Mickey buys Homer: Disney to take over 21st Century Fox

The home of Mickey Mouse is set to take over The Simpsons and many other favorite television and movie franchises — including Avatar and X-Men franchises — in a media deal which reshapes the entertainment landscape at a time of rapid consolidation driven by a perceived need to gain “scale”.

In a widely touted deal first reported by financial media (Financial Times), the Walt Disney Company has agreed to buy the entertainment assets of 21st Century Fox, the rival entertainment conglomerate created by Australian-born Rupert Murdoch.

A screen shows the trading info for The Walt Disney Company company on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 13, 2017. REUTERS/Brendan McDermid

As it became clear that the deal — details of which have emerged over the past month or so — was definite, the two companies issued statements as the New York Stock Exchange opened. The FT reported that it was a $66 billion all-stock deal in which Disney would buy the film, television and international assets of 21st Century Fox.

Murdoch, 86, has spent a lifetime creating a media business empire which began with one newspaper in Adelaide, Australia. The deal with Disney marks an epic shift in diverting his attentions away from an entertainment empire built on the original 20th Century Fox business to an apparent renewed focus on news.

The Murdochs will retain the Fox News network in the United States and its worldwide newspaper business. Disney chief executive Bob Iger has signed a contract extension to continue to run the business until 2021.

“We are extremely proud of all that we have built at 21st Century Fox, and I firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace in what is an exciting and dynamic industry,” Murdoch said in a statement on 21st Century Fox’s site.

What does it mean to you?

Since the beginning of 2016, there have been only four media or communications deals larger than $20 billion. The Trump administration has filed suit to block the $86 billion AT&T Comcast merger. And it’s unclear how the $66 billion Disney-Fox purchase will fare with regulators. If the deal goes through, Disney has already said that the Fox portfolio will feed a mega-streaming service to compete with Netflix and Amazon, which means that a Fox Property such as The Simpsons might only be available through Disney or channels such as Hulu in which Disney would be a 60 percent owner. But access disruption predictions are at this point premature and speculative. There are complex contracts in place which give Netflix and Amazon breathing room while they develop their own content and contemplate their future negotiating posture. Both Amazon and Netflix have deep pockets—though down the road, if the acquisition closes and the streaming strategy is successful, cash may be less important to Disney.

The FCC’s decision to roll back Obama era net neutrality rules is a big win for communications companies like Comcast because they may now create tiered access to their broadband pipelines, charging different rates for different levels of consumption. Media companies such as Amazon, Netflix, or a Disney-Fox fear significantly higher access costs which they would have to pass along to their customers. It is too early to say how this will impact consumers, and there are wild cards such as Google’s efforts in the broadband market.

The communications companies say they need additional capital to build out their infrastructure–to achieve scale. Michael Wolff, author of a major biography of Rupert Murdoch, recently called into question the rationale for the deals to create ever-larger media groups–including so-called “vertical” deals combining telecommunications and media companies and “horizontal” deals like Disney and 21st Century Fox. “The size is the strategy,”  Wolff wrote in The Hollywood Reporter.  On the other hand, the United States lags other countries in broadband infrastructure which undoubtedly requires massive capital to build. Scale certainly plays a role in the generation of capital, but these mega-mergers trade away competition in the name of scale. Google Fibre had significant competitive impact in those cities where they built infrastructure. Whether they can or will continue their efforts is an open question.

Further reading

  • The Man Who Owns the News, Michael Wolff, PenguinRandomHouse. Seminal recent biography of Rupert Murdoch, who cooperated with the author only to reject him when the book was published and the dirt was dished on the inside workings of the family empire. Review in The New York Times by the late David Carr.
  • Anthony Lane, film critic of The New Yorker, reported on the “tabloid culture” inside the Murdoch newspapers which led to the British “hacking-gate” scandal in a piece entitled: Hack Work
    A tabloid culture runs amok. 
  • The Wall Street Journal, owned by Murdoch’s News Corp. but with a fiercely independent approach to its business reporting on its proprietor, said in its “Heard on The Street” column that the deal was a vast step into the world market by Disney (May be behind a paywall).
  • Wikipedia, Google Fiber
  • Wikipedia, Net Neutrality






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