Hints of an Apple-Disney Merger - "Who's the Big Dog?"

Did anyone notice the announcement today from Disney that they would soon be giving away their broadcast content on the Internet? Some might think this means that the Disney deal to sell "Lost" and other TV show episodes on ITunes is a dead duck - after all, who would buy these shows from Apple when you can download them for free?

But are things really as they appear? One Silicon Valley dealmaker sees the signs of a bigger deal pending. "It's all about 'Who's the Big Dog'. The ITunes model breaks a lot of things for distribution. When the content biz takes it seriously, they won't do the $1.99 per video pricing model anymore. They can't vary the pricing - you've got to play pricing games to profit off of premium offerings at least some of the time, and begin the process of moving to value pricing." So what's going on here? It's pretty simple...

The industry is coming to the end of its "aversion to the Internet". And the ITunes pricing model is the least attractive part of the equation. Maybe they'll remake it later, with different marketing and distribution mimicing some of their more profitable distribution models, but they can't right now. Some possible "ITunes II" models are limited time downloads.

Be it as it may, we've finally come to the time where a Disney can now argue for the revenue generating potential of their content on the Internet sans the ITunes-styled "one price fits all" model. And that means they're the "Big Dog" in the deal. What's this mean for Apple? Since mergers are usually stock swaps, that means Disney wants their stock valued as high as possible, especially to compared to the guy they want to acquire - and that looks more and more like Apple!

Disney can position their stock in many different ways, but if they position it as how much they can create business from access to their video vault, it makes Apple salivate at the opportunity to vend that content. But from Disney's perspective, because they have numbers independent of Apple, Disney isn't dependent on moving that content through ITunes.

Disney can now use this to value its "inaccessible" video vault value, increasing their worth immensely, making the deal even more interesting to Apple.

So the best show on the Internet may not be those "Lost" episodes after all. Stay tuned for the continuing saga of "As the Apple-Disney Deal Turns".