Commentary: Disney deal to reshape on-demand media

By Josh Bernoff, Principal Analyst

Comcast launched a $66 billion takeover bid for Walt Disney on Wednesday. Without favoring Disney content, Comcast could use this move to jump-start video on demand and to shape of the future of on-demand media.

Embattled Disney has rejected this takeover offer. We think this is a mistake. Even more than weak ratings at ABC and pressure to cut fees at ESPN, Disney faces a long-term problem: As digital video recorders and video on demand take off, the power of networks will fade. Here's what Comcast--and networks--will do:

		Related story Comcast offers $66 billion for Disney The cable TV giant's surprise bid would create one of the largest media and distribution companies in the world.

• But it will use Disney to jump-start video on demand and broadband. Despite its aggressive moves in video on demand, Comcast has failed to get mainstream networks to offer popular content in video-on-demand tiers. This would change. By including Disney content, ESPN sports events and ABC network shows--with advertising--in its free video-on-demand offering, Comcast could do two things: first, make video on demand a popular destination, rivaling broadcast television, and second, develop an advertising model that benefits both Comcast and its network content partners. Similarly, we expect Comcast's high-speed Internet offering to feature Disney content.

• Other networks will eye distribution. With Comcast owning Disney, Viacom looks vulnerable, despite its strong media properties. With cash generated from the planned Blockbuster sale, it could make a move for financially troubled operators Charter Communications and Adelphia Communications and their 12 million households. NBC, digesting Universal Studios, is more likely to cozy up to Comcast than plan a cable operator acquisition.

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