Entertainment giant Disney today announced that it would buy most of the assets of Rupert Murdoch’s 21st Century Fox for $52.4 billion in stock in a move that reboots the Mouse House’s streaming and television ambitions.
As part of the purchase, Disney will acquire the Twentieth Century Fox film and TV studio and its international and cable TV businesses, assets that will bolster the Burbank, Calif.-based company’s forthcoming streaming services.
It is a bold move by the world’s largest entertainment organization and one that shows the incumbent is serious about competing with streaming upstarts such as Netflix and Amazon which have disrupted Hollywood in recent years.
“The acquisition of this stellar collection of businesses from 21st Century Fox reflects the increasing consumer demand for a rich diversity of entertainment experiences that are more compelling, accessible and convenient than ever before,” said Bob Iger, chairman and CEO of The Walt Disney Company in a press release.
In August, Iger announced plans to launch a sports-focused ESPN video streaming service next year and its own streaming platform for Disney TV shows and movies in 2019. The aim is to diminish Netflix’s stronghold: Come 2019, Disney will end its distribution agreement with Netflix for new releases, so movies such as Toy Story 4 and the sequel to Frozen will only be available on their own streaming service in the U.S.
Acquiring Fox’s assets make Disney’s streaming content far more appealing, provided it can be successfully distributed. Blockbuster franchises are the moneymakers in movies these days and Disney already owns kids movie behemoth Pixar Animation Studios, comic-book character powerhouse Marvel Entertainment and Star Wars maker Lucasfilm. Purchasing Fox will add on Avatar, Planet of the Apes and the X-Men series, which has grossed nearly $5 billion at the global box office.
What’s more, the deal will double Disney’s ownership stake in Hulu to a 60% majority holding, giving Disney control over three streaming services. It seems likely that Hulu will become a hub for adult fare including its hallmark The Handmaid’s Tale series, while the Disney-branded streaming service will provide family-friendly content and ESPN Plus will remain focused on sports.
Snapping up Fox’s TV assets ought to strengthen Disney’s TV business, which remains its largest segment despite suffering from cable-cutting. Disney will be purchasing a cable group that includes FX Networks, National Geographic, more than 300 international channels and 22 regional sports networks. Its TV assets will gain moneymakers including long-running animated show The Simpsons, plus hits such as NBC’s This Is Us and ABC’s Modern Family.
The acquisition is the latest merger in a consolidating media landscape as major studios and cable companies struggle to compete with Netflix and its 104 million-plus subscribers, many of whom switched over from traditional TV.
Netflix has made a lot of noise over its content budget, declaring it will have spent some $6 billion on content in 2017. The vast majority of that–approximately $5 billion, Forbes estimates–goes on licensing movies and TV shows from the libraries of entertainment giants such as Disney, which lend the rights to their output for a fee. Amazon boasts a similarly-structured $4.5 billion budget and more than 80 million subscribers through Amazon Prime.
Both technology companies have invested heavily in their own shows and movies, but given that industry surveyor Nielsen only began tracking Netflix viewership in the fall and that there is no such data available yet for Amazon, it’s unclear how lucrative those homegrown creations have been.
Netflix and Amazon have nailed down online distribution and built sizable subscriber bases, but good content is becoming increasingly been expensive and difficult to procure. Where Disney can compete is with more–and better–shows and movies to stream. Unlike its competitors, Disney has a fount of proven assets from Star Wars to Pixar that people want to watch. Now its challenge will be get it to viewers in a modern way: At home, via mobile and on demand.
The deal, which is valued at $66.1 billion net $13.7 billion debt, will likely prompt further consolidation in Hollywood. “With Disney’s proposed acquisition of 20th Century Fox, we believe remaining film/TV studio assets will become increasingly valuable/scarce,” wrote BTIG analyst Richard Greenfield wrote in a Wednesday note.
The pricetag is larger than all of Disney’s prior acquisitions combined. Disney’s stock is up 3% to $111 a share following the news.
source: Forbes.com by