Disney and Fox are racing towards the finish line.
The two media companies are expected to announce a $60 billion-plus pact this week that will see Disney snap up much of Fox’s television and film holdings. If completed, the deal will dramatically reshape the entertainment landscape, bringing together for the first time two of Hollywood’s “Big Six” studios under common ownership, all to give Disney the bigger arsenal of programming it needs to do battle with Netflix and other new entrants in the content business.
Details of the plan and deal points are being closely guarded. There are also many uncertainties about who will run the combined companies, how the government will react to the prospect of consolidation among Hollywood studios, and what it all means for the creative community. Here’s a look at key questions that need to be addressed.
1) Will the Murdochs be involved in Disney?
Yes, they’ll have their own company to run, but will Rupert, Lachlan, and James be satisfied overseeing Fox News, the Fox broadcast network, and Fox Sports in such a pared-down form? They’ll also, as part of the deal, receive a small stake in Disney. But could they somehow leverage the merger into a seat at the table for father or sons? Disney chief Bob Iger is expected to extend his contract as CEO beyond its current mid-2019 expiration point to preside over the integration of the Fox assets. But he’ll eventually need to find a successor. As the Disney board has had no traction with internal candidates, they might be inclined to look at Fox’s formidable team. James Murdoch’s name has been mentioned as making the transition to Disney, spurring succession talk, but sources on both sides of the talks caution that there is no such stipulation in the deal.
2) Will Fox continue to make movies?
On Monday, Fox grabbed a leading 27 Golden Globe nominations, double the number racked up by any other major media company, for fielding the likes of “The Shape of Water,” “Three Billboards Outside of Ebbing, Missouri,” and “The Post.” These are gutsy, auteur-driven movies that are geared at adults. They’re also exactly the kind of movies that Disney no longer makes. The studio instead focuses on animated fantasies, Star Wars sequels, and Avengers spin-offs; big-budget offerings that appeal to all ages. Moreover, Disney got out of the indie movie game when it sold Miramax in 2010. Does it have any interest in Fox’s art house label Searchlight?
With Disney looking to launch a streaming service, there’s an argument to be made that it needs as much content as possible to attract customers. If Disney wants to create a Netflix killer, that won’t just require having access to Captain America and Luke Skywalker. It may mean offering up a few R-rated movies. Fox knows how to do that.
3) Will the Justice Department OK the deal?
Rupert Murdoch has friends in high places (namely a certain Oval Office occupant), but it’s tough out there for media mergers. Just ask the folks at AT&T and Time Warner. That pact is currently being held up by the Justice Department over anti-trust concerns. That deal is a vertical one, meaning that the two companies operate at different stages of a product’s supply chain and have very few overlapping operations. The Disney and Fox deal is a horizontal merger, in other words that they are in the same business. Historically, horizontal mergers have faced more hurdles in getting government approval because they have a greater chance of creating monopolies. It remains to be seen how this corporate marriage will be greeted in Washington and if Disney and Fox will have to jettison any television or film holdings in order to appease the government.
4) Will Iger stay longer?
Iger’s tenure at Disney has been a dramatic one. He’s shown a willingness to make bold bets, snapping up Pixar, Marvel, LucasFilm, and, now, Fox. Managing all these fiefdoms takes talent. Iger is currently slated to step down in 2019 when his contract expires. But there’s no successor in place, and the pressure will be on him to sign up for another tour of duty. That may mean putting his (not so secret) presidential ambitions on the back burner.
5) Will the X-Men team With the Avengers?
Fanboys and fangirls don’t seem to care about monopolistic niceties or the end of the era for the Murdoch gang. They’re more interested in seeing Wolverine hanging out at Avengers HQ. Those dreams could soon come true. After all, the Fox purchase does give Disney, and in particular Marvel, its comic book division, rights to several superheroes that it had licensed to Fox. Not only does the company now have the ability to make X-Men movies, but it can also reboot the Fantastic Four. There’s a whole new world of mutants and costumed heroes just waiting to join the MCU. That leaves only Sony’s Spider-Man films existing outside of Disney and Marvel’s direct control.
6) What does this mean for Netflix?
Buckle up. Netflix has fashioned itself into the de facto subscription streaming service, luring tens of millions of customers to its platform. But Disney wants in on the business. The company has already announced plans to build a standalone streaming service by 2019, and with the Fox deal, it will not only be able to offer films and shows from Pixar, Marvel, and LucasFilm. It can add programming from the likes of FX and National Geographic, along with movies such as “Alien” and “Avatar” from the Fox studio catalogue. Plus, by purchasing Fox’s assets, Disney will have majority control of Hulu, giving them even more access to those digital dollars.
7) What happens to the Fox lot?
Fox’s Century City sound stages are the stuff of Hollywood history. Will Disney get the 50-plus acres of production and post-production facilities that sit on incredibly valuable Westside real estate? It may not want them. Given that the company already has its own substantial studio lot in Burbank, does it want to maintain offices on both sides of the 134 freeway?
8) What becomes of the Fox Broadcast network?
The upstart network that broke up the hegemony of the Big Three networks in the late 1980s may be in for a dramatic makeover. The word is the Murdochs intend to refocus Fox Broadcasting around news and sports. Fox has been struggling to gain traction with scripted programming in recent years. With the network’s sibling studio on its way to Disney, it’s hard to see how Fox can invest big bucks on high-end dramas and comedies. It would be just like the Murdochs to zig while the rest of the industry is zagging in the Peak TV era.
9) How will producers and creative talent under contract at Fox react to the Disney takeover?
Ryan Murphy could soon be working for Disney. Fox’s TV and film divisions have a long list of production pacts with top filmmakers, writers, producers, and directors. Disney has a approach to content, which may not be a fit for everyone. In the short-term, however, 20th Century Fox and its units will operate autonomously, at least until the deal is completed.
10) How much synergy savings will Disney promise Wall Street?
Analysts have zeroed in on about $2.5 billion in potential streamlining and elimination of redundancies within a few years after the deal is completed. That sounds like a big human toll, but for an operation the size of Disney, particularly after it has swallowed up the Fox assets, there may be less painful ways to squeeze out economies of scale.