What Can We Expect from the Disney-Fox Deal?


For the entertainment industry, last month was an exciting one as Disney announced its acquisition of 21st Century Fox at roughly $66 billion.[1] Although the deal is still pending DOJ’s approval and is expected to take up to 18 months to be cleared,[2] if approved, it will be one of the biggest deals in the history of the entertainment industry.[3]

For some movie fans, this means dreams do come true. Not only will Disney have the option to make new sequels for some of the old movie series such as, Home Alone, it will also finally have the power to make crossover stories that it could not make before.[4] Among all the other things, the deal will give Disney production rights to characters including the X-men and Fantastic Four.[5] These characters were sold to Fox by Marvel Studios in the 90s when Marvel was facing severe financial problems.[6] Although fans have longed for a movie where all the iconic Marvel characters appear in one story, Marvel could never bring such a story to the big screen due to a lack of production rights. Those crossover stories that did make it to the big screen, such as The Avengers, with X-men’s absence, are only half-told compared to the original comic books.[7] Since Disney now owns Marvel,[8] its acquisition of Fox will bring those missing characters back to the Marvel Cinematic Universe and open the door to “richer, more complex worlds of inter-related characters and stories,” as it was noted in Disney’s press release.[9]

Disney will not, however, own all of Fox’s assets.[10] The deal covers 20th Century Fox, a Fox-owned film studio, and some Fox-owned cable networks like Star TV and Sky, while leaving Fox some of its most successful ventures including Fox News and Fox Broadcasting Company.[11] In addition, Disney will gain Fox’s 30 percent stake in Hulu.[12] This, combined with the 30 percent share it already owns, will give Disney a controlling interest in the company.[13]

The possible changes Disney will bring to the streaming services industry have drawn a lot of attention. Indeed, it is worth wondering if Disney will change the balance of power in an industry that has been performing extremely well in recent years. Even though the American stock market was in an overall uptrend last year, Amazon and Netflix, two major streaming services providers, outperformed with a jump of 56% and 55% respectively in the S&P 500 index.[14] Seeing the potential of the market, many technology companies also started to heavily invest in this newly booming business, trying to provide their own streaming services and content.[15] For example, Twitter announced 12 new collaborations for live programming last May, and Facebook launched a new tab called “Watch” for original videos last September.[16]

The trend is so hot that four months ago, even Disney announced its plan to launch its own streaming platform in 2019.[17] Disney’s entrance into the market has intensified the competition. A clear sign of this is the fact that Facebook’s COO Sheryl Sandberg and Twitter CEO Jack Dorsey have stepped down from Disney’s board of directors.[18] A Disney spokesperson explained the change: “Given our evolving business and the businesses Ms. Sandberg and Mr. Dorsey are in, it has become increasingly difficult for them to avoid conflicts relating to board matters, and they are not standing for re-election.”[19]

The plan of providing its own streaming service is, however, less certain now that Disney will gain a majority control in Hulu after its deal with Fox is closed.[20] One of the things that streaming services providers are always fighting for is subscription.[21] If Disney starts a new streaming service, it will have to build the audience from scratch, which will put it at a disadvantage in competition with other streaming giants like Netflix and Amazon. On the other hand, since Hulu is already a top streaming company,[22] Disney would get a head start if it uses Hulu as the home for its content.

There is currently no clear sign as to whether Disney will actually change its plan. However, no matter which path Disney chooses, there will be a brutal war among all streaming companies with the industry giants, Netflix and Amazon, situated to sustain the harshest impact. As part of its plan to enter the streaming market, Disney has announced an end to its current licensing deals with Netflix, starting from 2019.[23] A combined Disney and Fox would own 19 percent of the most popular TV shows available on Netflix and hence become the second-largest provider of content to the streaming service.[24] Once Disney ends its licensing agreements with Netflix as it planned, Netflix is at the risk of losing subscription.[25]

However, all of this is based on the assumption that DOJ will approve the transaction. It was not long ago when DOJ filed a lawsuit seeking to block AT&T’s $85.4 billion acquisition of Time Warner.[26] DOJ’s action was surprising to many people, as the two companies are not direct competitors.[27] In Disney and Fox’s case, not only do the two companies have overlaps in the film industry, but they also both have business in cable sports.[28] This seems to raise red flags for Disney’s acquisition. Hopefully, the decision of the AT&T case, which is not expected until April or May, will give some indication of the government’s attitude towards the Disney-Fox deal and all the mega-mergers in the future.[29]

[1] The deal is worth $66 billion as it includes Fox’s equity, which is valued at $52.2 billion, and Disney assuming its debt of $13.7 billion. Matthew Garrahan, Fin. Times (Dec. 14, 2017), Disney to Buy 21st Century Fox Assets in $66bn Deal, https://www.ft.com/content/7ecc5eb2-e0c0-11e7-a8a4-0a1e63a52f9c.

[2] Matthew Garrahan, Looming Disney Takeover Casts Pall Over 21st Century Fox, Fin. Times (Jan. 11, 2018), https://www.ft.com/content/09cf0854-f6b8-11e7-88f7-5465a6ce1a00.

[3]  See Dade Hayes, Disney-Fox Deal: How It Ranks Among Biggest All-Time Media Mergers, Deadline (Dec. 14, 2017), http://deadline.com/2017/12/biggest-media-mergers-disney-fox-deal-list-1202226683/.

[4] See Alex Abad-Santos, What Disney’s Acquisition of Fox Means for Marvel’s Superhero Movies, Vox, https://www.vox.com/culture/2017/12/14/16738852/disney-fox-marvel-acquisition-x-men-superhero (Last updated Dec. 15, 2017).

[5] Chaim Gartenberg, Disney Has Acquired 21st Century Fox’s Film and TV Studios in A Landmark Deal, The Verge (Dec. 14, 2017), https://www.theverge.com/2017/12/14/16735502/disney-fox-deal-film-tv-studio-acquisition/.

[6] Id.

[7] Abraham Riesman, What Will the Disney–Fox Merger Mean for Superheroes?, Vulture (Dec. 14, 2017), http://www.vulture.com/2017/12/x-men-avengers-fantastic-four-disney-fox-merger.html.

[8] Julia Boorstin, Marvel Approves Disney Merger, CNBC (Dec. 31, 2009), https://www.cnbc.com/id/34645011.

[9] Gartenberg, supra note 5.

[10] Julia Alexander, What Does Disney and Fox’s Historic Deal Mean?, Polygon (Dec. 14, 2017), https://www.polygon.com/2017/12/14/16775978/disney-fox-x-men-avengers-marvel-simpsons.

[11] Id.

[12] Id.

[13] Id.

[14] Aaron Pressman, Why Shares of Facebook, Amazon, Netflix, and Google Can Rise Further in 2018, Fortune (Jan. 2, 2018), http://fortune.com/2018/01/02/fang-stocks-facebook-amazon-netflix-google/.

[15] See Tim Bradshaw, Facebook’s Sandberg and Twitter’s Dorsey to Quit Disney Board, Fin. Times (Jan. 12, 2018), https://www.ft.com/content/9c7256a6-f7fe-11e7-88f7-5465a6ce1a00.

[16] Id.

[17] Brooks Barnes, Disney Makes $52.4 Billion Deal for 21st Century Fox in Big Bet on Streaming, N.Y. Times (Dec. 14, 2017), https://www.nytimes.com/2017/12/14/business/dealbook/disney-fox-deal.html.

[18] Bradshaw, supra note 15.

[19] Bradshaw, supra note 15.

[20] Chris Morris, What the Disney-Fox Deal Could Mean for Hulu, Fortune (Dec. 14, 2017), http://fortune.com/2017/12/14/disney-fox-hulu/.

[21] See Mike Snider, Cord Cutters Can Now Pick from 200 Services, but Mostly Want the Top Four, USA Today (Nov. 9, 2017), https://www.usatoday.com/story/tech/talkingtech/2017/11/09/netflix-amazon-and-hulu-remain-top-3-subscription-streaming-services-hbo-moves-up/847440001/.

[22] See id.

[23] Barnes, supra note 17.

[24] Tim Bradshaw, Disney-Fox Combination Changes Power Balance in Hollywood, Fin. Times (Dec. 13, 2017), https://www.ft.com/content/26510a1c-dff3-11e7-8f9f-de1c2175f5ce.

[25] See Id.

[26] Shannon Bond & Barney Jopson, Trump Administration Moves to Block AT&T-Time Warner Deal, Fin. Times (Nov. 20, 2017), https://www.ft.com/content/4fa51ea2-ce4c-11e7-9dbb-291a884dd8c6.

[27] James B. Steward, The Disney-Fox Deal Has Friends in High Places, N.Y. Times (Dec. 14, 2017), https://www.nytimes.com/2017/12/14/business/media/antitrust-disney-fox.html.

[28] Id.

[29] See Ted Johnson, Disney-Fox Deal Lands at Uncertain Time for Antitrust Enforcement, Variety (Dec. 14, 2017), http://variety.com/2017/politics/news/disney-fox-deal-antitrust-enforcement-1202637338/.


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Fordham Journal of Corporate & Financial Law