Post of the Day
June 19, 1998

From our
Infoseek Board


Reply To:
DISNEY TO BUY 43% STAKE IN INFOSEEK
Author: TMFNico

This is a complex deal, with more to it than Disney acquiring a 43% stake in Infoseek. In addition to $70 million in cash, the deal is ultimately being "powered by" Disney's Starwave assets, which include the creative and technical assets behind ABC.com, ABCNEWS.com, Disney.com, Disney's Blast Online, ESPN.com, and other online sites and services.

Starwave, which is almost fully owned by Disney, is in effect being merged with Infoseek. Disney is in turn receiving 25.8 shares, or 43%, of Infoseek and a minority position on the Infoseek board. Disney will also "under certain circumstances" have the option to "achieve a majority stake in Infoseek over time."
"The deal seems structured as a half-way or open-ended step for Disney, leaving great flexibility with respect to subsequent steps."  

My guess is that those circumstances will materialize at Disney's discretion, based not only on how this specific arrangement with Infoseek progresses, but on Disney's assessment of how best to structure and position its resources, including Infoseek, as the industry evolves. The deal seems structured as a half-way or open-ended step for Disney, leaving great flexibility with respect to subsequent steps. I think this accounts for what appears to be -- and thus is -- an elevation in Infoseek's status which goes beyond mere "validating interest" by Big Boy Media. There is likewise more to it than "gotta-getta-portal."

The portion of Starwave not owned by Disney is owned by Starwave employees, who will exchange those for shares of Infoseek. Today's announcement says the expanded Infoseek, incorporating Starwave, will continue to operate under the Infoseek name.
  "The Disney properties will be offered on a non-exclusive basis, which accommodates existing arrangements between Disney and other online companies, such as AOL and, most recently, Excite."

The agreement also calls for Infoseek to purchase $165 million in promotional support for an "advanced portal service" to be launched later this year. This service will combine elements of Infoseek's and Disney's existing services, including the services mentioned above, which are clearly far more substantial than any of Infoseek's homegrown offerings. The Disney properties will be offered on a non-exclusive basis, which accommodates existing arrangements between Disney and other online companies, such as AOL and, most recently, Excite. Interestingly, though the company name will remain Infoseek, the announcement does not give a name for the "advanced portal" that is being created.

Using the most recent data from RelevantKnowledge, for the month of May, would rank the combined traffic of Infoseek and Disney ahead of the Excite Network, currently number 3, and at approximately the same level as AOL.com, currently number 2, behind Yahoo. In May, Infoseek ranked number 9, Disney ranked number 10. This deal is yet another example of how a single deal has the potential to alter the balance of power in online space.

* For more on Starwave, click here:
http://boards.fool.com/Message.asp?id=1090077000248000
* For Disney's recent content distribution deal with Excite, click here:
http://boards.fool.com/Message.asp?id=1100092000153000
* For a table that ranks some representative web sites by traffic volume, click here:
http://boards.fool.com/Message.asp?id=1020026000103000

TMF Nico


Go To Infoseek Board

The Post of the Day may be edited for readability or length, but never for content. The opinions expressed in the Posts are those of their authors, and not necessarily The Motley Fool. We make no claim or warranty as to the veracity or accuracy of any post, and present this feature only as an example of what may be found on our message boards. Don't take the Post of the Day, or anything else here, as gospel and, as our seventh grade English teacher, Mrs. Peacock, used to say, do your own homework, and avoid run-on sentences.