According to published reports, the Walt Disney Company has quietly been lobbying the U.S. Congress to block the proposed $180 billion (US$) merger of America Online and Time Warner, Inc.
In addition to lobbying House and Senate staffers, Disney executives have requested intervention by the U.S. Federal Trade Commission (FTC) and have apparently been sending out e-mails that are critical of AOL.
Just a Bargaining Ploy?
Communications between Disney and Time Warner on another issue have also been contentious. The companies disagree over the fees that Disney will pay Time Warner to carry the Mouse’s ABC network-owned TV stations on its cable systems in several markets.
Time Warner contends that Disney’s opposition to the AOL merger is little more than a bargaining chip for the fee negotiations.
However, some industry analysts disagree with that assessment. These experts say that scores of other companies privately fear that the potential market power of AOL Time Warner will squeeze them out, and that any public opposition could lead to economic punishment once the AOL Time Warner deal is approved.
AOL Talks Back
AOL contends that Disney’s concerns are unwarranted. Both AOL Chief Executive Steve Case and Time Warner Chairman Gerald Levin recently pledged that the merged companies will carry diverse content across their properties.
Case and Levin were grilled extensively by members of Congress on these issues in early March, when several Senators expressed serious reservations about the merger.
Disney Tells on AOL
Despite numerous assurances by AOL and Time Warner that they do not plan to use their market power to squash competition, a recent article e-mailed by Disney to two dozen congressional offices seems to raise some legitimate concerns.
The article, which appeared on CNET, alleged that AOL warned some of its smaller content partners about the possible repercussions of carrying links to free ISPs. AOL obviously regards the free ISPs as a threat that could undermine its position in the market.
Merger Stymies Disney’s Plans
While the use of market power to threaten partners against doing business with competitors is precisely the kind of behavior that Congress is concerned about, I am not sure that Disney is the right champion for the little guy.
After all, Disney is a giant media company that pumped out more than $23 billion in revenues last year, and is likely to flourish whether Time Warner merges with AOL or not.
With properties that include ABC, Inc., Lifetime Entertainment Services, the Anaheim Angels Baseball Club and the Mighty Ducks of Anaheim, Disney is hardly a candidate for obscurity anytime soon.
So, even though Disney has every right to be concerned, I believe that the Mouse doth protest too much, especially if its biggest complaint is that AOL supposedly threatened small content providers with the consequences of carrying links to free ISPs.
In my opinion, Disney is not fighting the AOL Time Warner merger because it fears the awesome power of a new industry giant. It is simply campaigning to nix the merger so it can fend off tougher competition.