The Disney/Fox Merger: All You Need to Know

Disney announced on Thursday 14th December 2017 that they have agreed to purchase the vast majority of 21st Century Fox in a deal worth $52.4billion, making it the 5th most expensive media company merger of all time. The purchase looks set to give Disney over 30% of the international box office, 40% of the North American box office and a 60% stake in streaming service Hulu, but that’s just the tip of the iceberg. Here’s all you need to know…

What Disney Have Bought

The Wall Street Journal are reporting that Disney’s hugely expensive acquisition provides the company with full ownership over Twentieth Century Fox cinema and television studios, cable networks (including FX and National Geographic Channel), Star India, a 39% stake in Sky, 22 regional sports networks and an additional 30% stake in Hulu, taking Disney’s control of the streaming giant to 60% overall.

Disney will also acquire around $13.7billion of 21st Century Fox’s debt, a total the company are expected to reduce by $2billion via synergy (the growth in value to Disney as a company following the acquisition). Evidence of this has already occurred via a rise in share prices.

Due to antitrust laws in the United States, Disney have not been able to acquire Fox properties such as Fox News, Fox Sports and its Fox Business brands because of its pre-existing ownership of rival network ABC.

Film Properties Owned by Twentieth Century Fox include:

• Avatar
• The Simpsons
• Star Wars: A New Hope
• X-Men (including Logan & Deadpool)
• The Planet of the Apes
• Blue Sky Studios (Ice Age, Ferdinand, Rio, etc.)
• Kingsman
• The X Files
• Die Hard
• Alien
• Predator

Fox Searchlight, the arm of Twentieth Century Fox tasked with distributing independent films such as Three Billboards Outside Ebbing, Missouri and The Shape of Water are also a part of the deal.

Who Benefits?

It is perhaps unsurprising, given his business acumen over the past several decades, that Rupert Murdoch and his family are the biggest individual beneficiaries of the sale of Fox to Disney, with 88 million Disney shares heading their way following the merger. This would make Rupert Murdoch the highest single shareholder of Disney stock, some 24 million shares ahead of the 2nd highest stock holder Laurene Powell Jobs (the widow of Steve Jobs) and would place his family 2nd only to a mutual fund named Vanguard in terms of total shares in the corporation. This could position Murdoch’s children as the heir to the throne at Disney, placing them in powerful positions to possibly replace CEO Bob Iger. Speaking of the involvement of James Murdoch, perhaps the most influential of Rupert Murdoch’s children, Iger seemed less committed to the suggestion that this would be the case, saying: “James and I will be talking over the next number of months. He’s going to be integral to the integration process, and he and I will be discussing whether there is a role for him or not at our company.”

Disney shareholders are expected to see a hike in share prices in the coming days, weeks and months, too. Shares have already risen, despite the deal not yet being legally cleared, and with a number of revelations regarding the handling of the merger yet to come, it seems likely that the share prices of Disney stock will take a huge hike in the near future, benefiting those in possession of them.

Positives for Film Fans

Disney’s purchase of Fox’s television and film studios puts the company in a position to reunite popular comic book property the X-Men with central Marvel force The Avengers, possibly creating a Marvel Cinematic Universe in which Wolverine could tangle with Hulk and Iron Man with Professor Xavier. The Fantastic Four are not a part of the merger due to the rights being held by a third party who licensed the property to Fox in the past, but it is thought that Disney’s Marvel arm will have fewer stumbling blocks in their pursuit of the property following the purchase, making a Fantastic Four appearance in the MCU very likely.

Fans of the Disney theme parks will also welcome the opportunity for Fox properties to be celebrated as a part of the Disney experience, with the likes of Alien likely to join Avatar as a theme park exploited property in the future.

Negatives for Film Fans

The increased power of the Disney brand over the box office is dangerous in a number of ways, not least from an ideological perspective.

Following the merger, Disney will own over 30% of the worldwide box office (based on current trends), which will put them in a position to further dictate the ideologies and themes of any given project (TV or film), and may limit the amount of creativity filmmakers and artists are allowed to show as regards any public offering under the company’s banner, because there is now one less media powerhouse to go to with any given project. With regards to the MCU and X-Men movies, this could mean that the X-Men films (including Deadpool) are pressed with the Marvel stamp, taking their different and often more adult themes and translating them into the family friendly, often universal, thematic presentations on offer under Marvel Studios at this time.

Update 15th Dec 2017: Bob Iger has confirmed that the X-Men, Fantastic Four & Deadpool will join the MCU. Deadpool will remain R-rated.

The purchase of Fox now puts Disney in control of a further 3 animation studios, taking the company’s total to 5. Not only does this corner the market in terms of what there is to watch and how different each product could potentially be, but it could see Disney dictate its rates of pay to animators; a topic that has been highly debated in recent months following allegations from animators that large studios had colluded to reduce competition for staff in order to keep wages to a minimum.

Prices

• May drive up cinema ticket prices.
  – Each cinema gives around 55% of any cinema ticket to the distributor. In the case of Star Wars, Disney requested a 65% take from each ticket sold, cornering theatre chains into a position wherein they had to choose between losing out on the profits a supremely popular Star Wars movie or surrendering a further 10% of their share. This merger could see Disney further exploit their power in similar ways, hiking up your theatre ticket prices as the chains scramble to find profitability. Worst case scenario is that movie theatres simply cease to exist.
• May drive up home video prices.
  – Disney are notorious for striking exclusivity deals with particular retailers and rotating the availability of their products in order to hike up value. With more properties comes more power, more opportunity for exclusivity and therefore more cost to each of us.
• May drive up streaming prices.
  – Disney have already announced that their films will be removed from Netflix in the coming year, and with an increased stake in Hulu, it seems that the content will find a new home on Hulu. With the entirety of the Disney and Fox back catalogues to offer, Hulu could suddenly become more expensive.
• Internationally
  – Fox had attempted for years to resolve issues regarding their full purchase of Sky in the UK and Europe. Issues regarding Fox and particularly Murdoch caused struggles in this regard. Disney purchasing Sky would likely be met with less opposition and should the purchase go ahead, Disney would be in control of vast amounts of international content, sporting content, etc. which would in turn create a more valuable (and expensive) product for the UK and Europe than already exists.

What of Future Film and Television Projects? 

It’s expected that future projects currently underway, such as Dark Phoenix and New Mutants will go ahead as planned, though less is known about the fates of the long gestated Gambit movie (set to star Channing Tatum), the future of the Alien franchise under Ridley Scott and the upcoming James Franco R-rated Multiple Man. 

The Importance of Hulu

When Disney announced the removal of their IPs from streaming services in favour of a self-owned streaming service being the exclusive destination of all Disney owned products, it was a big hit for streaming services and particularly Netflix. Having acquired the entire Twentieth Century Fox catalogue, including 25+ years of ‘The Simpsons’, Disney will now host a massive library of content that will demand a high quality service. This is where Hulu comes in.

It seems that Disney have firmly placed their bets on streaming being the future of entertainment by placing their sights firmly on Hulu in their acquisition of a further 30% ownership in the company (now at 60% overall). With the pulling power of every Disney and Fox property being exclusively available via Hulu, it seems that the content giant could put an end to Netflix, a company that has traditionally licensed content from both Fox and Disney in the past, and has yet to be fought by such stiff competition.

What of Fox News, etc.?

As has already been reported, Fox News, Fox Business and Fox Sports are not a part of the Disney deal and as such will remain untouched in a new, much smaller version of Fox that will act independently from the point of the merger and moving forwards.

Could This be the End of the Studio System?

The size of the acquisition and the new found power of Disney following the merger puts a lot of studios at a heavy disadvantage as regards fighting for their box office share, and may force some companies into mergers simply to protect their own futures. With Apple announcing that they’ll be entering the content race, and Facebook and YouTube making inroads too, it seems that these companies traditionally seen as technology/internet companies will become the new powerhouses of the cinematic landscape; the new studio system. The future of the film industry’s competitiveness seems to rest not with the traditional studios – Paramount, Fox, etc. – but with Disney, Apple, Facebook, YouTube (Google) and Amazon. It may well be the case that the sale of Fox is just the tip of the iceberg regarding all that is to come.

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