Will Disney Create a Paradigm Shift for TV Distribution

Implications: Analyst David Miller for Caris & Co. tells Bloomberg that Disney might sell its ten television stations to exit the distribution business.  Such a move would be a huge change for the traditional network powers.

Analysis: The Walt Disney Company owns 10 TV stations that were acquired when the company bought Capital Cities years ago to become the owner of one of the original "big three" TV network.  A new report, based apparently on independent analysis and no interviews with the Disney leadership, suggests Disney may sell the stations.

David Miller speculates the stations could fetch as much as $4.8 billion, which may seem light for 10 stations, but a few of the stations are in smaller markets:  Fresno, Flint, and Toledo.  The jewels are in NY, Chicago, LA, Houston, San Franciso, Philadelphia and Raleigh-Durham.

The timing of such a move would make sense.  Any deals conceived now could not close before 2009, and in 2009 the market for ad space drops significantly, sans Olympics and political.  The digitial transition set for February 2009 offers opportunities for additional revenue streams via multicasting and possible retransmission consent.

We've seen News Corp. (Fox) pare down its stations by selling some smaller stations.  There continues to be speculation that GE will sell off NBC Universal next year, but that has been denied by GE's Immelt and makes no sense.

One caveat to any deal would be that the NY, LA and Chicago stations remain Disney affiliates.  That is not necessarily a potential deal-breaker, but it is another condition that could complicate negotiations.  But as I posted in a recent report on CBS planning to sell 50 radio stations, who's buying?  The same question holds here for these stations.  The smaller ones could go easily and form duopoly combinations, but the big markets are more costly and more problematic.  It's a very slow time for TV station sales.

If this report turns out to be true, it raises a question as to whether or not other networks will follow suit and get out of distribution--with the idea that with broadband and IPTV you don't really need a system of affiliates like in the 1950s when TV was conceived based on the old radio distribution model.  This could lead to a real paradigm shift for TV networks if the others follow suit.