News

When Content Was King

1/20/2002 7:00 PM Eastern

It's been an unsettling time since EchoStar Communications Corp. Charlie Ergen surprised everyone by winning DirecTV Inc. and Comcast Corp. prevailed in snaring AT&T Broadband, the object of its unwelcome bear hug.

Both of those deals, which were signed at year's end, have the rest of the media world now in a state of waiting and wondering. That's particularly the case among programmers.

Actually, "tailspin" might be a more accurate description.

After all, a combined EchoStar-DirecTV would be a distribution giant, with 17 million customers. The post-merger AT&T Comcast Corp. would be even larger, with 22 million subscribers. And while both deals await regulatory approval, there's lots of action going on behind the scenes, and it's all very sobering stuff.

Feisty and frugal EchoStar chairman Charlie Ergen sure made programmers stop in their tracks when he threatened to drop Disney's ABC Family channel. For now, Disney won that poker hand, but the game showed the potential power of the two new entities and left other programmers in a state of heightened alert.

And then — all of a sudden — the slaggard AT&T Broadband, which had put the skids on plant-improvement expenditures, opened the spigot. It's now spending to upgrade markets where it thinks it has its best shots, in preparation for its marriage with Comcast. It's also tweaking its digital-cable packages again, a step that might cause more angina among already skittish programmers.

And then there was a third deal that squeaked by in calendar year 2001: French-owned media conglomerate Vivendi Universal S.A. gained control of USA Networks Inc.'s television properties, and USA chieftain Barry Diller as part of the bargain.

More important, maybe, was Vivendi's bid to protect its flanks by investing $1.5 billion in EchoStar — perhaps to assure its bases are covered in the satellite arena. That could also bump other programmers from their slots.

If that weren't enough, Ergen's new satellite duo made plenty of noise at the recent Consumer Electronics Show. DirecTV announced it would launch local-into-local service in 10 more markets, while EchoStar introduced advanced personal video recorders and interactive-television features.

Meanwhile, some of the other media giants are still licking their wounds. It's pretty embarrassing stuff. AOL Time Warner ate crow, acknowledging that its past financial goals were pie in the sky. It promised to take a more conservative approach in the future.

That little bombshell came just after the company CEO Gerald Levin announced that he would leave and that Richard Parsons would take his place.

And then there's The Walt Disney Co., which has been hammered from all sides. The company's bottom line has suffered since the Sept. 11 terrorist attacks knocked the wind out of its theme-park business.

The company, trying to plug up other holes in the dike, also fired the programming head of the ABC Television Network. Meanwhile, in published reports, some are suggesting that it's time for Disney chairman Michael Eisner to go away.

For a long time, the media's mantra has been that content is king. It's sure doesn't look that way anymore, as programmers suddenly realize the power of two new fat-cat distributors. And those two giants could get even bigger.

And the other vertically integrated media companies might follow Vivendi's lead, making moves to ensure content distribution.

If 2001 ended with a bang, 2002 is going to end with a whimper for some programmers.

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VR 20/20

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