The word on Wall Street these days is that the only thing that matters is if your company has devised a way to beat Amazon or Netflix. Profits don’t mean squat, but market share does – and it’s only a matter of time before Amazon and Netflix cut your lunch for you.
So the big news this week was that two of the giants in the media content business had joined forces in a mega-merger. But will this be enough to protect against a future Amazon Netflix extinction level event?
Without a doubt Disney’s acquisition of 21st Century Fox assets will shake up the entire global entertainment business. After Disney’s US$52 billion acquisition of 21st Century Fox- or most of it, anyway – there are so many pieces to unpack, it’s hard to know where to begin. Separately, these were already two of the biggest media and entertainment companies on the planet. Together, they form a Goliath whose tentacles will touch every corner of the content and distribution universe.
Right off of the bat, FIB can think of five ways this merger changes the dynamics of the global entertainment and media business:
1. ESPN’S COMA BABY GETS A HIT WITH THE DEFIBRILLATOR
Ever since Rupert Murdoch started in entertainment, he knew that Live Sports were a key to cementing his place as a long term content business. You cannot pirate Live Sports, and people will kill for Live Sports.
The merger will give Disney control of Fox’s stable of about 20 regional USA sports networks, which air the games of local teams all around the USA and other markets. Then there are the other assets like the NFL, NBA, Nascar, UFC etc.
It’s likely Disney will bring these networks under the ESPN banner in some capacity. ESPN had been on life support for some time and it was only a matter of time before it kicked the bucket. Now under the merger these new Fox networks give Disney a greater control of the Live Sports market at a time when ESPN is facing an existential crisis driven by cable cord-cutting and other factors. ESPN gets a blast with the paddles, and comes out a force to be reckoned with.
2. DISNEY’S STREAM SERVICE HULU GROWS SOME CAJONES
The streaming service Hulu is currently a joint venture between Disney, Fox, Comcast’s NBC Universal, and Time Warner. After the merger is complete, Disney will own a controlling stake in Hulu at a time when the service is just coming into its own producing its own hits.
Hulu still lags far behind Netflix in terms of subscribers, but with the right focus and leadership – and supercharged with exclusive Disney and Fox content – it’s poised to position itself as an alternative to Netflix with a real point of difference.
3. MEGA FRANCHISE NIRVANA
A Disney Fox mashup puts an unbelievably huge number of household name franchises under the same umbrella. Disney already owns Star Wars, Marvel, Pixar, the Muppets, and all those beloved Disney cartoon characters. Now, it adds Avatar, X-Men, Fantastic Four, and Deadpool and countless others with 20th Century Fox.
And the Fox catalogue goes on and on. Don’t forget about FX Studios, FX Productions, Fox21, and National Geographic Partners, not to mention 20th Century Fox Television – which owns The Simpsons, This Is Us, and tons of other shows.
4. PAY-TV DOMINANCE IN INDIAN AND EUROPE
The deal gives Disney control of significant TV assets in Europe and India. Notably, it includes the massive Star India, which operates 69 TV channels and represents a vital chess piece in a rapidly developing market. Per Reuters, India is Asia’s second-largest cable TV market, with 154 million households as of last year.
Disney will also get Fox’s 39% ownership of the pay-TV distributor Sky, which operates across Europe. In fact, it actually wants 100% of the company, as Fox already has a bid to buy the piece of Sky it doesn’t own. U.K. regulators still need to approve the deal.
5. JAMES MURDOCH TO SUCCEED IGER AS DISNEY CEO?
Disney CEO Bob Iger has had his eye on the exit door for years, but finding a worthy successor has proven nearly impossible. COO Tom Staggs was presumed to be the heir apparent, but he left the company last year after it became clear he wasn’t the one.
Meanwhile, knowing Rupert’s love for his kids, I wouldn’t be surprised to hear that part of his merger terms included a clause for his offspring. Fox CEO James Murdoch is expected to be offered some kind of senior role and, who knows, maybe even the big chair after Iger exits.
What is your opinion on this megalith merger? Drop us a line below.
