21st Century Fox and Walt Disney are in advance talks about the sale of many of Fox's entertainment assets. Here are 4 takeaways from the rumored deal.
The Disney-Fox Deal Popular Beliefs
Until recently many would have thought it improbable that Rupert Murdoch would sell any of the crown jewels in his media empire. It’s now looking very possible. Every bit possible to Disney!
According to CNBC’s David Faber, 21st Century Fox and Walt Disney are in advance talks about the sale of many of Fox’s entertainment assets. These valuables including the 20th Century Fox film studio, the critically acclaimed FX cable network, Fox’s regional sports channels along with its stake in the Hulu streaming service and the Sky U.K. Pay-television business. The enterprise value of the assets is an unfolding $60 billion. Under terms of the stock-based transaction. Fox would retain Fox News, the most watched cable news channel, and Fox Business, which is proving to be a formidable competitor to CNBC, among other things.
Though Faber notices Comcast was also holding talks with Fox. Although there is no advancement in those discussions. Wireless giant Verizon also is reportedly in the hunt. Of course, buyout discussions can always fall apart with little notice. However, that seems unlikely. Given the unexpected roadblock antitrust regulators put in front of the AT&T-Time Warner deal, selling assets to Disney seems like the safest road ahead for Fox and the Murdoch family.
Here are a few popular thoughts on this far-reaching Disney- Fox transaction.
#01 | The synergies of combining Walt Disney and Fox’s movie and television studio businesses (Pixar, Marvel, LucasFilms, 20th Century Fox and Fox Searchlight) would be profound.
The businesses are roughly the same size. Disney’s Studio Entertainment business generated $8.38 billion in revenue in 2016 on operating income of $1.74 billion. In the fiscal year ended June 30, Fox’s Filmed Entertainment division earned $8.23 billion in sales on profit excluding some costs (OIBDA) of $894 million. Lately, though Disney has had the upper hand.
Needham analyst Laura Martin, among others, has argued that Fox’s movie and TV business would be better off under Disney’s control given its underperformance. According to BoxOffice Mojo, Disney’s Buena Vista studios has about 18 percent share of the U.S. Box office, ranking second behind Time Warner’s Warner Bros. Fox’s 20th Century Fox studios was fourth with 12.3 percent. Though Fox is very popular for series that appear on its network such as “The Simpsons,”. It also airs hot shows for other networks including NBC’s “This Is Us,”. ABC’s “Fresh of the Boat”. And CBS’ “Life In Pieces.” Fox’s properties would fit nicely with Disney’s direct-to-consumer streaming service set to launch in 2019.
#02 | Adding Fox’s more than a dozen regional sports networks will give Disney’s ESPN, which is bleeding subscribers, a needed boost, particularly as Wall Street continues to focus on this season’s decline in NFL ratings.
The self-proclaimed “Worldwide Leader In Sports” shells out $1.9 billion annually for the rights to broadcast. “Monday Night Football,” the most of any network. Fox’s networks have some lucrative broadcast rights for the New York York Yankees and other teams, which should help keep some fans from “cutting the cord.” The timing for ESPN couldn’t be better since ESPN’s add-supported direct-to-consumer service is due to launch early next year.
#03 |Fox doesn’t think it can compete with the free-spending rivals that are upending the video entertainment business.
For example Netflix, which plans to shell out $8 billion in 2018 on original programming. Amazon.com is a slacker by comparison, with a $4.5 billion spending plan, while Apple’s budget is around $1 billion. Whether that’s the right move is hard to say. Though critics have declared that we are living in a “Golden Age of Television,” . Meanwhile people have made similar arguments about Internet publishing for years. These days, many premium publishers are struggling to attract advertisers because of a glut of content. As long as Netflix continues to beat Wall Street’s high expectations, investors won’t make the same argument about video programs.
#03 |Finally, joining forces with Disney could pave the way for Rupert Murdoch’s son James to assume the role of CEO of the Mouse House.
Once the company’s current leader Bob Iger heads off to the sunset in 2019. The 44-year-old Murdoch likely will take a “senior executive role in Disney if a sale is agreed.”. James Murdoch is reportedly an enthusiastic backer of the Disney deal. Though there have been rows among the Murdochs in the past, sources told the FT that James Murdoch’s potential departure for Disney would be an amicable one. As soon as the ink dries on the Disney deal, one the first things that the Murdochs likely will do is merge what’s left of Fox with their News Corp. publishing assets, including The Wall Street Journal, undoing their 2013 split.