• by Ross Fadner , February 12, 2004

Agency execs freely admitted to being blown away by Comcast's surprising and not-so-friendly offer to acquire Walt Disney Co., but quickly turned their attention to the potentially broad implications of the deal--broadband, that is. With more than 20 million subscribers, media buyers said the coupling of Comcast's distribution with Disney's content could be a catalyst for driving a broadband video marketplace.

"Unbelievable," exclaimed Steve Farella, president-CEO of TargetcastTCM. "The world is totally upside down. It only goes to show that the power is being shifted to the local cable operators, where they've got the money and the pipeline into the home."

"Fundamentally," Farella adds, "the local systems operators have an enormous advantage, but they also have an enormous problem. The advantage is that they are the pipe into the home. The problem is that they are just regional; until they fix that, through some kind of integration, national advertisers will never take them seriously as a national advertising play."

Bob Flood, senior vice president-director of national electronic media at Optimedia, agrees.

"They need to get Cox and Cablevision and Time Warner on board and create some kind of an ad hoc network that can reach 50 million or more people.

Then they will be a factor," he said. Nonetheless, Flood thinks the deal will "absolutely" transform the media industry.

In addition to servicing 21.5 million cable and 40 million wire and fiber optic homes, Comcast is also the largest broadband provider in the United States, with 5.3 million high-speed Internet customers.

Comcast executives portrayed the proposal as a way to marry Disney's content and brand power with Comcast's leadership in distribution-particularly digital cable and broadcast. The media implications of merging the number one U.S. cable operator with Hollywood's top film studio, one of the nation's largest broadcast networks (ABC), and the nation's most dominant sports network (ESPN)--not to mention a slew of power of brands within the ultimate power brand, are enormous.

"We think it accelerates the digital future," deadpanned Comcast's CEO Roberts, in what is perhaps the biggest understatement made since talk of the merger began.

Greg Smith, media director, Carat Interactive, who also happens to be particularly interested in the digital future, downplays the immediacy of the merger's impact on the Internet, but notes nonetheless that "if there are two groups that have thus far been left out of content on the Web, it's traditional creative and Hollywood."

Jeff Lanctot, vice president, media, Avenue A, agreed with Smith. "The actual impact to buying and planning is far off, "he said, adding, "I see 2004 as the year that video really emerges online, and a Comcast/Disney combo would be well positioned to capitalize on that."

As to the merger's effect on media, Lanctot notes: "The potential deal, of course, would have implications that would be much more far-reaching than online. From video-on-demand to iTV, Comcast would be well positioned to move development along. Having control over both content and distribution does that. The size, scope, and power of the potential duo would be very impressive."

Optimedia's Flood: "Given the 20 million-plus subscribers and the opportunity that their two-way digital pathways offer them, they are in a unique position to generate real opportunities in terms of interactive television and broadband video."

Andy Donchin, senior vice president-national broadcast at Carat said: "Comcast is so large, and with Disney under their umbrella as a content provider, they can really make broadband video happen. It's going to be interesting to see what happens."

Together, Comcast/Disney would have had revenues of $46 billion in 2003, topping Time Warner's $40 billion.

Chairman of the Federal Communications Commission, Michael Powell, promised that the merger would get "ruthless and rigorous scrutiny" if it goes through.

-- Joe Mandese and Paul J. Gough contributed to this story