WORLD: Media Analysis - Eisner under the microscope while Comcast circles Disney

Eisner's old-school style of management has won him few friends.

The status quo is no longer an option for the Mouse House. True, the board did give Disney's chief executive, Michael Eisner, a vote of confidence when it rejected the $54 billion hostile takeover bid from Comcast, America's largest cable operator. Yet few believe that this is the end of the affair.

Even if Comcast doesn't return with a revamped offer, question-marks will continue to hang over the company and Eisner's leadership. It comes down to two related issues: the questionable quality of Eisner's strategic vision and his old-school management style.

Disney recruited Eisner 20 years ago when it faced a directional crisis. Eisner's successful strategy was to turn a somewhat cosy film studio into one of the emerging breed of cross-media conglomerates, buying up TV assets (the ABC network), expanding tourism interests such as theme parks and making the most of its cartoon characters as franchise properties.

As such, he had a strategic vision perfectly in tune with the times.

Now, however, his critics accuse him of being completely out of step.

The latest fad in US media thinking is that the future will be all about vertical integration - not just owning content but possessing the means to distribute it via cable, satellite or analogue terrestrial platforms.

Time Warner has a vast portfolio of TV and film production units as well as cable networks boasting 11 million subscribers, while Viacom and NBC have old-fashioned analogue terrestrial television stations.

But it was Rupert Murdoch's $6.8 billion move to take a controlling stake in the satellite platform DirecTV that really focused minds. With one stroke, Murdoch suddenly dominated one whole distribution platform.

But Paul Woolmington, the chairman and chief executive of the New York media specialist the Media Kitchen, says it wasn't all down to Murdoch - there was a mini-revolution going on anyway: "The whole point is that even before Murdoch came in, satellite was beginning to eat cable's lunch. Over the past five years, satellite has had better pricing, better service and better positioning."

Eisner, though, has always been relatively unmoved by the vertical integration panic, retaining unshakeable faith in an older mantra: "Content is king." But if content really is king, then how come Eisner treats his content creators anything but regally? The focus for dissidence (and dissonance) on this side of things is Roy Disney, the nephew of Walt and a former vice-chairman of the company, who was forced off the board last year.

Roy Disney is the champion of traditional skills, artistry and especially values - values he believes have been trampled on in an era of computer-generated animation. He can be relied upon to kick up a fuss every time the company's accountants persuade the board to lay off more animation specialists.

But this isn't Eisner's only problem close to home. An unrelenting autocrat, Eisner seems to make enemies for fun. Forbes magazine recently named him as the US's worst chief executive.

But his greatest creative blunder of all may well prove to be the split with Pixar earlier this year. Pixar, run by Steve Jobs, Apple Computers' chief executive, is the digital animation studio behind a whole run of hits co-produced with the Disney studio - for instance, Toy Story and Finding Nemo. Pixar represents the future, but the Pixar partnership dissolved in January this year when Eisner decided to play a gratuitous and needless game of hardball over distribution rights. That event in itself signalled to many that Disney was in play.

So where next? Some observers have suggested the Disney board is perhaps showing a united front for the time in the hope Comcast or other possible predators go away. Then it can get back to finding a successor to Eisner in its own good time and pray that this successor can lead the company out of its strategic uncertainties. And it may have some breathing space.

After all, Comcast is thought to be the only big communications industry player that can acquire Disney without triggering an investigation by the competition authorities. Other, more modest, names have been in the frame - including Barry Diller, the chairman and chief executive of IAC/InterActive Corp, best known for catapulting Fox into the limelight, and John Malone, the billionaire chairman of the cable giant Liberty Media.

But why did the Comcast offer fail? It was partly because the market reacted poorly to the news, driving down the Comcast share price - and as Comcast was offering its own stock rather than cash, the value of its bid slid with its share price. In that situation, offering even more paper just further devalues that paper, perpetuating the vicious circle.

So the saga continues and Comcast's interest is allegedly unwavering.

As Woolmington says, the real impetus towards vertical integration actually comes from the distribution side and that is what will eventually decide Disney's fate. He surmises: "Comcast probably needs a Disney more than Disney needs a Comcast."

DISNEY'S DREAM ASSETS

Studio entertainment

Percentage of total revenue: 35.5

Owns Walt Disney, Miramax and Buena Vista. Last year, it released

Pirates of the Caribbean.

MEDIA ASSETS

Percentage of total revenue: 35.5

Include the ABC TV network and various cable channels, including ESPN

sports.

THEME PARKS

Percentage of total revenue: 19

Disney's theme parks in the US, France and Japan were badly hit by the

deterrent effects on tourism of the 9/11 terrorist attacks. Investment

was slashed, quality and service suffered and this division began to

attract bad publicity.

MERCHANDISE

Percentage of total revenue: 10

The remainder of Disney's $27 billion revenues comes from

merchandise.

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