Disney-Fox Deal Changes the Past, Present, and Future of Hollywood

Disney-Fox Deal Changes the Past, Present, and Future of Hollywood

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While the Walt Disney Company’s (DIS) deal with 21st Century Fox (FOXA) came in just under the speculative $60-billion dollar price tag, it nevertheless marks a massive shift in Hollywood’s century-old studio system. It also indicates the direction of the overall entertainment media industry, as the studios that remain vie for market share in the digital age.

The deal itself comes at no surprise. 21st Century Fox had been shopping around their film & television studio and other media assets since at least early November. Once Comcast (CMCSA) dropped out of the bidding war on Monday, reports flooded that Disney — already the champion of the worldwide box office — would be the winner/buyer.

For a total of $52.4 billion, Disney will own the Avatar franchise, the original Star Wars trilogy and the prequels, as well as television properties such as FX, National Geographic, and 22 regional sports channels. International networks in India and across Latin America and the British telecom giant Sky will also be included in the deal. Fox broadcasting network, Fox News Channel, and FS1 sports won’t be, instead forming a spin-off company still owned by News Corp (NWS).

That is, if the U.S. Justice Department approves the deal, which will take 12 to 18 months to complete in any case. AT&T Inc.’s (T) purchase of Time Warner Inc. (TWX) has been held up for over a year by the Justice Department’s regulatory challenges. Whereas that’s a case of vertical integration, Disney and Fox’s is horizontal, which has historically faced even higher scrutiny from the Antitrust Division. They will definitely take note of the fact that Disney could eventually come out of this with 35 to 40% of the total market share in box-office receipts, and perhaps force some changes before approving the terms of the agreement.

As it currently stands, this deal’s potential for adverse effects on competition, pricing, and employment worries many people in the industry, not only federal regulators.

The Writers Guild of America came out swinging on behalf of the union’s members, who have already faced their own workplace struggles in the face of digital media expansion.

“In the relentless drive to eliminate competition, big business has an insatiable appetite for consolidation,” WGA-West stated in a press release immediately upon the deal’s announcement on Thursday.”

As with any acquisition at this scale, layoffs loom, mostly over the 3,200 people employed at Fox’s Century City business hub just outside of Downtown Los Angeles. Director James Mangold, whose film Logan is Fox’s biggest box-office hit of the year, expressed concerns about creative control, particularly the ability to make R-rated movies under the famously family-friendly Disney’s watch.

Of course, Disney’s power move doesn’t make business any easier for competitors, namely Netflix (NFLX) and the other four studios of the (now) Big Five: NBCUniversal (bought by Comcast in 2011), Columbia Pictures (Sony in 1989), Paramount (Viacom in 1994), and Time Warner (soon-to-be AT&T).

Disney recognizes that online streaming will define the future, if not already the present, of entertainment media. The deal with Fox would bump up Disney to a 60% majority stake in Hulu, which it shares with the aforementioned studios. In addition, Disney has already announced plans to pull its content from Netflix and to introduce a paid online sports network, ESPN Plus, in 2018 and its very own streaming platform in 2019.

Jim Nail, an analyst at Forrester, predicts rising competition among online streaming outlets will likely result in more bidding wars for content, as that’s the key to the game. And nobody has played the game better than Disney CEO Bob Iger, who oversaw the successful acquisitions of Pixar, Marvel, and Lucasfilm and will now stay through 2021 to oversee this one.

If and when this deal gets approved by the feds, Disney will be holding the key to the magic kingdom.

 

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One response to “Disney-Fox Deal Changes the Past, Present, and Future of Hollywood”

  1. rk0000 says:

    Yes, this is right! But Fox News Channel, and FS1 sports won’t be.

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