One could be forgiven for comparing the planned Disney-Fox merger to one of the character-driven dramas the studios put out such as Wall Street: Money Never Sleeps or The Social Network. The stage is set with intrigue and mystery; Is “Fox actually for sale?’, “Is Disney really going to buy it?”, “Who else is trying?” “Will we finally get the Fantastic Four or X-Men into the MCU? You have an intriguing mix of characters – Disney’s amiable CEO Bob Iger and the formerly cocksure, but now pragmatic Fox head, Rupert Murdoch. You even have two rejected lovers; Verizon and Comcast. But, just before the the two giants complete the nuptials, a jilted suitor steps in and tries to change it all! Comcast attempts to woo Fox by into abandoning the sweetheart deal by offering an extra $13B in cash. But no, the Mouse will not be thwarted! Disney sees and the bet and raises with a pair of cards still face down on the table. And then, as all eyes are watching, flipping the cards to reveal DOJ approval and a shareholder vote less than a month away. Roll credits!
Well, at least that was the original screenplay for the 2068 holovid about the deal “based on actual events”…
What’s the deal?
Headed by founder Rupert Murdoch, the family owns 17% of News Corp. The assets being offered include the entire 20th Century Fox film and movie library, the production studios themselves as well as the film distribution arm, the FX cable channels, plus Fox’ stake in Hulu as well as British cable news company Sky. Other assets include National Geographic Partners (and related channels) plus the 22 regional Fox Sports Networks. The Murdoch family will retain its broadcasting network and stations, the Fox News Channel, Fox Business Networks and selected other assets. These will be gathered into a new company dubbed “New Fox.”
When the Disney acquisition of most of Fox’ entertainment assets was announced last December 14, it was subject to approval by Fox shareholders and the US Department of Justice’s regulators who look into whether it reduces competition. While the shareholder vote was scheduled for earlier this month – and largely assured – it was expected that the government would take 12-18 months to approve or reject the deal. The Disney-Fox deal got a boost on June 12 when regulators approved the AT&T acquisition of Time-Warner after an 18-month review.
Even though the deal had not been formally approved by the shareholders, Disney had been working with the antitrust regulators to remove obstacles. As it turned out, their only objection was concern about Disney owning both the Fox Sport Network and its own ESPN with its six, lesser-known channels. Specifically, the Department was concerned that the sports channels would stifle competition for sports programming in those local markets as they could have an overwhelming advantage when combined with Disney-owned ABC Broadcasting’s local affiliates. Disney chose to head off that concern by agreeing to sell off the FSN channels rather than to try and incorporate them into the ABC brand. By selling off these cash cows, Disney should be able to recoup over a billion dollars of the $71.3B it plans to spend.
Despite the approval, the deal isn’t complete. Other Federal government agencies have their own ongoing reviews. But, based on the quick takeover of Time Warner by AT&T following the DOJ’s approval in early June, any delays will are not likely to be significant.
There’s still Comcast, however. The cable giant, which owns NBC Universal and Dreamworks among other assets, had offered an all-cash deal that paid more than Disney’s $52B. Fox preferred the Disney deal, in part, because it offered 25% the Mouse’s stock to Fox shareholders. Rupert Murdoch had been hoping to get his son, James, onto the Disney board of directors, but that was not offered.
From a strictly business sense, Comcast has the enviable position that it owns the “pipeline” that gets media into consumers’ homes. In fact, it is the largest cable operator in the nation. In order to receive content from a streaming service such as Netflix or Hulu, a customer would have to buy high-speed internet services from Comcast or its competitors. And that’s what makes Comcast willing to risk financial hardship and regulatory hell – it needs content. Rival AT&T, which operates both the DirecTV satellite and Uverse cable services had been pursuing the Time-Warner deal to get at the immense Warner Bros. film library. Comcast and AT&T are going up against the deep-pocketed “FAANG” tech titans; Facebook, Apple, Amazon, Netflix and Google – which all create content and take market share from the traditional media outlets.
At the beginning of June, Comcast upped its bid to $65B in an all-cash offer, pricing Fox at $33 per share. Financial analysts have said that this may be close to the upper limit that Comcast can offer without going heavily into debt. But, Reuters reports that a hedge fund which owns 7.4% of Fox wants to delay the July 27th shareholder meeting – which had already been pushed back from July 10 following Comcast’s bid – in order to give Comcast a chance to top Disney’s latest offering. On June 20th, Disney raised their bid to $71B in cash and/or stock, which was a $10/share increase over their original bid. The (relatively) quick shareholder meeting is seen as a way to push Comcast aside.
Eye on the Sky
Even if Comcast loses out on Fox, it still in the play for one of its assets. One of the reasons for Murdoch’s downsizing of Fox was his thwarted bid to take over the remaining 61% of Sky plc that it does not own. The London-based pan-European satellite television company has been in the sights of Fox, Disney and Comcast for some time. British authorities nixed Fox’s acquisition of the company because of concerns about how Fox News reported. There is also some lingering fallout regarding the phone hacking scandal lead to the shutdown of Murdoch’s tabloid News of the World back in 2011. By selling off Sky News to Disney, Murdoch hopes to remove that impediment. Meanwhile, in light of the increased bids made for 20th Century Fox, Sky’s independent shareholders have told the U.K. Takeover Panel that the companies’ bids for Sky needs to be increased.
What’s this mean for Geek Culture?
Disney has made no secret of its intent to go head to mouse ears against Amazon, Netflix and even Hulu with its own streaming service rolling out in 2019. Content is absolutely king in this competition. As one of “The Big Six” Hollywood Studios, Twentieth Century Fox had already been a thriving concern for two years before Walt and Roy bet the future of The Walt Disney Studio on Snow White in 1937. In the 83 years since its founding Fox has built a library that surpasses even Disney’s. In addition to The Simpsons and Futurama, Fox, of course owns the X-Men and Fantastic Four rights, plus the Alien, Predator, Planet of the Apes and Avatar franchises. The latter of those happens to be already represented at Walt Disney’s Animal Kingdom Resort in Orlando Florida. Fox television is also in it second season of The Gifted which is based on the X-Men universe.
The ability to tie up the loose strings such as being able to say “mutant” in MCU movies, including the “Fox Fanfare” at the beginning of all Lucasfilm movies, and finally regaining control of the distribution rights for Episode 4: A New Hope excite the fans, but do little to boost the bottom line.
The acquisition of Fox puts Disney hard on the heals of Netflix in terms of available content. Disney intends for its streaming service to be competitively priced, with content targeted at all age groups with only G, PG and P-13 ratings. Disney can easily set aside its R-rated content for streaming on Hulu – which it will own 40% of following the merger. The new Disney streaming service will be the home of all of its shows currently on Netflix plus the new live-action Star Wars series.
With its acquisition of Pixar, Marvel and Lucasfilm, Disney has shown that it is able to quickly recoup the high initial costs. Fox and Disney are separately the top two in box office revenue in recent years. Because it will be working to maximize the intellectual property it owns, we can expect to see more of characters that may not have been considered mainstream enough to bring to the screen. Jessica Jones, Luke Cage, and The Inhumans are three such examples. The latter’s resounding failure is a caution that not everything will be good, but Disney has more hits than misses. Fox recently acquired a minor stake in indie comic book company BOOM! Studios which owns titles such as Lumberjanes, Castle and Irredeemable among others. And, lest anyone think that indie comics make for poor movies, Rocketeer and Men in Black both came from outside the DC and Marvel duopoly. In short, Disney will be able to keep most of its money in-house rather than sharing it with outside parties – Fox included. In addition to keeping shareholders happy, Disney is incentivized to keep its viewers happy and willing to choose its streaming service over the competition.