Only hours after Walt Disney (DIS) reached a truce in its battle with Time Warner's cable operations, Disney chief executive officer Michael Eisner spoke out Tuesday on the issues involved. Eisner made some pointed jabs at his company's media rival during a conference call with analysts to announce results for Disney's Go.com Internet division.
With Time Warner owning both the pipes (cable systems) and much of the content that goes through those pipes (cable channels such as CNN, HBO, and TNT), Disney is afraid that its own content will be forced to play second fiddle. Eisner has said that he just wants "a level playing field," but Disney recently has taken the offensive. It has aggressively tried to get prime spots on cable systems by using its popular channels (including ESPN and the Disney Channel) to place newer Disney-owned channels such as the Soap Opera Channel. Time Warner has resisted these efforts, and tension has mounted in recent months.
Matters came to a head Monday when Time Warner yanked Disney's ABC-TV network off its cable systems in seven large markets because the two companies could not agree on how much money Time Warner should pay Disney for its programming. Service was restored Tuesday afternoon after the companies reached a temporary agreement lasting until July 15. In the conference call a few hours later, Eisner said he didn't want Time Warner or anybody else to be a "gatekeeper," determining what content cable users can see. He compared Time Warner to the movie studios of the 1930s and 1940s, which also owned theater chains.
As if that weren't enough, Time Warner's pending merger with America Online opens up new areas of conflict. Disney has been one of the leaders in interactive TV; for example, it allows viewers of the popular ABC television show "Who Wants to Be a Millionaire?" to play along in real time on ABC's Web site. The merged AOL-Time Warner will be an obvious threat in this area.
Eisner said he believes Disney's superior content will allow it to be "creatively nonstoppable" in its battle with Time Warner, but he's obviously not taking any chances. He'll certainly face more questions about the convergence of television and the Internet when Disney announces its full first-quarter results after the market's close on Wednesday.
David Kathman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.