MIGHTY MOUSE
Disney buying big chunk of 21st Century Fox in deal worth $52.4 billion
NEW YORK — Disney is buying the Murdoch family’s Fox movie and television studios and some cable and international TV businesses for about $52.4 billion, as the home of Mickey Mouse tries to meet competition from technology companiesin 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,” although Mr. 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 Mr. Murdoch’s Fox stations. The deal also brings Marvel characters such as X-Men and The Avengers under-one roof — Disney’s.
Mr. 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.
Mr. 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, Mr. Murdoch and his sons described the move as a return to
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 is acquiring from Fox, making them exclusive 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 mechanics
Mr. Iger will continue as chairman and CEO of The Walt Disney Co. through the endof 2021. Disney said Thursday that it anticipates at least $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 Foxshareholders.
Before the buyout, 21st Century Fox will separate the businesses it’s keeping into a newly listed company that will be spun off to its shareholders. It also will include the company’s studio lot in Los Angeles and equity investment in Roku.
Fox also is selling to Disney its substantial overseas operations. Disney will get at least a 39 percent stake in European satellite-TV and broadcaster Sky. Fox is hoping to acquire the remainder of Sky before the deal closes, so that it could give Disney full control after the sale. Disney is acquiring Star India, a major media company with dozens of sports and entertainment channels.
Disney also will win majority control of Hulu, both its live-TV service and the older service with a big library of TV shows.
Not everyone thinks this is a good bet by Disney, though. Rich Greenfield, a longtime Disney critic, thinks the deal is a bad idea that ties Disney to older TVdistribution systems — cable and satellite TV — rather than helping it look toward the future.
He also notes that regulators may not like the idea of combining two major movie studios. The Justice Department surprised many in the industry and on Wall Street when it sued to block another media megamerger, AT&T’s acquisition of Time Warner in November.
Mightier Mouse
The Disney-branded service, expected in 2019, will have classic and upcoming movies from the studio, shows from Disney Channel, and the “Star Wars” and Marvel movies.
Disney could continue to add movies and TV shows from Fox’s library to its services, making them more attractive compared with Netflix’s offerings. The combined libraries of the Disney and Fox movie and TV studios could have more titles than Netflix, Barclays analyst Kannan Venkateshwar said. Buying Fox’s FX networks will add edgy TV shows that complement Disney’s long list of kid-friendly series and films, he said.
Disney also plans an ESPN Plus service for next year.
It isn’t a duplicate of the ESPN TV network, but it will stream tennis matches along with major-league baseball, hockey and soccer games, as well as college sports.
Disney also owns Marvel, but not all the Marvel characters. It’s made movies starring Thor, Doctor Strange and Captain America and the Avengers crew. But the X-Men are at Fox. Bringing them home under one roof could mean movies with more of the characters together. Sony will still have rights to Marvel’s SpiderMan, though a deal with Disney lets Spider-Man appear in Disney movies.