit wouldn’t still be dragging down Disney’s earnings nearly 10 years after the deal was done. Iger also stood in for Eisner during the final stages of the Pixar negotiations, so it could be argued that he bears almost equal responsibility for that deal going south.
In fact, Iger increasingly has a “Daddy, what did you do in the war?” problem. As Eisner’s right arm, Iger can’t distance himself from Disney’s problems. Worse, as Eisner’s henchman, Iger has muddied his pristine Industry image as a “good guy.” And then there’s the problem that Steve Burke once worked for Iger, who sent off his underling with the snarky statement that Burke was leaving ABC and heading to Comcast because of a desire to be part of a “smaller, entrepreneurial operation.” With Burke’s help, Comcast acquired AT&T and now wants to make a dwarf of Disney. In short, even if he survives Eisner, Iger, the kid from the middle-class home on Long Island, is probably a goner.
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