Disney dancing with Yahoo — again

Studio alliance may make web portal major entertainment source

HOLLYWOOD — Here we go again. Rumors that Disney may soon take over popular Internet portal Yahoo are making the rounds once more.

But this time, momentum and market conditions favor the Mouse House’s completion of the deal.

Sony’s Aug. 17 announcement that it has teamed with four other studios to launch an Internet-based video-on-demand service code-named MovieFly was the official starting gun that kicked off Hollywood’s race to deliver movies over the Web.

Disney and Fox, who teamed on a planned competing service called Movies.com, now are lagging behind.

But Yahoo could play a major role in helping Disney catch up.

Although Disney has its eyes on a number of potential companies — among them AT&T Broadband, Spanish-lingo cabler Univision and animation darling Pixar — it has yet to secure a major technology provider to simplify the delivery of full-length feature films to Internet users.

Inhouse research and development group Disney Imagineering could devise a solution, but any new service would be untested among consumers and require millions of dollars to market — millions more than if Disney used an already popular service to launch Movies.com.

Disney needs a major boost to catch up to Sony, and Yahoo could provide that boost immediately. Among the factors in favor of such a tie-up:

  • Yahoo Broadcast has become a popular destination for Netizens to view everything from movie trailers to full-length features. Just months ago, Disney’s ABC News division inked a deal to broadcast segments on Yahoo, a move that can be viewed as a test by Disney to see if longer video sequences can be satisfactorily streamed online via the portal.

  • As the top Internet portal, Yahoo boasts more than 57 million monthly visitors — an attractive and Web-savvy group ready to try out Movies.com.

  • The price is right. Just days after Sony announced MovieFly, the Mouse House disclosed plans to raise $7.5 billion by selling various securities to pay down debt, invest in subsidiaries and possibly acquire new assets.

    And with Disney chief financial officer Tom Staggs having expressed a strong commitment to grow through acquisitions, Yahoo now looks like a strong contender for those funds.

    Prior to Disney’s cash-raising announcement, Yahoo’s market cap was more than $8 billion. The company now is worth — coincidentally — $7.5 billion. Shares of Yahoo ended the week at $13, close to its 52-week low of $11 and far from its high of $140. That price could fall even more before Disney makes an offer, which could come around November, when its deal to buy Fox Family closes.

  • A sale to a major media conglom fits well with the idea that Yahoo brought former Warner Bros. honcho Terry Semel aboard to head the San Francisco-based company as CEO in order to make it attractive to buyers, specifically his industry buddies.

While neither Disney nor Yahoo would comment, insiders at both companies say they are indeed talking.

“But Yahoo is talking to everyone,” one staffer says.

Ironically, Sony also has strong ties to Yahoo, having recently inked an extensive multiyear marketing pact with the portal. Sony chairman-CEO Howard Stringer says this is only a first step, fueling speculation that Sony, too, is eyeing Yahoo.

Indeed, Sony recently tapped Lynda Keeler as VP of interactive services, a newly created post, to oversee the conglom’s relationship with Yahoo.

Whether it’s Disney or Sony that buys Yahoo, either move will help evolve the portal from merely a popular search engine and news provider into a major source of entertainment on the Web.

Either company would provide it with a stable of the brands necessary to attract media-hungry Netizens.

Of course, amid the volatility of the tech and media sectors, both studios could wind up backing away from Yahoo. Disney and Fox may even decide to drop their plans to launch Movies.com.

Stranger things have happened. After all, it wasn’t that long ago that Yahoo was being heralded as a potential buyer of Disney.

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