Anyone who follows Disney (NYSE: DIS) knows that the media conglomerate is serious about videogames -- it should be, considering that consoles from Nintendo (OTC: NTDOY), Sony (NYSE: SNE), and Microsoft (NASDAQ: MSFT) are currently cooking in the industry's new cycle. The company has been increasing its investments in this area, and it will continue to do so; making games for Nintendo's DS hand-held system, as well as other platforms, has become a priority. But Disney is also serious about the synthesis of virtual worlds -- you know, the kind of online gaming platforms that can suck a person's life away due to their addictive, immersive scope.

Well, the powers that be at the Mouse have decided that a dedicated team of professionals is needed to ensure a proper presence in the virtual-world space. According to a press release, Disney has created Disney Online Studios for the express purpose of programming new online entertainment platforms. It seems that the company wants to leverage the promise of social networking -- hope you're not too sick of that buzz phrase -- by creating worlds that allow gamers to interact with each other via community tools in addition to playing around in he worlds themselves. Right now, Disney operates Toontown, and it plans on developing immersive online environments for the company's Fairies and Cars franchises. Pirates of the Caribbean has also been given the online treatment; and let's not forget the acquisition of the popular Club Penguin destination.

MAJOR PAPERS:

• The Wall Street Journal reported that analysts are looking to assess the significance of a new accounting problem at American International Group Inc (NYSE: AIG) which includes "material weakness" the company's auditor found that relates to subprime exposure.
• China Mobile Limited (NYSE: CHL) is expected to announce its support today for Long Term Evolution, a wireless broadband standard gaining strong momentum as the next-generation wireless technology for providing super-fast web surfing on cellular phones, the Financial Times reported.

OTHER PAPERS:

• According to the Associated Press, Petroleos de Venezuela SA said it has stopped selling crude oil to Exxon Mobil Corporation (NYSE: XOM). The decision, made "as an act of reciprocity" for Exxon's "judicial-economic harassment," will also include the suspension of commercial relations with the U.S. company.

WEB SITES:

• Reuters reported that The Walt Disney Company (NYSE: DIS) signed a deal to buy 20% of Net TV, a digital television company controlled by Spanish media company Vocento.

Viacom's (NYSE: VIA) Paramount studios had a pretty kickin' year at the multiplex in 2007. According to Boxofficemojo.com, Paramount came out on top in terms of market share at 15.5%. It distributed some great hits -- Transformers, the DreamWorks Animation (NYSE: DWA) films Shrek the Third and Bee Movie, Will Ferrel's Blades of Glory comedy, and Eddie Murphy's Norbit. Viacom's movie business seems to be doing better. According to the latest 10Q for the reporting period ending September 30, 2007, operating income for the filmed-entertainment segment was $71.7 million versus a loss of nearly $8 million in the previous year's comparable quarter (the nine-month period still showed a loss). So, Paramount needs to keep the momentum going this year. How will it top the power of last summer's blockbuster Transformers? With a little swashbuckling help from Indiana Jones, of course!

To get things started, the media company sent out a press release alerting fans of fast-paced adventure that the first teaser trailer for Indiana Jones and the Kingdom of the Crystal Skull will be released on February 14 during ABC's Good Morning America program and in theaters across the globe. For those of us who've been waiting with a will of patience that was oftentimes as excruciating and as taxing as sitting through yet another news item about Britney Spears' latest mental breakdown, this is one heck of a Valentine, although I do hate teaser trailers (they are, after all, such a tease!).

Will the new Indy flick be a big hit this summer? I think it will be, although it isn't an absolute given, since a lot of the younger demos probably find the Raiders aesthetic a bit antiquated these days; plus, there will be stiff competition from Disney's (NYSE: DIS) new Pixar cartoon Wall-E, Time Warner's (NYSE: TWX) The Dark Knight, and Marvel's (NYSE: MVL) Incredible Hulk project. Still, we're talking about George Lucas and Steven Spielberg here, and they still retain a lot of cultural pull with all demographics. Viacom and Paramount will probably be happy with the results from Crystal Skull come the summer , although I think it's safe to assume that Lucas and Spielberg will be taking a large portion of the grosses. Nevertheless, Viacom is in on the action, and I'm sure it wouldn't want it any other way.

Disclosure: I own shares in Disney and Marvel.

So isn't this ironic... a property on the grounds of The Walt Disney Company (NYSE: DIS)'s Disney World (reportedly the happiest place ON EARTH) is putting the kibosh on kids. To kick off the new year, the Victoria & Albert's restaurant on the grounds of the Grand Floridian Resort & Spa in Disney World is instituting a ban on customers under 10 (no word on whether Peter Pan fits into the ban).

Victoria & Albert's, which has a prix fixe menu staring at $90 (per person) is the only Disney restaurant with a AAA five-diamond rating. Jackets are required for men and women must wear dresses or pant suits. The restaurant's general manager, Israel Perez, was quoted on the AP wire as asserting "We want to be the restaurant that's available for that adult experience." Prior to the ban, only about three families a month dared to bring young children into the restaurant.

Exactly. Most families with small children wouldn't want to pay $90 per head for a dinner that the children would potentially shove around their plates. A five-diamond restaurant with a prix fixe menu isn't the ideal environment for kids, and parents know that -- Disney World should have a little faith in its visitors! As for providing the "adult experience," while Disney has billed itself for years as an ideal honeymoon destination or "adult vacation" escape, anyone who goes to Orlando to spend time with Mickey and friends recognizes that he or she is, after all, in Disney World. If you're not a fan of kids, you go somewhere else (speaking from experience).

As for Disney, the stock, along with the rest of the market, has been in a slump of late. In today's regular trading, the shares sank 2% and put in a new annual low.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Microsoft (NSADAQ: MSFT) has cut deals [subscription required] with NBC, CBS (NYSE: CBS), Disney (NYSE: DIS) and a number of other media companies to use their video content on its Xbox Live and MSN services.

According to The Wall Street Journal, "under the agreements, Disney, MGM and Showtime will contribute programming to Xbox Live, an online service with about 10 million subscribers that is primarily used for playing videogames."

Microsoft may be getting a great deal of content, but the question remains whether people would want to watch content through a video game platform, no matter what other features it has. At this point, the American living room is wired with satellite and cable VOD, DVRs, video game platforms and set-top boxes from companies like Amazon (NASDAQ: AMZN). All of this clutter means that no one company is likely to be able to stand out as a core provider of entertainment services.

It is a good thing that the Xbox can be used for playing Halo 3. It is not likely, however, to become a core video viewing device. The consumer won't be able to find it in the pile of other devices.

Douglas A. McIntyre is an editor at 247wallst.com.

The Walt Disney Company (NYSE: DIS) got a nice present today in the form of the nation's number one movie, National Treasure: Book of Secrets.

The sequel to the 2004 blockbuster, National Treasure, National Treasure: Book of Secrets had a monster weekend, with $45.5 million in sales. Nicolas Cage is once again the leading man in this movie, and in this thriller, Cage's character, Ben Gates, is in a struggle to clear the name of an ancestor that has been implicated in the murder of Abraham Lincoln's assassination.

If the first installment of this series is any indication, Disney could be seeing some pretty big numbers from this movie before it is all said and done. When National Treasure debuted in 2004 the movie raked in $35.1 million and ended up with a total of $173 million at the box office.

MAJOR PAPERS:

• In what may be a sign of interest from large media companies looking to delve into the "content delivery space," the Wall Street Journal reported that EdgeCast Networks is set to announce it has raised up to $6M from Steamboat Ventures, The Walt Disney Company's (NYSE: DIS) venture-capital arm.
• Barron's "The Trader" section says they'd stay away from Federal National Mortgage Association (NYSE: FNM), even though the Bush administration's subprime-mortgage freeze program caused the stock to rebound some. Barron's speculates that Fannie should take an earnings hit in the range of $6.4B to $14B.

OTHER PAPERS:

• According to the UK's Telegraph, The Blackstone Group LP (NYSE: BX) is "in the middle" of putting together a consortium to make an offer for Rio Tinto PLC (NYSE: RTP).
• According to the Financial Times Deutschland, Deutsche Telekom AG's (NYSE: DT) T-Mobile is selling less than 700 of Apple Inc's (NASDAQ: AAPL) iPhones a day; this compares to the 10,000 iPhones the unit sold on a daily basis during Christmas.

Being a parent can certainly bring lots of joy. At the same time, it can be terrifying. But there's help: iParenting Media. The company operates websites like www.PregancyToday.com and yes, www.iParenting.com.

Now, the company has sold out to The Walt Disney Company (NYSE: DIS). No doubt, this looks like a great fit and should provide iParenting with much more distribution and content resources.

iParenting got its start in 1996, when the cofounders -- Alvin All and Elisa Ast All -- looked for a site to help with Elisa's pregnancy. Well, there weren't many good sites. So why not start one? Over time, they built a thriving community of more than 40 different sites, covering areas like teens.

iParenting will be a part of the The Walt Disney Internet Group, which already has a set of popular family websites like Family.com, FamilyFun.com and Wondertime.com.

Disney did not disclose the terms of the deal and in today's trading, the stock price is down 49 cents to $32.55.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Walt Disney (NYSE: DIS) reported fourth quarter and end of year earnings yesterday, and the year turned out to be a good one for the entertainment giant.

Its media networks segment operating income was up 23% from 2006 figures, to $4.3 billion. Cable networks, primarily ESPN and Disney, were up $3.6 billion on higher ad rates and subscriber growth. ABC Studios returns were up slightly for the year but down for the quarter, a result of greater sales of shows such as Desperate Housewives and ESPN's Monday Night Football, offset by a drop in syndication revenue.

Parks and Resorts operating income up 11% for the year, to $1.7 billion, and up for the quarter 9%. The only down note was a drop in attendance at Hong Kong Disneyland.

Sunday night, while the writers and producers in Los Angeles were doing their strike countdown, a good friend was catching a flight to Albuquerque to start production on a new feature film. It seems that New Mexico is offering tax credits that make it worthwhile for a feature film to be produced there, yet again "stealing" revenue from Los Angeles and California.

While no one on the production was interested in leaving town, the studio decided that the tax credits made it worthwhile. Sooooooo, he and his 80 crew members blew town to set up shop for months outside of Hollywood, and the state of California let them go. Vancouver and Toronto have established solid credentials as filming locations at a discount to Hollywood, and they have all the trappings for major productions. With about $350 million in film and television income last year, Louisiana has established itself as one of the nation's most popular film centers, and 40 other states are looking to follow suit.

California is losing hundreds of millions of dollars annually to these "runaway" productions. Runaway used to mean a film was over budget, or it was breaking box office records. Now it means they will film somewhere else.

Surprisingly, California, with its movie star Governor Arnold Schwarzenegger, is doing little to keep the productions here. You would think The Governator would be interested in the subject, but alas -- nothing. No matching tax credits, no partial tax credits, no competitive move whatsoever.

Mothers, you wouldn't let your sons grow up to be cowboys, would you? That's how the song goes, anyway.

So why would you let your daughters grow up to be Hannah Montana? Apparently, it's too late for that. Now there's a song that should be on the top of the charts these days.

Given the tween-beat frenzy around the fictional Walt Disney (NYSE: DIS) star, it probably should come as no surprise that "Hannah Montana costume" ranks at the top of the ten most searched-for Halloween costumes for the week ended Oct. 20, according to Hitwise.

The Walt Disney Co. (NYSE: DIS) is expected to announce some pretty big news today. Several sources have reported today that the entertainment giant is going to be investing some big bucks into an overhaul of one of its major theme parks.

The company is expected to announce that it will be pumping $1.1 billion into its California Adventure theme park. Located in Anaheim, California, California Adventure has long played second fiddle to the company's other California destination, Disneyland.

The preliminary reports are suggesting that the $1.1 billion renovation will take place over 5 years, once the company officially announces its plans we will update you with some more concrete timetables for the project.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer

MOST NOTEWORTHY: The U.S. media sector, oil services, MercadoLibre and Horsehead Holdings were today's noteworthy initiations:

• Credit Suisse initiated coverage of the U.S. media sector with a Market Weight rating, shares of The Walt Disney Company (NYSE: DIS) with an Outperform rating and shares of Time Warner Inc (NYSE: TWX) and Viacom Inc (NYSE: VIA.B) with Neutral ratings.
  
• Bernstein initiated coverage of the oil services sector with a Positive Bias rating. The firm initiated Weatherford International Ltd (NYSE: WFT) with an Outperform rating and $84 target and Halliburton Company (NYSE: HAL), Baker Hughes Incorporated (NYSE: BHI) and Schlumberger Limited (NYSE: SLB) with Market Perform ratings and a $44 target, $103 target and $96 target, respectively.
  
• MercadoLibre Inc (NASDAQ: MELI) was initiated by American Technology with a Buy rating and $45 target, as the firm believes the e-commerce growth opportunity in Latin America is still in its infancy. Shares were also started at Pacific Crest with an Outperform rating and $37 target, as the firm believes the company should benefit from strong secular growth and company-specific drivers. MercadoLibre was also initiated at JP Morgan with an Overweight rating and at Merrill Lynch with a Buy rating and $35 target.
  
• Friedman Billings expects Horsehead Holding Corp's (NASDAQ: ZINC) EBITDA to increase even in a declining commodity environment and believes the company is well positioned to gain market share. Shares were started with an Outperform rating and $27 target also added to the firm's Top Pick List.

OTHER INITIATIONS:

• Citigroup started shares of Companhia Vale do Rio Doce (NYSE: RIO) with a Buy rating and shares of StealthGas Inc (NASDAQ: GASS) with a Hold rating and $20 target.
  
• Roth Capital started shares of Internap Network Services Corporation (NASDAQ: INAP) with a Buy rating and $19 target.
  
• Raymond James initiated Atmel Corporation (NASDAQ: ATML) with an Outperform rating and Argo Group Internaional Holdings Ltd (NASDAQ: AGII) with a Strong Buy rating.

After looking through some web postings internally, there was a very interesting article regarding Time Warner Inc. (NYSE: TWX) that can be indirectly inferred to Time Warner Cable Inc. (NYSE:TWC) and all units of the media conglomerate. The article "For Time Warner, a time to break up?" is available on the CNNMoney.com website, but is really a FORTUNE Magazine article. FORTUNE and CNN are both properties of Time Warner Inc.

The article is basically predicting that Jeff Bewkes will soon replace Dick Parsons as the Chairman & CEO of the parent company. It also points to a recent anvil weighing on the transition -- the sagging stock price of Time Warner. The truth is that the first real wave of the transition took hold in 2006 when the company separated Time Warner Cable and used financial leverage to buy back billions of dollars worth of stock. That buyback did continue, but 2006 was the year the buyback was felt the most as the stock rose nearly 50% from its lows.

While the article does not call for major changes, it notes how Time Warner produces more cash flow than its rivals, although News Corp. (NYSE: NWS) and Walt Disney Co. (NYSE: DIS) have outperformed as stocks. The article goes on to mention that Bewkes has noted that other media break-ups may not be yielding much upside, and that he agrees with Parsons for now that the combined entity is worth more than the pieces as unaffiliated entities.

Regardless of the many twists and turns in the article, this seemed odd coming out of FORTUNE. I laid out my own scenario where the company could float a portion of AOL as a tracking stock, a scenario that still seems quite likely. Rather than an entire spin-out of the cable assets, it seems to me that the media giant should at least maintain a large stake (if not an outright 50% plus 1 vote majority) in the cable company, and that any analyst calls to the contrary are misplaced. It is easy to call for break-ups in a bull market to unlock more value, but there are many more defensive and stabilizing strategies for a giant to weather harder times.

Although he is currently taking a cautious view on the overall market, Nate Pile, the editor of Nate's Notes, believes that eBay (NASDAQ: EBAY) and Walt Disney (NYSE: DIS) warrant accumulation for those with a long-term investment view.

As to the stock market and economy, he notes, "I'm concerned that the Fed really is stuck between a rock and a hard place. Yes, the market has responded favorably since the Fed's decision to cut the discount rate. But I believe we ought to be more concerned than excited by the Fed's action." Why? He notes, "Whenever the Fed does something 'clever or unexpected,' it is rarely because they think everything is going according to plan."

Meanwhile, the advisor says, "We have looked at our recommended stocks to focus on those that have shown strong relative strength despite market turmoil. We believe this is one of the best indicators for evaluating appreciation potential for once overall market conditions have turned more favorable."