Everything You Need to Know About the Disney-Fox Deal

Independence Day Double Feature

What Happens if the Government Blocks the Deal?

Murdoch may have friends in high places at the Justice Department, but the Disney-Fox deal — which is larger than any of Disney’s previous deals combined, and currently stands as the sixth-largest media deal in history — raises all kinds of regulatory red flags. The Justice Department has recently taken a strict approach to media consolidation, as evidenced by its suing to block the AT&T-Time Warner merger.

In lieu of this, Disney has agreed to pay a $2.5 billion breakup fee to 21st Century Fox if the deal is blocked by federal regulators. The agreement also requires a breakup fee of $1.52 billion payable by either side if Disney or Fox pulls out of the transaction for reasons outside of regulatory issues. According to Disney’s Securities and Exchange Commission filing, the acquisition pact expires on December 13, 2018, but can be extended for up to one year.

Hulu commercial free

What Will Happen Now That Disney Basically Owns Hulu?

Before the deal, Disney and Fox both separately held 30% stakes in the streaming service. Now, Disney will hold a majority ownership in Hulu, at 60% — more than any of the competing stakeholders Comcast/NBCUniversal (30%) and Time Warner (10%). At 6 million subscribers, Hulu is a formidable force in the streaming field, which is still dominated by Netflix — though perhaps not for long after Disney pulls its films, and Marvel, Star Wars films from the service.

Nothing will change immediately for Hulu in the wake of the deal — the streaming service’s agreement with Comcast/NBCU prevent any major structural changes to Hulu. But industry insiders speculate that Disney could consolidate Hulu with its own planned streaming service — making one giant mega service. For now, Iger is telling shareholders that Disney intends to keep the two services separate, with Hulu focused on adult-oriented shows and movies, while Disney’s service will be for family-oriented content. Iger said :

“Owning a third of [Hulu] was great but having control will allow us to greatly accelerate Hulu into that space and become an even greater competitor to those already out there. We’ll be able to do that not only by putting more content in Hulu’s direction but by essentially having control to the extent that managing Hulu becomes a little bit more clear, efficient and effective.”

disney streaming

What Does This Mean for Disney’s Upcoming Streaming Service?

This year, Disney announced that it was launching its own streaming service, populated by its original films as well as Marvel and Star Wars properties. With 20th Century Fox and Fox Searchlight under its dominion, those studios’ vast slate of films could make their way to Disney’s streaming service as well.

Earlier this summer, Iger announced that Disney would spend $1.58 billion to gain a majority ownership of BAMTech, a live streaming platform, which would propel Disney’s streaming service and ESPN-branded sports service. Iger emphasized that “direct-to-consumer plays are a priority” for Disney, meaning that the company will likely launch even more streaming services to appeal to every demographic.

This includes international audiences, who would see a huge surge in Disney-curated content thanks to Disney’s impending $15.7 billion takeover of European pay-TV giant Sky, formerly under Fox. The Sky deal is not yet wrapped, but is expected to be closed by June 30, 2018.

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How Will This Affect the Rest of the Media/Entertainment Industry?

With Disney set to dominate over one-third of the entertainment industry, it’s putting rivals on high alert. With five major studios left competing with Disney — and Disney’s biggest rival Time Warner made $1 billion less than the House of Mouse in 2016 — it leaves a desolate environment for medium and small-sized companies.

Comcast’s $13 billion purchase was ahead of the curve by buying a controlling stake in NBCUniversal in 2009 — a partnership that will likely be renewed in the Hulu wars. AT&T purchased DirectTV in 2015 and is working on a $85.4 billion deal to buy Time Warner. Charter Communications acquired Time Warner Cable in 2016. Lionsgate acquired Starz earlier this year.

As rivals scramble to consolidate or buy content houses to compete with Disney’s mammoth company, that leaves smaller and medium-sized companies without many options except to consolidate themselves in the larger studios. This could mean a smaller variety of films, and fewer medium-budget films — as if there are any left.

Disney Fox (1)

How Will This Affect the Rest of the World?

In addition to its impending acquisition of Sky, Disney is set to take over the world. Disney will likely take advantage of its new properties by focusing on pushing Disney in film and Fox in TV internationally.

Disney has a strong foothold in the Asian box office, but Fox TV channels dominate the Eastern countries, such as Star India. The Sky network will set Disney up to be a powerful TV influence in European countries.

disney buys fox

Will People Lose Their Jobs?

Yes.

In the announcement, Disney’s press release stated, “The acquisition is expected to yield at least $2 billion in cost savings from efficiencies realized through the combination of businesses.”

In layman’s terms, that means the deal will enforce about $2 billion in job cuts in the Fox properties that are being sold to Disney. So yes, a lot of people will lose their jobs.

What Does Hollywood Think of this Deal?

While a few filmmakers welcomed the superhero properties joining Disney’s fold and happily rejoiced the split from Murdoch, Kick-Ass and Kingsman creator Mark Millar voiced his concern about the question of too many superheroes. “I think I’m also alone in not really caring about seeing all the franchises crossing over,” Millar tweeted. “Too many characters just becomes impenetrable to a mainstream audience. Marvel’s simplicity has been a great strength.”

But beyond the fervent fan discussions of superheroes, there are real chilling implications for the deal, which the Writers Guild of America called attention to in a scathing letter opposing the deal. The deal will only harm the creatives, who will have a harder time getting fair wages — a battle writers have been fighting in Hollywood for years — the WGA argued. The letter continues:

“In the relentless drive to eliminate competition, big business has an insatiable appetite for consolidation. Disney and Fox have spent decades profiting from the oligopolistic control that the six major media conglomerates have exercised over the entertainment industry, often at the expense of the creators who power their television and film operations. Now, this proposed merger of direct competitors will make matters even worse by substantially increasing the market power of a combined Disney-Fox corporation. The antitrust concerns raised by this deal are obvious and significant. The Writers Guild of America West strongly opposes this merger and will work to ensure our nation’s antitrust laws are enforced.”

We’ll keep you updated on the ins and outs of this deal as more details get reported.

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