Disney marriage will please only size freaks

"There was nothing to stop either company doing internationally what they were prevented from doing domestically... Neither had the vision or the guts"

Wall Street, it seems, is completely sold on this one. Even Warren Buffet, the investment guru, is besotted. Putting aside his traditional aversion to mergers of any sort, Mr Buffet has been quoted as saying that the Disney/Capital Cities link-up makes more sense than any deal he has ever seen. Wow!

What has caused Mr Buffet to throw caution to the wind and lavish such praise on what more normally he would have described as a pointless waste of money? Well, for a start there is the huge profit he will be making on his Capital Cities stake. That does rather concentrate the mind.

But there is more to it than that. Mr Buffett, like the rest of collective America, seems actually to believe the starry-eyed and, if the truth be known, largely vacuous, claims for this marriage being made by Michael Eisner and Thomas Murphy, respectively chairman of Disney and chief executive of Capital Cities-ABC.

This, we are told, is the ABC and Disney response to the multi-media revolution, a combination of one of America's most powerful and internationally recognised production houses and its perhaps best-known TV broadcaster to create a monolith capable of dominating the world.

The US still likes to believe it is capable of doing this, both in corporate and military terms, and that perhaps explains better than anything else the rapturous welcome this merger has received across the pond. Is it in any way justified?

Disney and Capital Cities are substantial companies perfectly capably on their own of chasing, or even leading, Rupert Murdoch and Ted Turner in the race to build a global digital highway in the sky, broadcasting products throughout the world. Before getting carried away with the potential this link-up unleashes, you have to ask yourself why. The most common answer, until recently, was that laws dating back to the 1930s - deliberately designed to prevent national broadcasters combining with Hollywood production houses - have frustrated the inter national ambitions of American media companies, stunting their development and growth. This, of course, is nonsense. There was nothing to stop either company doing internationally what they were prevented from doing domestically, nothing to prevent them going into satellite, nothing to stop them buying into foreign media companies. Neither had the vision nor the guts to do it.

No, this deal is much more about the domestic US market than the international one. It is fed primarily by the big-is-beautiful mentality and its purpose is essentially anti-competitive and monopolistic. It is about reducing choice and diversity, not increasing it, and it is about locking up product and dominating distribution. It also doubtless marks the start of a new era of media consolidation, the long-term consequences of which may not be so welcome.

Time was, not very long ago, when regulations upheld by the Federal Communications Commission in Washington DC meant that there was an unbreachable wall between the Hollywood studios that produced the television programmes and the networks themselves, which were the distributors. In recent years, the barrier has been slowly dismantled. A sweeping telecommunications bill before Congress will complete the process. Not everyone likes what is happening, including President Bill Clinton. The Disney-ABC merger is seminal in many respects. Disney will have at its disposal the best pipeline available for feeding its product to the American public and beyond by way of ABC's numerous cable interests, notably the ESPN sports channel, in which it has an 80 per cent holding. ABC meanwhile is establishing an unhealthy lock on the output of Disney, the most popular and pervasive production brand in the country.

A further rush towards consolidation will be inevitable as the fear of lock-out grabs hold. FCC Commissioner Andrew Barrett predicts that by 2000 there may be only 12 companies worldwide controlling everything we see and hear and convey on the media networks. The claim may be exagerated but the logic is faultless.

At the heart of the telecommunications bill, the result of feverish and determined lobbying by the industry, is the scrapping of all restrictions on telephone companies to compete freely with each other and leap wholesale into cable, film and television. Here, too, Disney and ABC are already setting the pace. Disney recently set up programming agreements with three of America's regional Bells.

The newly-merged giant, set to be the biggest in the world, will be the first Hollywood-broadcast-telephone behemoth. Whether the commercial benefit of this process of vertical integration lives up to Mr Eisner's claims is anyone's guess; as likely as not this is merely size for the sake of it.

For the time being, however, the consolidation freaks have the upper hand. Republican supporters of deregulation and the telecoms bill claim President Clinton is stuck back in the 1930s and risks frustrating the industry's efforts to leap into the information age. Consumers who wonder about handing control of that new age to a handful of mega-corporations such as Disney and Rupert Murdoch's News Corporation should ask themselves whether the Thirties offered some wisdom that is worth preserving, however.

Registering with the neighbours is costly

Car fanatics were assembling at dealerships on Monday evening to drive their new N-registration toys home at a minute past midnight. It is amazing what some people will do to impress the neighbours, if any were awake when they got back.

The Society of Motor Manufacturers and Traders is quite right to ask the Government to kill this crazy ritual, which distorts annual sales patterns and allows Continental manufacturers to offload cars cheaply in the UK when their own markets are in the summer doldrums. It is time for the date of manufacture to be confined to the log book, not the registration plate.

But the motor industry's other current whinge at the Government, for special fiscal help in the shape of a tax incentive to scrap old cars, is an equal nonsense. If the companies had passed on the whole of the benefits of their last help from Government, the scrapping of car tax in 1992, prices would now be 10 per cent lower, according to Ian Sheperdson, an economist at HSBC.

The price difference is worth about pounds 1,200 on an average car, more than twice the pounds 500 subsidy the SMMT is after to scrap a car. Manufacturers, he says, squandered a golden opportunity. The reason their sales have been suffering is that they have been so aggressive on prices. The boost to the motor industry three years ago cost the Exchequer pounds 1.25bn. If the companies had not held on to so many of the benefits, their total sales over the past three years could have been 200,000 higher.

With new car prices still rising at 3.9 per cent in the year to June, they should be cutting prices rather than asking the Government for help. If they were seen to do that, perhaps the Government would give them the number plate change as a quid pro quo.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power