Starwave Corp. and Walt Disney Co. weren't commenting on a published report Friday that said the media giant is buying nearly a third of the online content company and would take over its management. But analysts said Disney would be sloppy to let the chance slip by.
"It was inevitable," says Forrester analyst Kate Delhagen, a former Starwave employee who is familiar with its operations. "Disney has been chattering away about creating an online presence, but it didn't want to do it from the ground floor. Starwave has already done the 'hard work,'" she said.
The Los Angeles Times, citing unidentified sources, said Starwave has sold a 30 percent minority stake to Disney and signed a letter of intent giving Disney control over its management. Both Starwave and Disney declined to comment on the report or any agreement.
The two companies are already involved via the ESPNet Sportszone site. The Times estimates the deal at US$80 million, which means Starwave, a privately-held company whose investors include Paul Allen, is valued at $300 million. Starwave's revenues are estimated to be as high as $15 million. According to published figures, the company has invested some $60 million in its operations.
The move would mark Disney's largest foray into the online realm. Analysts say it may be a push to bring its ABC online news service into a competitive position with rival NBC, which launched the rapidly successful MSNBC Network as a joint venture with Microsoft last summer. Disney bought Capital Cities/ABC for $19 billion, yet Disney's Web presence has been scant aside from its site and its family site. Starwave operates Family Planet, a rival site.
Starwave has partnered with several content providers, excelling at designing Web sites and creating the technology behind them. Starwave currently operates nine online sites, including Outside Online, Mr. Showbiz, Ticketmaster Online, and its most profitable, ESPNet Sportszone, which has 230,000 subscribers. Disney owns ESPN along with the Hearst Corporation.
