Disney Merger on the Rise and What It Could Mean For the Future
After Disney's competitor Comcast dropped out of the bidding last week, it is official now that Disney, who has championed the $71-billion purchase of the Fox assets, is going to purchase the film, TV, and other assets of 21st Century Fox. Disney will also gradually and eventually absorb Fox and all its entertainment properties including Fox’s prolific television and movie studios, cable channels FX and National Geographic, the controlling stake in streaming service Hulu, and international properties in India and Latin America. Unsurprisingly, there will be a monumental change in the film industry as the number of major studios shrinks from six to five. But what does that exactly mean to the future? How is that going to make a difference?
Photo Courtesy:Guy Shield
According to Forbes.com, "The film business gets ready for the further escalation of takeover and merger rumors surrounding such prime studio targets as Paramount and Sony. Both theater chains and moviegoers will be affected by the unification of Walt Disney DIS +0.43% and Fox ." Even more, industry analyst believe that with well-known reputation, the level of previous movies' success, and with box-office success all but assured on its films, "Disney has been able to charge theater owners film rental terms that are higher than industry norms on many of its titles. Furthermore, the studio doesn’t have those smaller, more intimate movies that exhibitors can balance their overall film rental with by negotiating favorable terms."
Then there is the question about executive leadership of the combined assets. Disney CEO Bob Iger said this morning, following the news of Comcast’s withdrawal, “our focus now is on completing the regulatory process and ultimately moving toward integrating our businesses.” However, Deadline.com points out: "Disney to some extent prepared for its bulked-up operations with its March reorganization that added to the portfolios of Kevin Maye and Bob Chapek. As hinted by that revamp, I hear the company’s operations are being divided into three big areas, distribution, led by Mayer, experiences, led by Chapek, and content."
Photo Courtesy:Matt Rourke / Associated Press
Most analysts speculated that Disney had the edge mainly because its deal posed fewer regulatory hurdles than a Comcast-Fox merger. According to LA times, the Justice Department gave a quick OK to Disney's bid in June, as long as it sells Fox’s 22 regional sports networks, including Prime Ticket and Fox Sports West in Los Angeles. The Disney-Fox merger review lasted just five months."Although Disney and Fox have a similar asset mix, Comcast has the complication of owning pay-TV and internet services. Comcast is the nation’s largest broadband internet provider — a fact that has troubled the Justice Department before. When antitrust regulators said last week they would appeal the merger of AT&T Inc. and Time Warner Inc., the door slammed on Comcast’s chances of persuading Murdoch and his executives that a regulatory review of a Comcast-Fox tie-up would be speedy."
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In any case, there are undoubted realization of a combined Disney-Fox studio is going to keeping theater chain CFOs up at night