Disney buying chunk of 21st Century Fox in US$52.4B deal
Move shocks entertainment industry as it confronts big changes in era of Netflix
Disney is buying the Murdoch family’s Fox movie and television studios and some cable and international TV businesses for about US$52.4 billion, as the home of Mickey Mouse tries to meet competition from technology companies in the entertainment business.
Disney’s all-stock deal for 21st Century Fox gives it the studios that produce the Avatar movies, The Simpsons and Modern Family, though Murdoch will form a new company to keep the U.S. television networks, including Fox News Channel, Fox Business Network and Fox Broadcasting. The Simpsons will continue to air on Murdoch’s Fox stations. The deal also brings Marvel characters such as X-Men and The Avengers under one roof — Disney’s.
Murdoch’s new company will get national rights to Major League Baseball, the NFL, NASCAR and college sports through the Fox TV network and cable networks FS1, FS2 and Big Ten Network. Disney is getting Fox’s regional sports networks, including the Yes Network showing the New York Yankees.
In owning these properties, Disney will be in a better position to compete with the likes of Netflix when it launches ESPN- and Disney branded streaming services in the coming years.
That Rupert Murdoch and his sons were willing to sell off much of the business that has been built up over decades came as a shock to the entertainment industry.
Murdoch, who built a global media and entertainment empire out of an inheritance from his father in Australia, said what remains of his family’s business will be able to focus on American news and sports. During a call with investors Thursday, Murdoch and his sons described the move as a return to the company ’s lean and aggressive roots.
The deal — announced Thursday on the eve of a major “Star Wars” movie release from Disney — comes as the entertainment business goes through big changes. TV doesn’t have a monopoly on home entertainment anymore. There’s Netflix, which is spending up to US$8 billion on programming next year.
Amazon is building its own library, having splashed out on global TV rights to Lord of the Rings. Facebook, Google and Apple are also investing in video.
As consumers spend more time online, TV’s share of U.S. ad spending is shrinking. Advertisers are following consumer attention to the internet, where Google and Facebook win the vast majority of advertisers’ dollars.
To combat this trend, Disney is launching its own streaming services. It could beef them up with some of the assets it’s acquiring from Fox, making them exclusive to its services and sharpening its ability to compete with Netflix for consumer dollars.
Disney CEO Robert Iger said many Fox properties will fit with the new service, including National Geographic and additional Marvel productions. In some cases, though, Disney will have to wait for existing Fox deals to expire. Fox movies are exclusive to HBO through 2022, for example.
“We’ve been talking about cord cutting for the better part of a decade. But now it’s real,” USC Annenberg communications professor Chris Smith said. The media companies have to compete with the internet giants for consumers’ attention — and the younger generations pay more attention to YouTube, Facebook and other “platforms” than traditional TV, Smith said.
The deal, which would make Disney the No. 1 studio owner with more than a third of the market, will need approval from U.S. antitrust officials who are sure to scrutinize a tie-up that concentrates Hollywood moviemaking and sports broadcasting.
“They’d have enormous power in the entertainment and production sphere,” Gene Kimmelman, the head of Washington policy group Public Knowledge, said of Disney.
“When you have too much content tied together, it really does create a market power problem in a transaction.”
Iger will continue as chairman and CEO of The Walt Disney Co. through the end of 2021. Disney said Thursday that it anticipates at least US$2 billion in efficiencies and other cost savings from the acquisition. Both companies’ boards have approved the deal. It still needs approval from Disney and 21st Century Fox shareholders.