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Schumpeter: The real Disney

March 27, 2013

IN 1996 Warner Brothers released ?Space Jam?, a film starring Bugs Bunny and Michael Jordan, a basketball star. It drew sniffy reviews from curmudgeonly critics but made pots of money. The plot was wildly implausible: Mr Jordan and Mr Bunny beat a team of evil aliens at basketball, thus saving everyone from having to work at an alien theme park called Moron Mountain. But that?s fiction. In real life, sports stars and cartoon characters would never work well together.Or would they? In fact, at Warner Brothers? great rival, they do. Disney is best known for cartoons that enchant children, from ?Snow White? to ?The Lion King?. But its most valuable asset is ESPN, a cable sports network beloved by beer-guzzling grown-ups. Disney owns 80%; Hearst, a privately-held media firm, controls the rest. Disney does not disclose the numbers, and estimates vary, but ESPN is probably responsible for 40% of Disney?s operating income, 60% of its free cashflow and as much as half of its share price.A whole new ballgameWhen the story began, it was not obvious that it would have a happy ending. In 1979, when cable TV was in its infancy, ESPN?s founders had the idea to launch a 24-hour cable...

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