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Michael Eisner Is Still All Ears

Former Disney chief bullish on stations, M&A market in media industry 8/09/2009 11:00:00 AM Eastern

While television stations are having their challenges along with any other advertising-dependent business, former Disney chief Michael Eisner actually likes their potential entering a time in which he foresees a lot of merger-and-acquisition movement in the media sector.

With his new stop-motion comedy Glenn Martin, DDS set to debut Aug. 17 on Nick at Nite, Eisner spoke with B&C Editor-in-Chief Ben Grossman about the station business, who he is watching in the M&A space and why giving away content for free online is “hysterical experimentation.” Following is an edited transcript.

Would you buy television stations right now?

Yes, because they are undervalued. Will they be huge growth businesses for a media conglomerate chasing growth? No. But will they be cash generators going forward? Probably.

So will there be acquisitions made?

There will be a lot of M&A action in the media space in the next three years. A lot focused around content companies.

Who are you keeping an eye on as a potential player in the transaction market?

Comcast won't just be sitting there; they may want to recapture their dreams of going after Disney, but not with Disney specifically. And I am sure Brian Roberts and Steve Burke have Time Warner high on their computer screens. Now, I have zero information about this whatsoever. But anyone paralyzed in a distribution business absolutely should be looking at high-end content.

What is the state of the network television business in your eyes?

It's challenged, yes, because of the economy and the proliferation of alternatives. But what will end up as the sum total will be greater than it is today. The costs are very, very expensive, there is no doubt. The quest for finding that one big hit is out of kilter with the business.

Why is everyone giving away content for free right now online?

It's hysterical experimentation, but it's not altogether inappropriate. Nobody knows what the next act is. Once everyone thought it was AOL, then it was Yahoo. Now, is it Hulu? Is the next act really just giving everything away for free? I just came from conferences in Sun Valley and Aspen, and I have seen every presentation known to man and I just have one conclusion: Nobody knows. I don't care who they are, what they are the CEO of, they don't know.

Is building a single destination—like a Hulu—a good play right now?

It is a lot easier to have a destination when the government helps you like a cable operator in a particular market or a broadcast license. But when you have no barrier to entry, it's a lot harder.

However, being harder doesn't mean impossible. There will be some destinations, and they will be built on high-end content.

My bet has always been what is more important, content or distribution; distribution companies tend to be more and less relevant with the waving of a wand. People still underestimate the value of content. If you have ownership of high-end, exclusive content, end of game. That's where you need to be.

So just high-end content?

This [environment] has killed mediocre content. Audiences don't just have to sit there anymore and be entertained by mediocre content like in the past. There are too many options now. Look at cable; networks like AMC are being built on big original product, not a bunch of half-rate, off-net programming.

And no one has totally figured out user-generated content; that's a real long putt. I don't believe in unedited amateur content, like on YouTube. It is very hard to figure out how to wrap your hands around that as an advertiser.

Looking in from the outside now, do you think running a media company is harder than ever?

No, it's always been harder than ever. In some ways, right now it is actually easier than ever because there is no one making the rules for you. There are no rules.

Authentication has become a hot topic in the cable space. What are your thoughts on that?

You can try and put up a small dam on Niagara Falls, but at some point the water will spill over the top. You can't force consumers to come to you.

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