Potential Disney bid for Fox assets shows need for scale amid Netflix pressure

Netflix is pushing over-the-top thinking. Walt Disney may be mulling a bid for Rupert Murdoch’s film studio and cable networks. A deal would reduce Twenty-First Century Fox to news and sports assets while helping the Magic Kingdom bulk up to fight the video-streaming network.

Disney Chief Executive Bob Iger has been talking with Fox about the possibility of a mashup between the two media conglomerates, according to a CNBC report on Monday. Fox would sell its international assets, including its 39 percent equity stake in European pay-TV group Sky, along with its movie and cable units. It would keep its US broadcast stations and eponymous news network, which is undergoing its own transformation after a spate of recent sexual-harassment allegations. The details were scarce but one thing is clear: Scale is a necessity. As distributors become larger – AT&T is seeking to close its $85 billion deal for Time Warner for instance – media companies have to follow. Netflix’s success in securing 100 million subscribers worldwide and its plan to spend some $8 billion on content next year adds to the pressure.

The acquisition of Fox programming would strengthen Disney’s arsenal as it prepares to launch its direct-to-consumer video offerings from its entertainment networks and sports giant ESPN. Fox too has acknowledged the need for scale with its failed $80 billion tilt at Time Warner in 2014 and its second run for full control of Sky, still waiting for UK regulatory approval.

That’s what makes possible retreat by the Murdoch family all the more puzzling. Murdoch built his empire from newspapers he inherited from his father in Australia and turned them into a global enterprise housing everything from Fox News to “The Simpsons” to Star India. Murdoch, who is executive chairman, and his family hold nearly 40 percent of the voting shares in Fox and sister company News Corp. He elevated his sons James and Lachlan to eventually take over the reins. A reversal would be stunning – perhaps suggesting that nothing is too outlandish in a videostreaming world.