London Times
The message
Roberts family lives out its American dream
By David Yelland
ONLY in America can you set up a tiny cable outfit with 1,200 subscribers and build it into one with 21.47 million and then, one cold winter’s morning, offer to acquire the Walt Disney Company and create a $125 billion (£66 billion) empire.
Yet this is exactly what father and son team Ralph J. and Brian L. Roberts have done, starting out in 1964 with (quite literally) a mom and pop cable company in Tupelo, Mississippi, with revenues of less than $100,000 and ending, should the Disney bid succeed, with a corporation employing 179,000 people enjoying revenues of $45 billion.
This is quite an offer, although it will have to be raised at some stage, and I have to say that Brian L. Roberts’s presentation before analysts and press at New York’s St Regis Hotel on Wednesday was one of the best bits of business communication for a long while.
Before I go any further with the Roberts message, I have to reveal a prejudice against America’s cable guys. In general these are people that developed or inherited regional monopolies which they bilked for profits whilst delivering deplorable service.
Having said that, two practitioners have broken the mould. John Malone’s Tele Communications Inc. and then the Roberts family — especially the younger one who became president of Comcast in 1990 and has since taken over completely.
Less than two years ago Roberts Jr bid $50.8 billion for AT&T Broadband, which was then one and a half times the size of Comcast, and has absorbed and improved the overall company.
The contrast in style and communications skills between the Roberts family and Michael Eisner, the arrogant Disney chief, is not only marked — it is critical to understanding what has gone right with Comcast and wrong with Disney. Comcast’s stock over the past 30 years has way outperformed the average. In fact there are only four companies in the US that have done better — Southwest Airlines, Wal-Mart, Walgreen (a pharmacy and general store chain) and Intel.
Disney on the other hand, after many stellar years under Eisner, has done nothing in recent years — which resulted in the main board resignation last year of Walt Disney’s nephew, Roy, and Stanley Gold, who have fought a war against Eisner in public.
Eisner loves the glitz, the media friends and his ego has grown as the years have gone by. Messrs Roberts are, by comparison, dull — they are relatively unknown in America apart from among those that matter: their staff, their shareholders and on Wall Street.
If they have a weakness it includes, at least until recently, a lack of skill in handling Washington’s power brokers. This could be critical because the Federal Communications Commission, which regulates the US media and is run by Colin Powell’s 39-year-old son Michael, is bound to obsess itself with this deal.
To judge, however, by the Wednesday presentation, Roberts and Comcast’s Stephen Burke have got their message off pat. The only thing that can stop them is a third party such as Malone coming in but, as I say, they will have to raise the offer as this all-paper deal is now pitched below Disney’s market cap because of the way the two prices have moved.
I am a bit of an anorak when it comes to these press conferences because this is when a slide presentation becomes more than that; it becomes the key tool in selling a $66 billion acquisition. There were some killer slides. Take the ones on the cashflow benefit of the merger. Roberts identified $200 million to $500 million in savings that could come from raising the ABC television network’s performance “towards industry norms”.
He didn’t even say “up to” industry norms or “above” industry norms. No. Disney’s management of ABC has been so dire that the cable guys think they can find approaching half a billion dollars in cash just by raising it “towards” the average.
And it goes on. There is another $200 million to $300 million to be found by raising Disney’s cable network “towards” the same “industry norms”.
I can’t resist sharing with you the slide showing Comcast’s estimate of ebitda (earnings before interest, taxes, depreciation and amortisation) of the four major networks in the current year: NBC $1,400 million, Fox $900 million, CBS $800 million and ABC “zero”. Wow!
Then there was the slide showing the margins achieved on Disney’s cable assets. The sports channel ESPN’s were listed as 25 per cent, Comcast’s own E! was 48.9 per cent. As I say, killer facts.
This was a piece of corporate message spreading of great skill. It was simple, factual and, most of all, targeted perfectly to the audience that will decide Disney’s fate. Eisner is now finished, as I predicted before Christmas. For Comcast, big questions remain. Roberts hasn’t got massive experience in managing creative assets and he is bidding for some of the best in the world.
However, Hollywood’s studio executives have little loyalty to any of their parent companies — all Roberts will have to do is pay out a shed load of money to the best exec he can get. As for Disney’s news division at ABC, it can hardly be run any worse than it has been recently.
And what of Messrs Roberts? They are not innovators. They have grown through managing costs, acquiring businesses and delivering slightly improved customer care. There’s nothing wrong with that, but you only add value in the media business through ideas — not deals.
Having said that, they’re bidding for a company full of people with ideas. And if they buy the House of Mouse it will be testament, once again, to what’s possible in modern America.
david.yelland@thetimes.co.uk |
