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Disney-Marvel Acquisition Aftershocks

Mickey Mouse
Source: disneythemes.com
Mickey Mouse

Hollywood is still reeling from the news that Disney is acquiring Marvel Entertainment and all the other media giants are trying to figure out what this means for their businesses and what other acquisitions it will prompt. One Hollywood insider who works for a rival said with a shudder: "Disney's always been an 800 pound gorilla, but now its power with retailers like Wal-Mart is going to be out of control."

Disney already takes up a lot of shelf space at the major retailers, but now, with more DVD offerings and a huge chunk of the licensed toy space, Disney will have truly unprecedented leverage to negotiate prime display real estate and better deals. But that's just one piece of the puzzle. The implications of this entertainment behemoth could stretch to movie theater relationships and beyond.

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Now that Disney has Marvel's army of comic book characters behind it, competitors are looking around, trying to figure out what they might want to snatch up. And some players also have plenty of cash on hand. Time Warner has some $7 billion in cash and it already has its own bevy of superheroes with DC comics. CEO Jeff Bewkes, perusing a strategy of turning Time Warner into a content oriented company as it spins off AOL, could be interested in cable networks or potentially even a film studio. News Corp has some $6.5 billion in cash and cash equivalents as of the end of its latest fiscal year. Comcast had $1.16 billion in free cash flow in the second quarter, and of course we remember the cable giant's bid for Disney in 2004. Liberty Media has been building up in-house film production so it could be interested in acquiring a film library.

So what are the assets on the table? Cox Communications is on the lookout for potential buyers for The Travel Channel. DreamWorks Animation is a potential target because its unique digital animation could be a good complement for a studio like Time Warner's Warner Bros. which doesn't create that kind of intellectual property. MGM is busy restructuring its debt, but if it fails to generate enough cash to cover its payments, it could sell its huge, valuable film library, which continues to throw off home video revenue. And from a buyers perspective, the decline in the home video business means that MGM or any other library would come at a discount. Don't expect a rush of deals, but the media moguls are definitely looking, wondering if they should buy now before the economy improves and prices rise..

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