Disney seeks to block AOL Time Warner merger

Disney execs have conducted a low profile campaign for Congress to stop the proposed mega-merger
Written by ZDNet UK on

Walt Disney, fearing that its programming won't get fair access to America Online's (AOL) Web sites, is quietly lobbying Congress to warn against the online company's planned merger with Time Warner.

Executives at Walt Disney have been meeting with House and Senate staffers. They have also emailed them an article criticising AOL's practises, the staffers said. Executives have also approached some congressional offices about writing letters expressing concern about the merger to the Federal Trade Commission (FTC), which, together with the Federal Communications Commission (FCC), must approve the deal, the staffers said. The merger is still expected to be approved.

Disney's campaign comes amid contentious talks with Time Warner over a deal to keep TV stations owned by Disney's ABC network on Time Warner Cable systems in several markets. But it also underscores the worries of a number of other entertainment and media companies that the merger will squeeze them out of AOL's online distribution vehicles, including its main service and music properties. The deal, which would marry the world's biggest online and media companies, has come under fire from some members of Congress and consumer groups, but few content providers have publicly voiced the concerns they've expressed privately.

A person close to Seagram, which owns Universal Music Group and Universal Studios, said that regulators and legislators have approached the company to discuss its concerns, but it has yet to respond. Several industry executives, who asked not to be identified, are worried about the competitive edge AOL Time Warner will have. They say that without equal access, consumers signing on to AOL could be directed to Warner Music artists, for instance, and may have to scour the Internet to find musicians from rival labels.

Some believe the industry's public silence is testament to the potential market power of AOL Time Warner -- and content providers' fear of crossing the merging companies. Mike McCurry, co-chairman of iAdvance, a lobbying coalition that is pushing for cable companies to provide open access of their lines to rival Internet companies, said he has approached several major entertainment and information driven companies to join his group. "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,'" the former Clinton White House spokesman said.

An AOL spokeswoman said that AOL and Time Warner have been quite clear in their public statements addressing such concerns. She reiterated recent pledges -- made by AOL chief executive, Steve Case, and Time Warner chairman, Gerald Levin -- that the merged companies would carry a diversity of content on their systems, because it's good for business, and that they would distribute Time Warner's own content as widely as possible.

One company that has been pulling out all stops to lobby the issue is Disney. But even it has sought to maintain a low profile. It has asked congressional staffers to keep their meetings with Disney executives confidential, and until now, wouldn't comment publicly on its activities.

Preston Padden, Disney's executive vice president for government relations, and other executives have visited numerous congressional offices. Staffers said Disney hasn't sought to block the merger; rather, it has questioned whether AOL Time Warner would use its market power to favour its own content over rivals.

Padden turned up for a Senate Judiciary Committee hearing on the issue in February and sent emails this month to 24 congressional staffers, attaching copies of a negative article on AOL's business practises. The article, by CNET, related conflicts between AOL and two of its partners over the company's request that it not carry advertisements for rival Internet service providers (ISPs) on certain AOL Web sites.

However, he wouldn't comment on Disney's specific lobbying strategies. "We're not settled on any course of action," he said. "We've been trying to figure out whether there's a basis for our concern... and what's the best course."

Time Warner has said Disney's campaign is aimed at strengthening its hand in talks over the terms under which Time Warner Cable would continue carrying ABC shows in Houston and other markets. In a recent letter to councilman Ronald McMillan, president of Time Warner's cable division in Houston, Disney said: "This is about money and only money." McMillan said that the companies had almost reached an agreement in early January, but that Disney and ABC increased their demands after the merger was announced.

Padden concedes that Disney had sought to expand the talks to include AOL Time Warner's future treatment of its programming. But, he said, the issues are "much broader" than the network carriage talks. "What we're looking at is whether a company that controls the pipeline to the home plans to discriminate in favour of its own content," he said.

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