Over the past months, the rumours that Disney was interested in taking over Fox’s production facilities have been increasing. First mentioned back in November, today saw the announce that $50+ billion deal is now confirmed and going ahead. In a special blog post, Lumina examines the good and bad implications of the deal and what the future may hold.
Up for acquisition was vast profit-making enterprises, including all TV and film production companies, National Geographic and other television channels including FX, plus stakes in a variety of SVODs and satellite broadcasters (Sky). Several large industry players were in the running for the Fox assets, including Comcast – owners of NBCUniversal, plus outside chances for Sony Pictures too. Yet, throughout the months, Disney has remained the frontrunner and under Bob Iger’s leadership, the company has been purchasing major studios and brands in recent years.
For 21st Century Fox, they have the opportunity to sell off parts of the business where profit margins will become squeezed in future years. The SVOD and Pay TV markets are packed with competitors, however its arguable that Disney are truly going after the production facilities.
Disney are set to launch their own SVOD solution in 2019. It’s not a new area to Disney, they have previously launched multiple services to cater for their children’s content. In fact, this time around, its well documented that Disney are aiming for the likes of Amazon Prime and Netflix, to become a disruptor in the SVOD marketplace. For this to happen, it knows it needs vast production capabilities to fill the library with new content. After the deal, Disney will have amounted vast levels of production facilities to take it into the future. 20th Century Fox and all its subsidiaries, plus stakes in Endemol Shine Group and Sky’s own production companies (subject to the Fox takeover).
Should the SVOD service that Disney is building towards fail to take off, the deal might prove to have been wrong time, wrong place. Streamlining the business to ensure the distribution – through all its forms – has content available will be crucial for the deal’s success. Also of note is the stake in Hulu that Disney will acquire from 21st Century Fox, making it the majority stakeholder of the streaming service. Hulu is already the 3rd largest streaming service in the USA, with 32 million subscribers, amounting to around 16.5% of the SVOD market (LINK).
Ultimately, The Walt Disney Company has grabbed the power to become the true leader in the entertainment industry. With the tech giants expanding into the sector, pumped with billions of funding, Disney looks set to counteract this with an extensive production and distribution profile.