I have been asked several times today by people who know that I have covered the Disney – Fox merger about what it means for the average person with a cable, satellite, or streaming services package subscription. The deal has also created a significant amount of understandable confusion regarding what Disney will end up controlling, and what assets from Fox are not part of the transaction.
The Disney acquisition of certain assets of the Fox media and entertainment empire has been in the works for several months. The driving forces behind both sides making this deal are different, but the transaction obviously helps both sides or else it would not have been completed.
In an earlier piece on this merger, I explained how Disney is looking to add content for the launch of their streaming app service to rival Netflix and Amazon, called “Disney+”. This acquisition of the 21st Century Fox assets, FX Network, National Geographic Network, and the Fox stake in the Hulu streaming service provides Disney with loads of content ownership.
Fox was looking to streamline their operations and cut themselves loose from the studio holdings that have high overhead costs associated with them. The move away from some of their more ancillary cable television holdings would allow them to focus on their core offerings of news, business news, and sports. These areas have higher profitability from the advertising sales perspective.
Many people are confused about this merger and think that Disney, which already owns ABC and ESPN, will now own Fox networks like their flagship channel, Fox News, Fox Business, and FS1. Those same people are curious as to how that would pass through the antitrust regulations of the federal government.
However, that is not the case. Fox will maintain ownership of their networks here in the U.S. and abroad as well as Fox News, Fox Business, and Fox Sports (FS1 and FS2 networks) in the newly created entity called Fox Corporation.
Disney will gain the outlying assets that I detailed earlier and will begin to seek what their CEO, Bob Iger, described in the press release as “cost synergies”; which translates into layoffs of people that they deem as redundant in the newly merged entities. Disney will also undoubtably look to expand upon the Marvel movies, and maximize merchandising opportunities by creating stand-alone movies on specific characters that were once the property of Fox.
Fox will look to expand the development of programming for their mainstream Fox network as well as gaining new rights agreements for live sports content on the Fox Sports networks. They will no longer be able to produce TV programs in their own studio which will impact their overall production costs, but they will save the overhead of maintaining 21st Century Fox and the Fox TV studio areas.
The Fox networks will be able to purchase productions made in the Disney/21st Century studios. Their sports division is heavily invested in soccer with a World Cup coming up in three years, and will continue to invest in soccer and other sports content namely the NFL package.
The merger is similar to the AT&T / Time Warner consolidation that I covered in multiple pieces over the course of that time frame through the process. It remains to be seen whether content will become limited by Disney to the other cable or satellite providers. I think the streaming content will certainly be limited, but Disney does not have a “horse in the race” like AT&T does with DirecTV on the distribution side of the business.
The deal was certainly a big win for Disney prior to the launch of their new streaming service. The media landscape has condensed and the content that is so valuable is landing in the hands of the few. The average consumer should prepare to pay a subscription fee for the Disney streaming service in addition to any other memberships they currently maintain.
The capabilities of Disney to produce outstanding content is well established, the acquisition today is going to make them even more formidable in the years to follow.
(Some background courtesy of CNN, CNBC, and The Financial Times)