Call it the Rupert Effect.
Not long ago it seemed the fast-and-furious wave of media consolidation was over, with Time Warner Inc.'s marriage to AOL having proved a bust and troubled Vivendi Universal agreeing to shed its U.S. entertainment assets. The era of big deals looked dead.
Then last week, the situation changed -- and so did the predictions of many Hollywood insiders about what may lie ahead in 2004.
The reason was that News Corp. completed its three-year pursuit of DirecTV, adding the leading satellite TV provider in the United States to a portfolio that already includes the Fox broadcast network, the nation's No. 1 TV station group, a movie studio, powerful regional sports channels and the Fox News cable channel.
The acquisition gives News Corp. Chairman Rupert Murdoch enormous clout and threatens his principal rivals, including Time Warner, Walt Disney Co. and Viacom Inc. Some predict that Murdoch's competitors will have little choice but to seek new combinations in a bid to check News Corp.'s burgeoning power.
Here, then, are some bold predictions for next year, based on interviews with analysts, investors and top industry executives -- along with a little intuition and imagination:
Time Warner Gets Busy
Time Warner Chief Executive Richard D. Parsons will agree to pay $100 million to $200 million to the Securities and Exchange Commission to settle charges of accounting fraud at the company's America Online division, cleaning up a liability that has paralyzed the media giant for two years.
That will allow Time Warner to shift into high gear and make up for the time lost to management strife, legal scandal and the heavy debt incurred from its merger with the Internet services provider.
To strengthen one of its biggest growth engines -- cable systems -- Time Warner will acquire Adelphia Communications Corp. once the Denver-based pay-TV provider, which collapsed after its own accounting scandal, emerges from bankruptcy protection in the summer.
To finance the acquisition, Time Warner will spin off its cable group to the public, though it will still retain a big stake. The move will give Time Warner control of about 16 million subscribers, putting it in position to compete with the industry's leader, Comcast Corp., and its 21 million subscribers.
A second acquisition, of Cablevision Systems Corp. and its 3 million cable subscribers, would give Time Warner a lock on the lucrative New York-Long Island market -- though there are no guarantees that Cablevision founder Chuck Dolan will agree to let go.
NBC Meets HBO
By the end of the year, Parsons will seriously contemplate his boldest move of all: a merger with General Electric Co.'s NBC Universal.
Such a deal would give Time Warner a major broadcast outlet, providing it with an important bargaining chip with pay-TV operators and putting it on equal footing with News Corp., CBS owner Viacom and ABC parent Disney.
Time Warner and General Electric have discussed such a combination since the mid- 1990s, but talks have always broken down over issues of control.
But the timing could be right by late 2004 or early 2005.
After all, even after buying Vivendi Universal's U.S. entertainment assets, NBC still lacks sufficient clout with pay-TV distributors -- a deficiency that Time Warner could shore up.
Putting NBC, MSNBC, CNBC, Bravo, USA and Sci Fi under the same roof as HBO, CNN, WB, TBS, TNT and the Cartoon Network would give the partners unmatched firepower on the small screen, not to mention more news-gathering efficiencies than any other company in the world.
Life After Eisner
The coming year will be the year that Disney finally gets serious about finding a successor to Chairman Michael Eisner.
Eisner survived several threats to his leadership in 2003 -- the most serious a November boardroom brawl that saw Roy Disney and another director step down in a huff and call for Eisner's resignation.
Now, with the board swept clean of Eisner's critics, many pundits suggest that the beleaguered chief will be in a position to throw his weight around all the more.
Don't bet on it.
Eisner could be in for more turmoil if ABC tanks in the ratings in 2004. And with Roy Disney continuing to mount a very public campaign against Eisner on Wall Street and in the press, the board will have little choice but to demand a bona fide succession plan.
One candidate to replace Eisner is Disney's president, Robert Iger. But Iger received something of a vote of no confidence when a Disney board member held secret negotiations with News Corp.'s chief operating officer, Peter Chernin. Sources say the talks disintegrated because Eisner would not set a date for his retirement.
Chernin, however, is still waiting in the wings.
