COLUMN ONE : It’s Back to the Future for Disney : Deal shows those old stalwarts--the TV networks--have gained new life and respect. Now they are seen as keys to the global entertainment age.

If the big deal combining Walt Disney Co. and Capital Cities/ABC were a movie, it would be titled “Back to the Future.”

Yes, the mega-deal announced Monday foreshadows the coming age of digital and global entertainment, when giant companies will produce and distribute films and programs everywhere through sets or boxes in homes.

But the Disney-Cap Cities combination doesn’t rest on any single technology, whether satellite or cable or 500-channel interactive computerized TV. It’s too early to know if any of those will ultimately prevail.

Rather, this $19-billion acquisition honors the know-how of distribution to mass audiences held by those 50- and 60-year-old veterans, the TV networks.

And that’s ironic. Only a few years ago, experts were predicting the end of the networks, as cable television reduced their audiences and advertisers cut their spending. Networks came back into favor recently as advertisers recognized their ability to reach more homes with a single program than any other medium. Also, federal rules are about to change to allow ABC, CBS, NBC, Fox and others to own the programming they put on.

Suddenly the networks, which also control the largest stations in the country, looked like powerful gatekeepers, able to decide whether programs from a studio such as Disney got on the air.

“The networks are like the beachfronts,” said Scott Sassa, president of Turner Entertainment Group, an arm of Turner Broadcasting Systems in Atlanta. “They are eroding away, but there are no other beaches.”

Thus Disney is reaching out to ensure itself outlets for films and programs. In doing so, Disney confirmed a trend and stepped in front of it with a deal that will create the largest media company with annual revenues of more than $20 billion.

A sale of CBS to Westinghouse is anticipated later this week. And analysts speculate that NBC, which is owned by General Electric Co., will either make a deal with Turner Broadcasting--perhaps purchasing the Turner company--or use GE’s vast resources to grow to great size itself.

The vision is of a future dominated by giants of entertainment and information. When this deal is completed, Disney will head a list that includes:

* Viacom International, owner of Paramount Pictures, MTV and Blockbuster Entertainment.

* News Corp., the holding company for Fox Network, 20th Century Fox and other properties of Rupert Murdoch’s media empire.

* Time Warner, which owns Warner Bros., the Time-Life publishing company and the largest music company in the United States.

Turner, owner of CNN and other cable networks as well as film production companies, would also make the list, as would Bertelsmann of Germany.

More Outlets Sought

Why is size considered so important? Because costs have risen in the race for the hottest talent and the standout hit. To make and market the average movie costs $50 million; the cost of a hit television series such as ABC’s “NYPD Blue” can cost $1 million an hour.

So media companies have sought to spread costs over more outlets. That’s why they have been acquiring publishers, record producers, retail chains, movie theaters, production companies, cable channels, television stations--and networks.

This is called “vertical integration” in the jargon of the business. And in theory it promises higher returns. Viacom, for example, now can profit from a movie made by Paramount Pictures at the box office, from ticket sales at the theaters it owns, from rental fees collected at Blockbuster Video, and from subscriber fees on its Showtime cable network.

When this deal is completed, Disney can get greater exposure for its films and programs through the ABC network, or on ESPN or the Lifetime channels, which Cap Cities also owns. These outlets can also be promotional vehicles for all of Disney’s many products.

Of course, theory doesn’t always work in practice. Owning the product and the shelf space compounds the risks: If a picture bombs, Disney would suffer at the box office and its network would reap low ratings.

But that’s why Disney is so important to Cap Cities/ABC. The deregulation that allows networks to produce and own programming is only an advantage if the programs are good. ABC has been producing programming overseas just to get into practice. But no television company and few movie studios can come near Disney’s long record of producing classics.

Yet this combination of a movie studio and a television network would not have happened if optimistic predictions about the pace of technological change had come true. Even last year, all the talk was of information highways and stupefying 500-channel movies-on-demand services. Now they are once again seen as distant horizons.

“This [Disney] deal would not have been made two years ago when people were convinced the technological revolution was going to happen instantly,” says Malibu-based new-media analyst Jonathan Seybold. “The fact that it’s happening now reflects a more sober perspective that this stuff is going to take a long time.”

To be sure, ABC, NBC and CBS lack the dominance they enjoyed in the 1980s. With a multitude of home entertainment options today, from the VCR to HBO and the Internet, the networks are well beyond the era when Ed Sullivan kept families fixed to their sets on Sunday nights.

Cable has stolen a third of their viewers. And as viewership--and profit margins--have declined and splintered, ABC, NBC and CBS have scaled back their scheduled hours and put second-string shows on beachheads like Saturday nights.

NBC and ABC grew by moving into cable, forming CNBC and ESPN, respectively.

And the recent success of Fox Broadcasting has vividly exposed another network vulnerability, showing for the first time that disenfranchised viewers would defect to remote reaches of the dial for the right shows.

But Fox’s rise also proved another point: that the networks, with the right program mix, could survive in the coming digital age and its 500 or 5,000 channels. If viewers could find Fox on channels 96 and 42, then the household names of the Big Three networks would certainly carry weight in viewers’ search through the clutter.

The upshot is that the value of network television has been reaffirmed in recent years, as advertisers were reminded that TV can be customized to local viewership in a way that other electronic mediums cannot, and can offer the biggest mass audience.

“Advertisers must sell their Pampers, shampoos, cereal, toilet paper and soft drink this week, this month and this quarter, and can’t wait until the year 2000, when some of these blue-sky technologies develop,” said one TV executive. “Television still provides the maximum reach and the greatest frequency for the lowest dollars.”

One media expert adds: “CBS, even with an 18% share of the audience, reaches more millions of people in a single second than almost all of cable combined.”

Indeed, while the most popular network shows can score a 40% share, meaning 40% of TV viewers watched the show, the best a cable blockbuster can hope for is a 4% share. “When there is an Iraqi war, a Waco, Tex., or high points in the O.J. trial, CNN does well. Cable ratings are high when Turner runs a hot movie, ESPN has a Wimbledon exclusive, or MTV runs the Grammy awards,” says Bishop Cheen, an analyst at Paul Kagan Associates, a media research group in Carmel. “But cable is a decimal-point rating world. Tonnage is still the formula preferred by packaged goods manufacturers.”

Just how valuable is that mass audience? Despite its lowest ratings in history, the broadcast industry experienced a banner year in 1994. Advertisers shelled out $31.2 billion to the networks and the broadcast stations in 1994, (compared with $4.6 billion to cable networks).

And yet, no matter how profitable, past technologies are certainly fading away. When the true digital revolution does arrive, the logic of Disney’s move to control a distribution outlet for its programming may well evaporate, Seybold says.

Vertical integration may have no place in a world where consumers can access information from a far wider range of distribution systems ranging from satellite to cellular cable to the Internet.

Over the long term, analysts say, branding and navigation--tools to find what’s out there of value in a vast sea of information--will be the critical resource.

“There has always been this distribution bottleneck, and everyone in this business has that ingrained into their head,” Seybold says. “But we don’t know if that is going to apply 10 years from now.”

The High-Tech Future

It should be noted that Warren Buffett, the master investor who put Cap Cities together with ABC in 1985, is selling network television in this deal and becoming a major shareholder of Disney. It’s the kind of global franchise Buffett likes, notes investment analyst John Tinker of Furman, Selz. (Buffett is also a major shareholder of Coca-Cola and Gillette.)

Of course, Disney--with a brand name known around the world--can cope no matter what technological form prevails. And the Burbank-based company is not slow to recognize new approaches. It already has a venture with three regional Bell operating companies to supply television programming to homes when over-the-phone networks come in.

And analysts say Monday’s acquisition of Cap Cities/ABC actually complements that high-tech future, in which hundreds of hours of TV shows will be converted into light pulses and squeezed into a fiber cable the width of a pin.

“The additional content that Cap Cities owns, which includes newspapers and magazines, can be an enormous boon to the [telephone companies] who are looking to create new and different kinds of programming that can’t be found on cable TV networks today,” said John Aronsohn, an analyst with the Yankee Group, a Boston-based consulting firm.

Indeed, Disney’s telecommunications partners applauded the deal with ABC. “It gives us even more clout in the marketplace for acquiring content,” says Bell South Corp. spokesman Kevin Doyle.

The simple reality behind Monday’s deal is that success in the coming age of digital and global entertainment will depend--as it always has--on brand names and the ability to distribute them to every home.

The world will always welcome Mickey Mouse.