Like a high school couple making it Facebook official, there’s no going back now for Disney and FOX (FOXA). More than 14 months and $71 billion later, the Mouse House has officially acquired Fox’s major entertainment assets, reshuffling the entire industry in the process. So without any further drawn out preamble, here’s everything you need to know about the massive merger.
New Fox
New Fox, or the Fox Corporation as it looks like it’s being officially billed, will be a slimmed-down and more focused version of the previous conglomerate. It will be built around the Fox Broadcasting Company, Fox Television Studios, Fox News Channel, the Fox Business Network, FS1, FS2, Fox Deportes and the Big Ten Network. In other words, the new company revolves around the broadcasting network, news and sports (there’s a reason Rupert Murdoch paid more than $3 billion for the rights to Thursday Night Football).
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Unfortunately, Disney has promised investors $2 billion in cost savings from the merger, which roughly equates to at least 4,000 layoffs. Fox has a total worldwide workforce of 22,400 employees certain analysts have projected firings to land anywhere between 5,000 and 10,000 employees between both companies.
Comcast, which owns NBCUniversal, had also been in the running to acquire Fox, which ultimately forced Disney to up its bid from $52 billion to more than $71 billion. While Comcast obviously did not come out on top, they did acquire Sky for $39 billion, which gives the company a sturdy global footprint.
Key Fox executives transitioning to Disney include new chairman of Walt Disney Television and co-chairman of Disney Media Networks Peter Rice, former chairwoman CEO of Fox Television Group Dana Walden and FX Networks CEO John Landgraf.
Disney Blockbusters
This territory has been well covered at this point so there’s no reason to go into a big spiel. Instead, we’ll just briefly list the major pieces of big-screen intellectual property Disney is acquiring.
- The rights to the X-Men, Fantastic Four and other key Marvel characters will now be folded into the Kevin Feige’s Marvel Cinematic Universe. That includes Ryan Reynolds’ Deadpool franchise, which is likely the only character who will continue without being recast or Disney-ified.
- Disney now controls the rights to the complete Star Wars saga.
- James Cameron’s Avatar and its $1 billion worth of sequels now fall under the Disney banner. An Avatar theme park was already a big attention-grabber at Disney’s Animal Kingdom and the ancillary merchandising benefits are expected to be, ahem, significant.
- Fox Searchlight, an annual Oscars contender responsible for recent awards-worthy dramas such as The Favourite and The Shape of
Water , will continue to operate under Disney. It is unknown how their annual output will be impacted, but it does give Disney more of a foothold in prestige cinema.
Disney Television
National Geographic will join ABC and ESPN as Disney’s primary linear entertainment options, though the acquisition of FX Networks is probably the small-screen crown jewel of the deal. The beloved basic cable network will be receiving an infusion of resources from Disney, giving Landgraf—long considered one of the top executives in the TV industry—ample room to operate. FX is a consistent Emmys contender behind Netflix (NFLX) and HBO.
The overall deal was largely driven by Disney’s need to compete with deep-pocketed streaming threats such as Netflix, Amazon (AMZN) and Apple (AAPL). Adding the entirety of the Fox library gives them a war chest of high-profile brands (Lucasfilm, Marvel, Pixar, Fox, etc.) and a deep sea of content with which to do battle. On Disney’s earnings call in February, CEO Bob Iger reiterated that “[Direct-to-consumer] remains our No. 1 priority.” That positions Disney+ and Hulu—of which Disney will now take a controlling stake—as crucial cogs in the company’s future. Fox’s adult-skewing content is expected to be re-routed to Hulu, whereas the family-friendly content will help line the library of Disney+. This is a significant boost to both services that immediately puts them on a higher playing field than upcoming standalone services from WarnerMedia and Comcast.
Disney will be forgoing a bundle of lucrative licensing revenue by developing its own over-the-top service and keeping content in-house in a vertical system. Streamers are infamously unprofitable in the early going (Netflix is still operating at a yearly loss). But these losses could be partially offset as cable networks, productions studios and other potential property partnerships are attracted to Disney’s newly fortified kingdom.
Controversy in the Mouse House?
Overlooked in this seismic shift is the potential for internal drama at Disney. In previous acquisitions, Disney has often allowed successful brands to operate with a fair amount of autonomy. But there is such considerable duplication between Disney and Fox’s operations that this will prove to be an entirely new kind of integration.
Due to Hulu’s previously existing deal with Disney-owned ABC, Disney+ will be unable to air content from ABC. In a small way, the company will be overseeing two competing streaming services, though the content offered on each will vary. Given the overlap and the increasingly competitive battle for TV viewership, Disney might risk cannibalizing itself.
There’s also the complicated matter of executive compensation, which has been the source of much speculation since the wheels on this deal started spinning. The last thing Iger needs is factions at odds with one another within his domain. Empires are brought down from within.
