NEW YORK (AP) โ Disney is buying the Murdoch familyโs Fox movie and television studios and some cable and international TV businesses for about $52.4 billion, as the home of Mickey Mouse tries to meet competition from technology companies in the entertainment business.
Disneyโs all-stock deal for 21st Century Fox gives it the studios behind Avatar, โThe Simpsonsโ and โModern Family,โ though Murdoch will keep the Fox News Channel, the Fox television network and other U.S. television businesses. The deal also brings Marvel characters such as X-Men and The Avengers under one roof.
That Rupert Murdoch and his sons were willing to sell off much of the business that has been built up over decades came as a shock to the entertainment industry.
Murdoch, who built a global media and entertainment empire out of an inheritance from his father in Australia, says selling much of the 21st Century Fox entertainment businesses to Disney allows what remains of his familyโs business to focus on American news and sports. During a call with investors Thursday, Murdoch describes the move as a return to the companyโs lean and aggressive roots.
The deal comes as the entertainment business goes through big changes. TV doesnโt have a monopoly on home entertainment anymore. Thereโs Netflix, which is spending up to $8 billion on programming next year. Amazon is building its own library, having splashed out on global TV rights to โLord of the Rings.โ Facebook, Google and Apple are also investing in video.
As consumers spend more time online, TVโs share of U.S. ad spending is shrinking. Advertisers are following consumer attention to the internet, where Google and Facebook win the vast majority of advertisersโ dollars.
โWeโve been talking about cord cutting for the better part of a decade. But now itโs real,โ USC Annenberg communications professor Chris Smith said. The media companies have to compete with the internet giants for consumersโ attention โ and the younger generations pay more attention to YouTube, Facebook and other โplatformsโ than traditional TV, Smith said.
To combat this trend, Disney is launching new ESPN- and Disney-branded streaming services over the next couple of years. It could beef them up with some of the assets itโs acquiring from Fox, making them exclusive to its services and sharpening its ability to compete with Netflix for consumer dollars. Disney CEO Robert Iger said many Fox properties will fit with the new service, including possibly National Geographic and additional Marvel productions.
Iger will continue as chairman and CEO of The Walt Disney Co. through the end of 2021. Disney said Thursday that it anticipates the acquisition providing at least $2 billion in cost savings. Both companiesโ boards have approved the deal. It still needs approval from Disney and 21st Century Fox shareholders.
Before the buyout, 21st Century Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company that will be spun off to its shareholders. It will also include the companyโs studio lot in Los Angeles and equity investment in Roku.
Disney is getting Foxโs regional sports networks, including the Yes Network showing the New York Yankees.
Fox is also selling to Disney its substantial overseas operations. Disney will get at least a 39 percent stake in European satellite-TV and broadcaster Sky. Fox is hoping to acquire the remainder of Sky before the deal closes, giving Disney full control. Disney is also acquiring Star India, a major media company with dozens of sports and entertainment channels.
Disney will also win majority control of Hulu, both its live-TV service and the older service with a big library of TV shows.
โThe core underlying driver for this deal in our opinion is the impending battle royale for content and streaming services vs. the Netflix machine,โ GBH analyst Daniel Ives wrote.
Not everyone thinks this is a good bet by Disney, though. Rich Greenfield, a longtime Disney critic, thinks the deal is a bad idea that ties Disney to older TV-distribution systems โ cable and satellite TV โ rather than helping it look toward the future.
He also notes that regulators may not like the idea of combining two major movie studios. The Justice Department surprised many in the industry and on Wall Street when it sued to block another media megamerger, AT&Tโs acquisition of Time Warner, in November.
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MURDOCH FAMILY TAKES A BOW
Murdoch built his empire by buying a string of papers in Australia, the U.K. and the U.S., building an influential platform for his views. He expanded into TV and movies, launching the Fox network and Fox News and changing the face of American news and entertainment.
โRupert has spent many, many years assembling the components of his empire,โ said NYU business professor Samuel Craig, who specializes in the entertainment industry.
Rupert Murdoch has ostensibly already handed the reins over to a new generation at Fox. His son James is CEO, while his other son, Lachlan, like Rupert, has the title of executive chairman.
The Murdoch empire has already been divided. After a phone-hacking newspaper scandal in the U.K., News Corp. was split off into a separate company for the publishing and newspaper businesses, which include the New York Post, The Wall Street Journal, The Sun and The Times in the U.K., and book publisher HarperCollins. Now, Fox is slimming down, with the bulk of the company going to Disney.
โThe Murdochs realize they donโt have the same kind of leverage Disney has, the same kind of brand power,โ Smith said.
It would be harder to launch a Fox-branded streaming service that attracts lots of the new generation of consumers, for example. Smith said that makes it a great time to sell off the entertainment business.
Fox will be left with the live events, news and sports that are key parts of the traditional TV bundle. There is speculation that the Murdochs would want to recombine the slimmed-down Fox with News Corp., though Murdoch told investors Thursday, โWe havenโt thought about combining with News Corp.โ
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MIGHTIER MOUSE
The Disney-branded service, expected in 2019, will have classic and upcoming movies from the studio, shows from Disney Channel, and the โStar Warsโ and Marvel movies.
Disney could continue to add movies and TV shows from Foxโs library to its services, making them more attractive compared with Netflixโs offerings. The combined libraries of the Disney and Fox movie and TV studios could have more titles than Netflix, Barclays analyst Kannan Venkateshwar said. Buying Foxโs FX networks will add edgy TV shows that complement Disneyโs long list of kid-friendly series and films, he said.
Greenfield, however, notes that a lot of programming wouldnโt be immediately available to Disney. Fox movies are exclusive to HBO through 2022, for example.
Disney also plans an ESPN Plus service for next year. It isnโt a duplicate of the ESPN TV network, but it will stream tennis matches along with major-league baseball, hockey and soccer games, as well as college sports. It might be able to add more sports through Foxโs regional sports networks โ cable channels that show popular sports in the viewerโs region.
Disney also owns Marvel, but not all the Marvel characters. Itโs made movies starring Thor, Doctor Strange and Captain America and the Avengers crew. But the X-Men are at Fox. Bringing them home under one roof could mean movies with more of the characters together.
