Disney Reaches Deal With Time Warner Cable, Bright House

The Wall Street Journal

Walt Disney Co. said it reached a long-term agreement that will provide customers of cable-television providers Time Warner Cable Inc. and Bright House Networks Inc. with a wide swath of programming from Disney's units.

The companies didn't disclose financial details, but media giants such as Disney have been gaining an increasing share of their revenue from fees paid by cable, satellite and fiber video providers.

The deal—called Disney's most expansive content agreement so far—includes the recently announced Disney Junior, a new 24-hour basic channel for preschool-age children, parents and caregivers that will debut in 2012; ESPN3.com, ESPN's live sports broadband network; a new authenticated service that will let subscribers watch ESPN, ESPN2 and ESPNU through their broadband services as well as mobile Internet devices; and a new super-highlight channel, developed with Time Warner Cable, called ESPN Goal Line, that will take fans around the best matchups each Saturday during the NCAA football season. A similar service called ESPN Buzzer Beater will be available for the college basketball season.

"We are pleased to have reached an agreement without any interruption in service," said Time Warner Cable Chairman and Chief Executive Glenn Britt.

Several cable providers have come to standoffs that threatened their subscribers' access to major events before striking new deals with media companies in the past few years.

Time Warner Cable, the second-largest cable operator in the U.S., was involved in a high-profile war with News Corp. over rights fees that threatened to black out Fox on its systems in January. News Corp. also owns The Wall Street Journal.

Then, Disney threatened to pull the signal of its New York ABC affiliate from more than 3 million Cablevision Systems Corp. customers if it didn't receive more compensation. After U.S lawmakers threatened to intervene, the two sides reached an agreement in time for viewers in New York to see ABC's March telecast of the Academy Awards.

Time Warner Cable serves the New York City area, southern California, Texas, Ohio and the Carolinas. Bright House Networks, the ninth-largest U.S. multichannel video programmer distributor, has 2.4 million customers in several large cities, including Tampa Bay and Orlando, Fla.; Indianapolis; Detroit; and Birmingham, Ala.

Disney, Apple Near iTunes Deal

The Wall Street Journal

 

Apple Inc. is in discussions with major TV companies to offer 99-cent rentals of television episodes, according to people familiar with the situation, as the company tries to reshape the television business around its devices, including a new one for pushing Internet video onto TV sets.

Apple is nearing an agreement with Walt Disney Co. to offer such rentals for some ABC television shows through its iTunes content store, these people said, but the proposal is facing at least some resistance from big TV companies, including CBS Corp., General Electric Co.'s NBC Universal, News Corp., and Viacom Inc., people briefed on Apple's proposal said.

The Cupertino, Calif., company is pushing to reach agreements for its television service—which would give viewers a 48-hour window to view an electronic version of the show—before the new television season starts in September, some of those people said.

At the same time, the company is working on a new device that would allow users to stream video, such as rentals, to their TV sets, according to a person with knowledge of Apple's plans. Unlike Apple's existing Apple TV hardware, which stores downloads users can access on their televisions, the new device would act as a conduit for streaming media more directly, and could be announced as early as September, the person said.

Apple declined to comment.

Lower prices for TV shows, along with the new TV-streaming device, could help Apple in the pitched battle to pipe content into American living rooms. Traditional cable- and satellite-TV providers are already facing competition from companies including Net flix Inc. and Hulu LLC. Google Inc. soon plans to roll out its own Web-TV service, too.

Media companies, however, have been wary of pumping too much content online, worried that they could encourage viewers to cancel their monthly TV subscriptions. The tens of billions of dollars media companies make each year from monthly bills are a key source of profits.

Through iTunes, customers currently can pay to download electronic copies of many cable and broadcast shows, often for $1.99 each for the standard version, to view on iPhones, the iPad tablet computer, Apple TV or other devices. Apple has told media companies that the entertainment offerings through iTunes are too costly, according to people familiar with the matter, and has said the media companies would make more money if prices were lower.

Media companies are weighing the potential revenue they would make if more people paid for TV shows on iTunes against the dangers of eroding their business on traditional TV. But they don't want to be left behind as viewers spend more time online. That has led some to offer some shows on their own websites, or through services like Hulu.

News Corp.'s Fox is receptive towards Apple's pitch of 99-cent TV-show rentals, according to people familiar with the matter, who cautioned that significant hurdles remain to any deal with Apple. News Corp. also owns The Wall Street Journal. Bloomberg News reported Apple's talks with News Corp. Tuesday.

CBS is mulling the Apple proposal, but is unlikely to agree to an Apple service of this type, according to a person familiar with the matter. NBC and MTV-owner Viacom don't currently intend to accept Apple's proposal, according to people familiar with the companies' positions.

The 99-cent rental plan is the latest of several pushes by Apple in the last year to boost consumption of TV shows through its iTunes content bazaar. Apple pushed to get TV companies to participate in a plan to offer television subscriptions over the Internet. Those plans met resistance from several media companies, as did a later proposal to sell TV episodes for 99-cents each, according to people briefed on the proposal.

Electronic rentals differ from sales, in part because they remain viewable for a limited time. But some media executives argue that they would still undercut online sales in iTunes because many people only watch episodes they buy only once. It is unclear which Disney programming would be available for viewers as part of the service. One person briefed on the Disney-Apple talks said a deal is not done yet, but that one is close.

Disney has been seen as a likely Apple collaborator in part because Apple Chief Executive Steve Jobs sits on its board and is the Burbank, Calif., company's largest individual shareholder.

Disney Plans Joint-Venture Channels in South Korea

Associated Press

 

 

LOS ANGELES — The Walt Disney Co. says it plans to launch two Korean-language Disney channels in South Korea in a joint venture with SK Telecom.

The venture plans to launch Disney Channel and Playhouse Disney Channel aimed at children and families there in the spring of 2011, pending approval from Korean regulators.

SK Telecom will own 51 percent of the venture, while Disney will own 49 percent.

The channels will be carried on cable and Internet-connected TV services.

SK Telecom CEO Man-won Jung said in a statement Tuesday that he hopes the alliance will create other opportunities and noted that consumers watch video on an array of devices including mobile handsets and tablet computers.

Oscar Party Crash: No Deal in Cablevision-ABC Feud

In Cablevision-ABC Fight, Oscar Viewers Could be the Losers

Cablevision Systems Corp. said early Sunday March 7, 2010 the stall in negotiations should be blamed on Disney CEO Bob Iger [Pictured].

NEW YORK (AP) - Millions of cable subscribers faced the prospect of Oscar night without the Academy Awards broadcast Sunday after ABC's parent company switched off its signal to Cablevision customers and the two companies blasted each other for failing to reach a deal in a dispute over fees.

In dueling statements dispatched early Sunday, the two companies traded blame for the stalemate ahead of one of the most-watched nights of television.

"Cablevision has once again betrayed its subscribers," said Charissa Gilmore, a spokeswoman for the Walt Disney Co. and ABC Television Group, in a statement. "Cablevision pocketed almost $8 billion last year, and now customers aren't getting what they pay for ... again."

Cablevision Systems Corp. said the stall in negotiations should be blamed on Disney CEO Bob Iger. "It is now painfully clear to millions of New York area households that Disney CEO Bob Iger will hold his own ABC viewers hostage in order to extract $40 million in new fees from Cablevision," said Charles Schueler, a Cablevision executive vice president, in a statement.

The signal can still be pulled from the air for free with an antenna and a new TV or digital converter box.

Cablevision has argued that Disney is seeking an additional $40 million a year in new fees, even though the company pays more than $200 million a year to Disney.

Disney counters by arguing that Cablevision charges customers $18 per month for basic broadcast signals but does not pass on any payment for ABC to Disney.

The dispute is similar to a standoff at the end of last year between News Corp. and Time Warner Cable over how much Fox television station signals were worth. That tussle, which threatened the college football bowl season and new episodes of "The Simpsons," was resolved without a signal interruption.

Cablevision also feuded with Scripps Networks Interactive Inc. in a January dispute that temporarily forced the Food Network and HGTV off the service. Neither side provided terms of an agreement that restored the channels after three weeks.

Disney and Cablevision have been airing dueling advertisements about the ongoing dispute for the past week. Also, lawmakers in Washington have chimed in, suggesting the Federal Communications Commission step in.

The company's previous contract with Cablevision expired more than two years ago, but it was extended month by month as talks continued.

Under previous arrangements, Disney was paid for cable channels such as ESPN and Disney Channel, but gave its ABC broadcast signal away for free, a situation that most broadcasters are now trying to change.

"We can no longer sit back and allow Cablevision to use our shows for free while they continue to charge their customers for them," WABC-TV president and general manager Rebecca Campbell said in a statement.

Schueler suggested that disgruntled viewers should blame Disney's top executive if the station goes dark.

"There is one man who is going to decide whether New York gets to see the Oscars, and that's Disney President and CEO Bob Iger," he said in a statement late Friday. "We call on Bob Iger to stop holding his own viewers hostage, end his threats to pull the plug on ABC at midnight and instead work with us to reach a fair agreement."

WABC-TV is the most-watched TV station in the country, said Disney, which is based in Burbank, Calif.

Disney Hopes Kids Will Take Online World of Cars Out for a Spin

LA Times

The company's latest virtual world, based on the Pixar film 'Cars,' is being tested for rollout this summer. The subscription-based online community is modeled after Disney's Club Penguin.

Lane Merrifield, co-founder of Club Penguin, which Disney acquired in 2007, relaxes at the online game's Canadian headquarters in Kelowna, British Columbia. He oversees Disney's virtual worlds.

Walt Disney Co. believes that World of Cars, its new subscription-based online community aimed at boys and based on the Pixar movie "Cars," won't get lost in the traffic of virtual worlds.

Things are already a bit congested. Some 200 virtual worlds target children under 12. Each competes for a slice of the 10 hours and 45 minutes a day the Kaiser Family Foundation estimates that kids spend viewing media, simultaneously vying for screen time against a growing number of portable media players and smart phones that offer their own diversions.

That's not deterring Disney, however, which is testing World of Cars for rollout this summer. The game will allow kids to create their own car persona and rub hubcaps with characters from the movie, such as Mater, the bucktoothed tow truck, or play online games such as tractor-tipping.

The launch marks the latest exercise in corporate cross-branding for Disney, which hopes it can leverage the movie's popularity into monthly subscription payments from boys and their NASCAR dads in advance of the release of "Cars 2" in summer 2011 and the Cars Land attraction that opens in 2012 at Disney's California Adventure theme park.

"We look at anything we can do online as a way to deepen and extend [people's] relationships with the characters," said Steve Wadsworth, president of Disney Interactive Media Group. "That only helps elevate the mind-share of that property or franchise with our audience."

World of Cars is modeled after Club Penguin, the online game of scarf-wearing penguins and igloos aimed at the juice-box crowd that Disney acquired in 2007. The site had 12 million active players and 700,000 subscribers when Disney bought it, although over the last year U.S. visitors to Club Penguin have leveled off, according to research firm ComScore Media Metrix.

Its global reach is broader, with Club Penguin attracting visitors from 190 countries as the site has been translated into Portuguese, Spanish and French. Kzero Worldwide, a British consulting firm, estimates that Club Penguin reaches as many as 35 million users globally, ranking it among the top five virtual worlds for children.

Disney will not release updated subscribers figures for Club Penguin -- Disney Chief Executive Robert Iger said in a recent analysts call that it had recorded gains -- but the subscription site is facing growing competition from toy makers seeking to extend their brands online.

Mattel Inc. made a leap online in 2007 with Barbie Girls, a site Kzero Worldwide estimates attracts 22 million players around the world. Hasbro Inc. partnered with video game maker Electronic Arts Inc. to launch Littlest Pet Shop Online in October, and toy giant Lego created Lego Universe, which debuted last month.

Established media companies with powerful children's programming, such as Viacom Inc.'s Nickelodeon, are similarly chasing their young audiences onto the Internet. After acquiring Neopets in 2005, Nickelodeon last May opened a spinoff virtual world, Petpet Park, which has attracted about 1.7 million registered users, according to Steve Youngwood, Nickelodeon's executive vice president for digital. It's in development on another virtual world, Monkey World.

The trick, however, isn't inventing a virtual world, but designing content that keeps children clicking back.

"Kids have notoriously short attention spans," said Steve Prentice at Gartner, a technology information and consulting firm. "They are intrigued by novelty, but unless there's an enduring reason for them to come back, they won't."

That's the challenge for Lane Merrifield, co-founder of Club Penguin, who oversees Disney's virtual worlds.

Pixie Hollow, the virtual world in which players flutter around with Tinker Belland other characters, has grown since its 2008 debut to 1.6 million monthly users in December, up from 1.3 million a year earlier. Toontown Online, one of the first virtual worlds, saw usage spike in the summer -- but the number of visitors in December fell below year-earlier levels, according to ComScore.

Meanwhile, Pirates of the Caribbean Online, the multi-player computer game that was launched in 2007, is taking on water. The number of online visitors fell below 192,000 in December from 500, 000 a year earlier, ComScore estimates.

"It's no secret it had some technical issues. There were some hurdles there," said Merrifield, who has been working to retool the game. "There were big downloads, and a lot of machines couldn't carry it."

Merrifield worked with the development team in North Hollywood to apply some of what he learned with Club Penguin. Players needed to be able to dive quickly into Pirates and play the game as soon as they launched their browser, he said, instead of waiting for a time-consuming download.

More fundamentally, Merrifield encouraged the Pirates team to depart from the game's linear storytelling to adopt Club Penguin's open-ended approach, in which the players have more say in the narrative and provide direction on the types of weapons, battles or quests they experience online.

That represents a fundamental shift in Disney's philosophy. Previously, whenever players sent e-mails suggesting ways to improve online games like Pirates or Toontown, they got an automated response saying the entertainment company did not accept unsolicited ideas.

"We retooled it. The foundation is where it needs to be. . . . We're hearing a lot of stories now about kids playing," Merrifield said.

Allowing players to determine the action on screen, Merrifield said, provides "a limitless supply of new content" and allows kids to become the storytellers. He credits 8-year-olds with some of Club Penguin's most popular ideas -- like the addition of ninjas.

Merrifield is applying the same approach to World of Cars. Players start by designing their own car, picking from among body types (stock car, say, or sleek, aerodynamic Porsche), colors and race-car numbers. As they roll down the main drag of Radiator Springs, they can choose to interact with characters from the movie, or head to Fillmore Fields to race through a hay bale maze with friends playing online.

"My goal is to make sure that Disney, from a virtual world standpoint, has the same tradition that Pixar does in 3-D computer animation," Merrifield said

Disney Takeover Approved By Marvel Shareholders

NY Times

Shareholders of Marvel Entertainment, the publisher of Spider-Man and the Hulk comics, on Thursday approved the company’s acquisition by the Walt Disney Company, as expected.

Marvel said the $4.3 billion acquisition would close at the end of the day, bringing Spider-Man, Iron Man and 5,000 other comic-book characters under the same roof as Mickey Mouse and Donald Duck.

Approval of the deal was expected. The chief executive, Isaac Perlmutter, who owns 37 percent of Marvel stock, supported it. He will be overseeing the Marvel business after the acquisition.

Marvel shareholders will receive $30 a share in cash, and 0.745 Disney shares for every Marvel share they own. Disney shares closed at $32.25 on Thursday, down 3 cents. Marvel shares closed at $54.08, up 3 cents.

The deal is Disney’s largest since it acquired Pixar Animation Studios, the maker of “Up” and “Cars,” for $7.4 billion in stock in 2006.

Marvel CEO Got Options Prior To Disney Deal

Story from the Wall Street Journal

Marvel Entertainment Inc. Chief Executive Isaac "Ike" Perl-mutter was granted stock options for more than a million shares in the weeks after a subordinate opened discussions with Walt Disney Co. that ultimately led to a merger agreement, according to a filing Disney submitted to the Securities and Exchange Commission.

Mr. Perlmutter stands to reap more than $34 million from the 1.27 million options, granted at strike prices ranging from $23.15 to $25.86 -- around half the $50 Disney has agreed to pay for each Marvel share as part of its $4 billion acquisition, which was announced Aug. 31.

According to the filing, David Maisel, chairman of Marvel's film division, met with Disney's CEO, Robert Iger, on Feb. 18, 2009, "to discuss ways in which the relationship between the two companies could be expanded."

The document, filed late Tuesday, adds that Mr. Maisel didn't mention the meeting to anyone else at Marvel, including his boss, Mr. Perlmutter, because the conversation was "general" in nature.

Less than two weeks later, on March 2, Mr. Perlmutter was granted options for 514,354 Marvel shares with an exercise price of $25.86.

On March 23, he was granted options to buy another 750,000 shares for $23.15 each.

According to a timeline in the filing, months passed and Messrs. Iger and Maisel next met again on June 2. This time, the Marvel executive told the Disney chief "that he would pass on the interest expressed by Mr. Iger to Mr. Perlmutter."

Talks accelerated rapidly from there, with numerous executives from both companies meeting throughout the summer, culminating in the merger agreement reached Aug. 30.

At the time of the March 2 grant, the company said 514,354 options were a reward for the company's 2008 performance. In the company's latest proxy statement, the board compensation committee said the option grant occurred a month after it dropped plans to instead bestow restricted shares valued at $4.3 million.

The company described the March 23 award of 750,000 options as part of an agreement to extend Mr. Perlmutter's contract, which had been due to expire in November of this year. Renewing an employment contract so far in advance "is a little unusual," said Mark Reilly, a partner at 3C, Compensation Consulting Consortium, who hasn't done work for Marvel or Disney.

The proximity of the options grants to the first meeting was reported Wednesday by Footnoted.org, an executive-compensation blog.

For years, Marvel in early March has awarded its executives restricted stock, not options. Only Mr. Perlmutter received options instead of restricted stock this year, according to a filing, which said the options "could provide him with a greater incentive to continue and improve upon his strong performance."

According to another Marvel filing, Mr. Perlmutter in April of this year did a "net exercise" of 333,333 stock options, garnering 21,149 shares.

Mr. Perlmutter holds about 28.9 million shares of Marvel, or around 37%.

Asked about the Marvel options, Disney said "the filing speaks for itself."

Although Mr. Perlmutter's ability to exercise the options was initially spread over several years, the Disney deal changes that. "Mr. Perlmutter's options will become fully vested immediately prior to the completion of the merger," the filing says.

Whether the two option grants to Mr. Perlmutter violated securities law would partly depend on whether any Marvel board members were aware of the Maisel-Iger meeting, according to a New York securities lawyer.

"If the board didn't know, they didn't do anything wrong," the securities lawyer said. But if board members were aware of a possible business combination, the lawyer continued, "that certainly is a securities law violation."

The filing says Mr. Maisel didn't disclose the meeting to "anyone else at Marvel."

Mr. Maisel's background is in corporate strategy, not in the creative side of the film business, and he was named as a senior executive at Marvel Studios in 2004, largely in order to bolster the film unit's fiscal discipline. People close to Marvel say he regularly meets with executives of other entertainment companies to discuss issues such as strategic alliances and distribution deals.

The company's filing said that Mr. Maisel had met "periodically" in the past with Mr. Iger on such subjects.

Asked to specify when or how often other such meetings had taken place, a Marvel spokesman said Mr. Maisel was unavailable.

The filing is an SEC S-4, a document offering details of a merger or acquisition.

The deal is still subject to shareholder approval.