Trying to compete
Disney buying large part of 21st Century Fox
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 keep the U.S. television networks, including Fox News Channel 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.
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 describes the move as a return to the company’s lean and aggressive roots.
Battling Netflix
The deal 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 $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 possibly National Geographic and additional Marvel productions. As for sports, Disney is getting Fox’s regional sports networks, including the Yes Network showing the New York Yankees. 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 mechanics
Iger will continue as chairman and CEO of The Walt Disney Co. through the end of 2021. Disney said Thursday that it anticipates the acquisition providing at least $2 billion in cost savings. Both companies’ boards have approved the deal. It still needs approval from Disney and 21st Century Fox shareholders.
Before the buyout, 21st Century Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company that will be spun off to its shareholders. It will also include the company’s studio lot in Los Angeles and equity investment in Roku.