This man is twice as big as Murdoch. He controls more of what we see on TV and in films than anyone else in the world. Charles Leadbeater and Edward Helmore report

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The Independent Online
If Rupert Murdoch has a recurring nightmare, it probably features Michael Eisner. As Murdoch swept the globe in recent weeks, negotiating a string of high-profile deals to extend his media empire into sports television and on to the information superhighway, it seemed he would carry all before him as the visionary of the new media age. Murdoch seemed to have a uniquely sure grasp of the cultural, technological and commercial pressures that are drawing together news, entertainment and sports.

As Murdoch swaggered, Eisner, chairman of the Disney Company, watched and waited. And at the weekend he pounced, with lethal power.

After three years of informal talks, Eisner spent the last weekend at the Sun Valley alpine resort in Idaho in negotiation with his counterparts at Capital Cities/ABC, the leading US television network. The outcome was unveiled on Monday: a $19bn merger between Disney and ABC, to create the largest entertainment and news group the world has ever seen. Disney will be able to distribute its films, videos and characters through ABC's broadcast and cable television networks. ABC's established programmes, particularly its sitcoms, will get the Disney treatment, creating spin- offs and theme park accessories.

The second largest takeover in American history will make the 53-year- old Eisner fabulously wealthy: since joining Disney 11 years ago he has already earned $500m in cash and stock options.

More importantly it makes Eisner the most powerful figure in popular culture in the world, with an unprecedented power to shape the tastes and values of tens of millions of consumers of films and television programmes in the US and elsewhere. Disney's magic kingdom is going global and consumers will find it increasingly difficult to escape its reach.

For Eisner, the deal marks a dramatic comeback, worthy of the wholesome heroes his studios create on celluloid.

Since joining Disney in 1984, Eisner has transformed it from a highly regarded but small film production company, with an annual turnover of $1.5bn, into one of the most powerful entertainment groups in the world, with a stock market value of $32bn, annual revenues of $10bn and profits last year of $1.1bn.

Everything seemed to be going smoothly for Eisner until the last year and a half which turned into a disaster. In April 1994 the long-term number two at Disney, Frank Wells, was killed in a helicopter crash. Last August the studio chief Jeffrey Katzenberg left the company after he was passed over as Wells's replacement. In March this year Richard Frank, the head of Disney TV jumped ship, to be followed last week by two senior executives from Disney's television animation unit who have joined the DreamWorks SKG operation the renegade Katzenberg has set up with Steven Spielberg and David Geffen.

Meanwhile, Eisner had to steer the company through unfamiliar public humiliations, in the shape of the dismal performance of EuroDisney and the failure to get approval for its planned America theme park in Virginia. To cap it all it is only a year since Eisner recovered from a quadruple heart bypass operation.

The ABC deal is stunning confirmation that Eisner - known by many as the Iceman - is back, and with a vengeance. Testimony to the combined group's potential to shape the world's entertainment and media industries has flowed thick and fast from his peers.

Michael Ovitz, chairman of Creative Artists Agency, widely regarded as the most powerful Hollywood agent, told the Wall Street Journal: "We are talking about a global marketplace rather than any single region. And to play in a global marketplace you need to have enormous depth. Combining the Disney brand name with ABC's reach is an extraordinary merger."

It is not difficult to understand why the Disney-ABC merger (the merged company will simply be known as Walt Disney) is generating such excitement.

It will dwarf its competitors. It will have combined annual revenues of $16.5bn and profits of $1.8bn, set against revenues of $8bn and profits of $0.92bn at Murdoch's News Corporation. The merged Walt Disney could have annual cash flow of more than $4bn with which it could fund its expansion. In contrast, much of Murdoch's empire has been built on debt and earnings from the increasingly competitive newspaper industry.

In one sense the deal reflects the decline of the traditional broadcast television network, which dominated much of popular culture in the Sixties and Seventies. The share of the television audience accounted for by the original networks - ABC, NBC and CBS - has fallen from about 95 per cent in 1970 to 57 per cent this year. That is because cable television and Murdoch's Fox network, set up in 1990, have taken a growing share. (The day after the ABC-Disney deal CBS was sold to Westinghouse and NBC is also thought to be up for sale.)

Yet the fact that Disney is prepared to pay $19bn for a television network in the age of multi-channel satellite and cable television, the Internet and cyberspace, is also a confirmation of the power of old-fashioned television to deliver a mass audience to advertisers.

The Walt Disney giant will stand on legs of technological conservatism - cartoons, films, broadcast television and funfairs. But it will use its strength in these traditional areas to expand into cable television. Disney has just a formed $500m cable television alliance with regional telephone companies covering almost half the US and ABC already has its ESPN cable service.

In addition, ABC has a joint venture with DreamWorks, the Katzenberg- Spielberg-Geffen production company, which has ambitions in music as well as film, having recently acquired George Michael from Sony. ABC is also allied with Electronic Arts which will be deployed to create computer games out of characters from the group's television and films. Eisner made it clear he also wants to expand into developing markets of the Far East where Murdoch has so far made the running.

The deal is an endorsement of Murdoch's strategy: he was the first to bring together a Hollywood studio and a television network by marrying Twentieth Century Fox to his Fox network. This week he was trying to make the best of facing a much more powerful competitor "They are twice as big as me now," he said. "A bigger target."

It is not all downside for Murdoch. According to Katherine Pelly, media analyst at Kleinwort Benson, the deal "does not establish anything of any meaning outside the US to rival NewsCorp." And with Disney as the dominant player, Murdoch will present himself as the underdog, a role he will exploit to the full to extract concessions from the television industry's regulators who will want to promote competition to Disney. However, from this week a spectre will be haunting the Murdoch empire, the spectre of Mickey Mouse.

If the technological core of the Walt Disney group will be quite traditional, the cultural signature will be conservative. The merger is the commercial complement to the political campaign launched recently by Senator Bob Dole against Hollywood's "depravity", personified by the films made by the directors Quentin Tarantino and Oliver Stone.

Walt Disney's anti-Communist credentials are well established. The great animator was an FBI informer against alleged Communists operating in Hollywood. It should be no surprise that one of the first companies to bow to Dole's pressure was Miramax, the Disney subsidiary. Disney forced Miramax to sell Kids, a film targetted by Dole, which depicts the anarchic life of inner-city teenagers.

Walt Disney's power to spread the saccharine sentimentality, anodyne storylines, happy endings, family values and clean-cut heroes so beloved by middle America has just increased dramatically.

There probably is no better guide to what Walt Disney will represent than Eisner himself. According to Barry Diller, the man who hired Eisner to work at ABC in the late Sixties: "Michael basically wants to fuse with Walt Disney."

In Hollywood he is praised for his self-deprecating wit, boundless energy and his boyish enthusiasm. At the announcement of the deal on Monday Eisner said that one of his biggest thrills was being invited to the 90th birthday of the ABC founder Leonard Goldenson. When Eisner first saw him it was in the halls of ABC in 1966 when he was a 24-year-old unknown.

Yet he is also reviled by his critics for his imperial style and his expressions of glee when rivals fall. A renowned workaholic he survives on five hours sleep a night. From a well-to-do Park Avenue upbringing he was educated in the classics. After graduating in English from a university in Ohio in 1964 he set off for Paris to become a writer: it was a dream that lasted 10 days.

Eisner's confidence that he embodies middle America's view of the world is evident in his willingness to translate his own experiences on to the screen. He came up with the plot line for Beverly Hills Cop after being pulled over by the police for driving a beaten-up station wagon. After watching his son play ice-hockey he came up with the idea for an ice-hockey movie called the Mighty Ducks which led him to create a real team of that name.

The confinement of Eisner's cultural horizons was exposed by the EuroDisney debacle. At one point he complained: "We keep forgetting that they don't even know what a park is in Europe. They don't know how to act and the Italians still don't know about queuing." He is relentlessly fastidious, ruthlessly competitive and slightly paranoid.

"Michael is a great believer in security," says Roy Disney, Walt's son. "He's got a tiny streak of paranoia about various things.When we were in Paris to sign the documents for EuroDisney we rode around in these bulletproof limousines."

A loner in business - he still has no obvious successor, his personal life is the embodiment of family values. He married Jeanette Breckenridge, a computer programmer, in 1967. They have three children, and he has been known to bolt from meetings to see his son play hockey. But he is not known to have many close friends.

"I would say that Michael has a problem trusting people," says a friend who did not wish to be identified. "He's the most competitive man I know. He's got to win."

This could be a crucial month for corporate America's attempts to impose itself upon the information age. In the Eighties it was fashionable to write off American business as the Japanese electronics giants Sony and Matsushita bestrode the world. They are in retreat from their ambitious investments in Hollywood; the Americans are on a roll. Later this month Microsoft will reinforce its position as the world's leading computer group, with the worldwide launch of Windows 95, the operating system that will control more than 80 per cent of the world's personal computers.

Disney's deal makes it the heart of global popular culture. Just as Ford and General Motors dominated the dawn of the car age, so these two corporations look set to dominate the early years of the age of infotainment.

Additional reporting by Rhys Williams