Disney "Sabre-Rattling" Over AOL-TW Merger

Fear that its programming will be given short shrift by the combined might of America Online and Time Warner has led the Walt Disney Company to lobby US lawmakers about the media giants' impending merger. Disney has made quiet but persistent efforts to influence legislators who must approve the merger, according to several reports appearing in late March.

Disney lobbyists have also taken up the issue of media dominance with members of the Federal Communications Commission and the Federal Trade Commission, who also must rule on the merger. The AOL-TW merger, if it comes to pass, could give an unfair advantage to AOL and TW companies, Disney representatives argue. The concern is shared my many entertainment and media companies, according to a March 23 piece by Kathy Chen in the Wall Street Journal, but executives have been reluctant to discuss the issue publicly. Disney has also been wrangling with Time Warner over keeping American Broadcasting Corporation television stations on TW cable systems in several parts of the country, including Houston. Disney owns ABC.

Other content providers could lose their competitive edge if the AOL-TW marriage goes unchallenged. Former Clinton White House spokesman Mike McCurry described the situation this way: "The companies privately say, 'We're worried, but there's not a lot we could do. We're not going to get in some conflict position with companies we have to do business with.' " McCurry is now co-chairman of iAdvance, a lobbying coalition campaigning for cable companies to open their lines to rival Internet companies.

AOL and Time Warner executives have dismissed fears of a media monopoly, and have been adamant from the beginning that their merged companies would carry "a diversity of content." Disney has not sought to block the merger, but is working to be in a stronger negotiating position once it is approved. "This is just some saber-rattling," said PaineWebber senior entertainment analyst Chris Dixon of Disney's actions. "It is obviously in AOL's and Time Warner's interest to offer everybody everything they want."

Preston Padden, the Disney executive in charge of governmental relations, appeared at Senate Judiciary Committee hearing on the issue in February. "We're not settled on any course of action. We've been trying to figure out whether there's a basis for our concern . . . and what's the best course," he commented. "What we're looking at is whether a company that controls the pipeline to the home plans to discriminate in favor of its own content."