investiledysfunction

In this day and age (saying that makes me seem old, eh?) of Second Life, avatars, the Sims, networked video games, etc, being actively involved in a virtual world is pretty common (or at least more common than it was 5 years ago). Sometimes, the virtual worlds are pretty exciting relative to the humdrum real world we live in and so we get enthralled/lost in these alter-worlds.

But let us remember one of the pitfalls of such worlds is that the friends and assets we accumulate in these pixelated alter-worlds can all go away if someone decides to turn the servers off. And at those times, we’re smacked with the reality that there is a reality and we just might have to deal with real people and not the idealized avatars that we interact with on the computer.

So where am I going with this? Well, it looks like the servers just went off in one of these virtual worlds and the denizens of this happy place are fighting mad. This group of folks (real ones) is upset with Disney for shuttering their Virtual Disneyland which Disney killed this past Wednesday. Basically, this online version of the theme park let people create avatars and explore the parks various attractions and given that there is a hardcore Disney follower demographic, a group of diehards started coming to the site and spending hours touring the virtual destination, accumulating points to buy virtual items, interacting with fellow diehards, etc.

Disney which built the site to commemorate the 50th anniversary of Disneyland contends the free site was never going to be around forever. And this makes sense. Disneyland cannot offer free services because people really like it. By contrast, Disney’s Club Penguin or Disney Fairies virtual worlds charge or plan to charge because there has to be a business model behind these types of ventures. Yes, it is the sad economic reality that we’re faced with in the real world.

And so my points (you still with me?) are two-fold. Disney made the right call and the people who are enamored with the free VirtualDisney probably just need to get over it. Free rarely lasts because someone has to pay for it.

This speaks to a bigger issue with lots of businesses being created today in what seems to be Bubble2.0. If your business is predicated on social networking, crowdsourcing and advertising leveraging web2.0 or some equally nebulous nonsesne, there is no real economic model behind it, and I suspect there maybe some problems no matter what people/venture capitalists maybe telling you. Yes, some of these cool tools and services will get bought by someone but the vast majority are likely to go the way of VirtualDisneyLand.

BusinessWeek’s March 24, 2008 issue has an article about Comcast CEO, Brian Roberts, entitled “Deal or No Deal” and the supposed “fork in the road” that he is at.  Wall Street and numerous significant stockholders are hoping and pushing for Roberts to stick to Comcast’s knitting (content distribution) and not go for media mogul-dom.  I’m sure investment bankers are pushing for the big sexy acquisition of a large entertainment company.  As you may remember, Roberts did make an unsuccessful overture to Disney several years ago.

For once, I think the Street is really getting this right.  There is no reason aside from ego or shear boredom for Roberts and Comcast to go after an acquisition especially one so outside it’s core business.  Every few years, the distribution vs content debate emerges with people arguing that one is more important than the other and then people rushing to buy whatever is “hot” at the time.  AOL Time Warner was an attempt at this, right?  Wildly successful, eh?

But the main point here is not that these deals don’t work.  No actually, that is the main point.  M&A really doesn’t work esp when trying to smash two businesses together that aren’t that similar and for which the rationale for the smashing are ever-elusive “synergies”.  So I hope Mr. Roberts continues to focus on his ‘core’ business and grow that and not give into the temptation of becoming a media mogul.

The other assertion made in the article is that the cable business is a low-growth utility.  Ultimately, there should be plenty of room for Comcast to develop new, innovative ways to distribute content.  Pursuit of these efforts would serve to strengthen Comcast over the long-term and at considerably less risk.

If Comcast does pursue the mega-deal by acquiring a content play, does anyone want to bet it will destroy shareholder value?  Any takers?