The Maven: Pomp and Happenstance

Coverage of the Disney-Pixar merger misses the big picture. AOL-Time Warner anyone?
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Nowhere is the spread between banner headlines and future trend lines wider than in coverage of high-profile mergers. Let The Business Press Maven guide you to the bottom of why this gap is often such a gulch.

For starters: a limitation. The Business Press Maven has neither the time nor strength of spirit (or stomach) to review the many times the excitable boys and girls of the media attended a merger announcement and, revved up on coffee and free Danish, let themselves be taken by the happily-ever-after lines rehearsed and recited by both sides.

I could list thousands of examples, but will instead, in honor of the recent

Disney

(DIS) - Get Report

-

Pixar

(PIXR)

coverage, write just one:

America Online

-

Time Warner

(TWX)

.

Remember that announcement and all the dutifully positive coverage that came from it, all those billions in write-offs ago?

In the past week, we've had different characters but essentially the same script.

Let's call the new version "DisneyPixarAmericaOnlineTimeWarner." It stands as one big long word for how believing what they hear during the pomp and circumstance of a merger announcement is the media's true love, with critical thought just a good friend.

Notice, too, how in both cases a fixation on the personalities involved gets in the way of understanding the raw numbers, unworkable in both cases.

But we're getting ahead of ourselves.

Let's back up to the AOL-Time Warner wedding, which was actually a wake. Steve Case was barely able to stay straight-faced about how, with wide Broadband access coming down the pike, he had pawned off his anachronistic dial-up outfit for such an obscene amount. Jerry Levin, then still employed at Time Warner, waxed on about peddling magazines or some such, on AOL. And the two prattled on, with jargon like "synergies" taking place of reason.

Neither value nor the fact that AOL was at the end of its lucky run played much of a role in the initial coverage. Too much of that focused on how Mr. Levin took off his tie in high tribute to Mr. Case and as a ham-handed signal that Time Warner would learn and change, thanks very much to the overpriced upstart.

The rest, as they say, was dark history. A bureaucratic behemoth learning to be nimble through innovative steps like more casual menswear?

Puh-lease.

Heaven knows (and so does The Business Press Maven) why the recent Disney-Pixar coverage could have been nearly superimposed over that of AOL-Time Warner. In terms of personality, the investment public was told (right after the press was) that Steve Jobs is the new Walt Disney and can bring the creative knack back to a bureaucratic behemoth. Pixar, like America Online, is also at the vanguard of a new can't-miss way of doing things. They are a little bit rock and roll to Disney's country --with its worldwide distribution. But this was a marriage of equals who will enter a state of collaborative bliss and blah-blah-blah.

It took John Stewart's fake news show, bless it, to breath some sense into the discourse, mocking Pixar's output for being different versions of

Toy Story

-- implying that Pixar's had a good run, but audiences will tire of its

schtick

just as they've tired of Disney's fare, which has come to be so predictable.

But it took about a week, under a neon-sign column heading of "Common Sense" in

The Wall Street Journal

to get a well framed dose of it, courtesy of James Stewart in a story entitled: "Investors, Beware: Disney Is Paying Too Much for Pixar."

And even that left out a major point.

Stewart compared the purchase price to the relatively miserly total assets, most of them in cash, which means that Disney essentially paid $6 billion to raid talent. Even The Business Press Maven isn't worth half that. Mr. Stewart went to town but didn't even touch upon the reality that since Disney already partners with Pixar, it already gets the benefits of about half of its profits. That deal is running out soon which means that, at best, they can only hope for more of the same old.

So why the heady initial coverage?

It's a bit of a simplification, and The Business Press Maven should probably say it from behind safety glass. But here's a good part of the problem: Wannabe journalists often pay $50,000 for journalism school and get two things in return. They get window dressing on their resume and they get one concept drilled into them more than any others -- get both sides of the story.

Shake a journalist student awake at night and he'll want to interview both you and the Sandman.

The problem in covering mergers, besides the excitement of the free Danish, is that this is one instance where the two sides are, for the day, on exactly the same side. So without critical thought from the journalist, any coverage turns lopsided.

Unable to fall-back on the he-said-she-said article mold, reporters concentrate on the personalities. One, the entrepreneur, is generally outsized and free spirited. Two, the acquiring CEO is more of a button-down type and the Yin-Yang promises abound. It's pretty to think it'll work. Gives reporters hope for their marriages, I suppose.

But investors should remember -- even (or especially) if the reporter doesn't -- that it rarely ends well. The entrepreneur is generally a bad second fiddle, and once the CEO, who clawed his way to the top, realizes that he blew it all thanks to some sales job from a sidewinder who passed something pretty close to intrinsically worthless off for $7.4 billion, press conference buddies turn into sworn enemies.

If journalists can't be a guide, history should. When it comes to flashy mergers, you often don't get what you paid for.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial website twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.