Jumping the gun over a frog

If you amble around the Disney/MGM Studios theme park this fall, you'll see a lot more of the Muppets. Walking characterizations of Kermit, Miss Piggy and Sweetums play a very prominent role in Disney/MGM's new daily "Stars & Motor Cars" parade, as the Jim Henson characters wave to guests up and down the parade route. Meanwhile, over on one of the theme park's soundstages, sets are being constructed for "Kermit's Swamp Years," a new Muppet direct-to-video project scheduled to begin filming next month.

So, with Muppet characters so prominent at Disney/MGM, you might think that Mouse-House CEO Michael Eisner finally has won his long battle for ownership rights to Kermit's clan.

Actually, no. To date, nobody has officially bought the Muppets from EM.TV, the German entertainment consortium which purchased them from Henson's family for $680 million in February 2000. Walt Disney Company lawyers are said to be still actively meeting with EM.TV representatives, as both parties struggle to come up with a workable set of terms for acquisition of the Jim Henson Company.

Meanwhile, Henson Company CEO Charles Rivkin is still meeting with Hollywood movers and shakers, trying to find someone to underwrite a Muppeteer-led buy-out of EM.TV's interest in the firm. For its part, EM.TV no longer expects a deal to be cut this year. It has pushed its deadline for the sale of Miss Piggy and pals back a year to October 2002.

Wall Street analysts suggest that the announcement proves EM.TV is having a particularly hard time finding anyone who is willing to pay its asking price for the Muppets. That is at least partly a result of the financial havoc the September 11th attacks has caused for major entertainment companies. The threat of a full blown war in the Middle East has left many studios -- including Disney -- with suddenly unreleasable films and/or severely depressed revenues. This means that a lot of firms that might have made a bid on the Muppets back in the spring don't currently have the cash in hand to seriously consider even making an offer.

Then there's the intimidation factor. By acting as if they already own the Muppets, the Mouse appears to have scared off a number of companies that might have considered acquiring Henson. Disney also appears to be using this none-too-subtle technique to apply some significant pressure on EM.TV in an effort finally to close the Muppet acquisition deal. Witness its recent full page ad in Variety, in which Disney congratulated KirchGruppe (the company that's currently in financial control of EM.TV) on its 45th anniversary by saying, "We look forward to many more years of successful partnership."

At face value, that ad's message seems pretty innocent. But when you consider that the Mouse is still in negotiations with the German corporation, things take a somewhat sinister turn. Reading between the lines, the ad suggests that -- if Disney doesn't get what it wants -- things could get pretty rocky for EM.TV and KirchGruppe.

It may sound like an cold and calculating way to do business, but that's the way the Mouse does things these days: fighting tooth and nail in an effort to save the Walt Disney Company a couple of bucks.

Take, for example, what happened when the Mouse recently reopened its negotiations to acquire the Fox Family Channel. Many on Wall Street thought a $5.3 billion deal was already in the bag. But, in the wake of the September 11th attacks, Mickey's lawyers evidently saw an opportunity to shave a few million off of the original asking price.

That's why Mouse House staffers began leaking stories to the financial press that Disney was having second thoughts about its decision to acquire Fox Family Channel. And Disney spokesman John Dreyer said, "We are concerned about the potential impact recent events could have on the deal, and we are reviewing it."

The gambit seems to have worked, as press accounts now indicate that Disney will pay $100 million less for the Fox Family Worldwide cable television operation.

The Mouse likes to play hardball, and it plays to win. Based on stories in the European press, the Mouse must be certain that it already has won the Muppets. Otherwise, why would President of the Disneyland Paris Resort Jay Rassulo be telling his staffers about Mickey's plans to add "Muppetvision 3D" to the Disney Studios Paris park by 2003?

But the Mouse-House lawyers seem to have forgotten that -- back in 1991 -- when Disney also pretended it already owned the Muppets, there was a very ugly, very public lawsuit. There were charges about copyright and trademark infringement, bad faith and fraud. Though the matter was eventually settled out of court, it still managed to do untold damage to Mickey's squeaky clean image. So, my advice to the Walt Disney Company is: Don't count your frogs before they hop.