Why Disney’s Takeover of Fox is a Very Big Deal

It’s probable that no television program in American television history has been more associated with a TV network as “The Simpsons” has been associated with Fox Broadcasting Company.

Fox debuted in late, 1986. “The Simpsons” was a sketch on the Fox network’s “The Tracey Ullman Show” from 1987 through 1989, debuted as a TV program in 1989, and has been the longest-running scripted primetime TV program since 2009. It’s still on Fox after 28 years.

Seeing “The Simpsons” on another network would probably be a shock to many viewers, but it’s now a genuine possibility because The Walt Disney Company, which owns the ABC network, announced on Dec. 14 that it reached a deal to buy all of 21st Century Fox’s television shows as well as all of the company’s movies, the cable TV stations FX and National Geographic, 22 regional TV sports networks, Fox’s share of the Hulu video streaming service, and most of Fox’s international businesses.

“Over the decades, Fox has produced dozens of box office hits and long-running TV shows — and now, Disney will own them all, adding to its acquisitions of Marvel Entertainment in 2009 and Lucasfilm in 2012,” reports the news website Polygon.

Although the all-stock $52.4 billion deal doesn’t include some of Fox’s television properties, including the Fox Business Network, Fox News Channel, and Fox Sports, the Forbes magazine article “What The Disney-Fox Merger Means For Consumers” called the agreement “one of the biggest deals the entertainment industry has seen.”

The agreement will go into effect in roughly 12 to 18 months if the U.S. Justice Department approves it, but there are antitrust concerns. In November, the Justice Department went to court to try to block another major TV industry deal — AT&T Inc.’s $85.4 billion deal to buy Time Warner, Inc. — because it said the deal violated antitrust law. That deal is problematic because AT&T distributes entertainment content and Time Warner provides content. Currently, Disney and Fox are primarily entertainment companies, but Disney has plans to be a distributor.

The Disney-Fox merger will have a huge impact on the TV and film industries if it’s approved.

“Hollywood will never be the same,” declared Investor’s Business Daily — and they’re right.

As Wealth Authority previously reported, the industry-related companies that are best positioned to succeed in the future are those that sell TV programs and other audios and videos directly to consumers.

Netflix is the leader in providing over-the-top (OTT) media streaming media services, but Disney will improve its chances of becoming a very formidable challenger if it acquires Fox’s TV shows and movies and Fox’s share of Hulu. Disney plans on launching its own OTT service in 2019. The service’s content will be more competitive if it can sell consumers the family-friendly shows it now owns plus the edgier shows that are now owned by Fox.

“Disney’s acquisition is in large part motivated by its desire to acquire more content ahead of the 2019 launch of its own branded streaming service, which will serve as a direct competitor to Netflix and Amazon,” reported Variety magazine.

Disney will own all the Marvel Comics characters and all the Star Wars movies if it acquires Fox, because the deal includes the purchase of Marvel’s Deadpool, Fantastic Four, and X-Men characters as well as the home-video and digital distribution rights of the first six Star Wars movies. Disney would also own the Avatar franchise, which includes the highest-grossing movie of all time and four sequels that are being developed as well as the movie franchises for Alien, Independence Day, Planet of the Apes and Predator, according to Slate magazine.

“You’ll watch a Disney movie whether you realize it or not,” says the Investor’s Business Daily article, which notes that Disney’s Buena Vista studio and the 20th Century Fox studio are the first and third largest movie studios in gross ticket receipts.

As for television, Disney would own the production and distribution rights to shows such as “24,” “American Dad!,” “Buffy the Vampire Slayer,” “Family Guy,” “Futurama,” “Hill Street Blues,” “King of the Hill,” “The Mary Tyler Moore Show,” “M*A*S*H,” “The Shield,” and “The Simpsons.”

In addition, Disney would own 60 percent of Hulu rather than 30 percent. Disney CEO Bob Iger told Investor’s Business Daily that he envisions Hulu as “sort of a more adult-oriented product using Fox Television production and FX.” Thus, Disney will still launch its own streaming service while expanding Hulu.

The Investor’s Business Daily article also reports that Disney has plans for an ESPN streaming service called ESPN Plus and projects that the 22 regional sports networks that Disney wants to buy from Fox could be part of that service. The 22 networks televise the games for 44 Major League Baseball (MLB), National Basketball Association (NBA), and National Hockey League (NHL) teams.

The deal is a big win for Disney if it survives challenges based on concerns about antitrust violations such as pricing that restricts competition according to business analysts because video streaming is the future of television and the addition of popular content dovetails with its upcoming streaming service.

Analysts are more divided on the deal’s impact on Fox. By keeping its news, business, and sports channels while adding $52.4 billion in stock, Fox could increase its profits by covering more events, adding reality shows, and using its sports and political programming to promote what Slate calls “big, male-focused original series.”

As for the deal’s impact on consumers, Iger said both of Disney’s streaming services would cost less than Netflix, but business analysts told Forbes and Variety that mergers, including this one, spur price hikes and fewer choices. One article on the merger is entitled “A Disney-Fox Merger Is Bad News for Everyone But Disney.”

Several business analysts predicted the Disney-Fox deal in the last year, but do you want to guess who predicted the deal in 1998? None other than “The Simpsons.”

“A scene in the (1998) episode shows the outside of the Fox studio, where “A Division Of Walt Disney Co” is written on a sign in front of the building,” reported the article “The Simpsons’ Predicted Disney Would Buy Fox 19 Years Ago.”

Regards,

Ethan Warrick
Editor
Wealth Authority


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