Alluring Disney is the forthcoming attraction: Larry Black on how Wall Street's big guns are being trained on the last of the big independents

CULTURAL Vietnam . . . cultural Chernobyl. . . le souris story of Euro Disney . . .

To the Walt Disney Company, the most image-conscious studio in Hollywood, the bad puns and metaphors attending the messy restructuring of its European venture could not be more damaging.

Euro Disney 'bears our name and reputation', concedes Michael Eisner, chairman of Disney, in the 1993 annual report, in a departure from his usual paeon to Mickey Mouse. A failure to rescue the French theme park would tarnish the Disney name in Europe for years to come, according to analysts at Moody's Investors Service, which lowered Disney's credit rating last week.

At home, however, it seems Disney's allure is about to become greater than ever. With the five-month battle for control of the rival Paramount studio nearing an end - today is the deadline for investors to tender their shares to the competing bids - many investment bankers believe Wall Street will turn its guns on Disney, the last independent entertainment software producer not owned by a hardware delivery system, be it a US cable-television group or an international conglomerate.

Alone among the studios, Disney is a brand name as potent as Coca-Cola or Marlboro, whose logo on a children's toy or family movie can still add millions to an otherwise undifferentiated entertainment item. Its archive of filmed entertainment and cast of exploitable characters is also huge, and growing.

With last year's purchase of Miramax - the distributor of The Crying Game and The Piano - and production deals with Joe Roth, former president of Fox, Merchant Ivory and Rambo producer Andy Vajna, Disney's film divisions will release a record 60 feature- length movies this year, worth dollars 1.4bn and three or four times the output of most rivals.

Disney also brings a wide range of multi-media talents to any potential merger, including its expertise in animation. The studio's appeal to potential predators 'adds to the lustre of the Disney franchise', says Jill Krutick, media analyst with Salomon Brothers in New York.

Disney is neither interested in a merger, nor taken with the logic behind the strategic alliances being struck in anticipation of the digital multi-media revolution. Mr Eisner was quoted last summer describing a 'multi-media TS Eliot Waste Land' in which 'housebound zombies' punch remote-control buttons because it is too dangerous to venture outdoors.

Disney is betting instead on the persistence of social 'out- of-home' entertainment: the cinema, the theme park, the Disney store in the suburban shopping mall; and on the emergence of programming as the most valuable component of 'the 500-channel future'.

As was the case in the 1980s, when rival studios wasted hundreds of millions of dollars buying up cinema chains, Disney believes that while entertainment delivery systems can become obsolete, there will always be demand for the product that travels through them.

'Everyone else is making deals with the phone company,' Mr Eisner said recently. 'We're starting a hockey team.' The Anaheim Mighty Ducks, a real-life National Hockey League franchise named after a Disney children's movie, represents the extension of Disney's out- of-home, original programming philosophy to sports.

Complementing this move, in what Disney would call the cultural arena, will be Disney's America, the American history theme park the company plans to open outside Washington DC in 1998.

Disney management says it is not interested in a deal with an entertainment delivery system. Executives of its mammoth home video unit, which has sold 20 million copies of Aladdin, joke that they have already bypassed multi-media technology. And with Disney's market capitalisation above dollars 20bn, excluding a takeover premium, it would be difficult to force one on them.

Still, the growth in Disney's share price - after soaring for nine years running - was weakest of all the large entertainment companies last year. Some argue that Disney's studio division is being stretched too thin. Last year's line-up was unimpressive, and included flops such as Fatherhood and My Boyfriend's Back. Its US theme parks also recorded lower attendances and flat earnings, although Disney reported record profits for the final quarter of 1993.

Some of the explanations for the slowdown at Disneyland and DisneyWorld are obvious, and temporary: floods in the Midwest, recession in Europe. But analysts say the company's attractions, historically shielded from price pressures because of weak competition, are facing ever more serious rivals.

Las Vegas, with attractions such as the Luxor pyramid and the MGM-Grand complex, is in the process of redefining itself as a family entertainment centre. Japan's Sega is opening virtual reality centres in the US featuring high-tech interactive games. Mississippi riverboat cruisis, Paramount's new Kings Island resort, and music-based parks run by Gaylord Industries are also cutting into Disney's near-monopoly.

Concerns about the future of the US parks, as well as Euro Disney, have caused some analysts to retain 'hold' ratings on the Walt Disney Company despite rising speculative interest in the shares. Lisbeth Baron, SG Warburg's US media analyst, warned against buying Disney shares last autumn, before she was restricted from comments by the firm's involvement in the Euro Disney restructuring.

'Disney faces the prospect that its loyal visitors now have a substantial number of choices for entertainment, albeit less polished,' she noted.

Keeping up with the competition will also put new strains on Disney's finances, some argue. Beyond Disney's America, the company is reported to be planning a park either in Hong Kong or China.

Its aggressive film schedule also cannot be financed internally, Moody's analysts warned last week in lowering their view of the company's creditworthiness.

So Disney, weakened by continuing bad publicity at Euro Disney, could become vulnerable, some Wall Street speculators argue.

Few media investment bankers, however, are yet prepared to bet against Mr Eisner, who has increased Disney's share price tenfold in his decade at the helm, and produced returns of 20 per cent annually for the past five years.

'Putting money everywhere,' Mr Eisner warns, 'is a way of admitting you don't know what you're doing.'

(Photographs omitted)