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Acquisition of 21st Century Fox by Disney

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On December 14, 2017, The Walt Disney Company announced its intent to acquire key assets of 21st Century Fox.[1] Under the terms of the agreement, Disney will acquire the Twentieth Century Fox film and TV studios and related assets; cable networks including FX Networks, Fox Sports Regional Networks; Fox's international networks; Indian satellite TV group Star India; and stakes in National Geographic Partners, Hulu, UK based satellite TV group Sky plc and other assets, in exchange for $52.4 billion in stock. Prior to the completion of the deal, Fox will spin-off its news and broadcast businesses, including Fox News, Fox Business, FS1, FS2, Fox Deportes, the Big Ten Network, and the broadcast business.[2]

History

On November 6, 2017, CNBC reported that The Walt Disney Company negotiated with Fox for a deal that both companies would merge.[citation needed] The merger would largely include Fox's filmed entertainment, cable entertainment, and direct broadcast satellite divisions (including 20th Century Fox, FX Networks, National Geographic Partners, and international divisions), but exclude divisions such as the Fox Broadcasting Company, 20th Century Fox's studio lot, Fox Television Stations, the Fox News Channel, the Fox Business Network, and Fox Sports, which would be spun off into a resulting independent company; a notable plus of such a purchase would be Disney being able to acquire the distribution rights to the first Star Wars film and the film rights to the Fantastic Four and X-Men franchises—which Disney did not obtain through its acquisitions of Lucasfilm and Marvel Entertainment. Talks had stalled for the day without a deal being finalized,[3][4] but CNBC reported on November 10 that the prospected deal had yet to be fully abandoned.[5]

On November 16, 2017, it was reported that Comcast, Verizon Communications, and Sony had also joined Disney in a bidding war for 21st Century Fox's key assets.[6][7] During a recent shareholders meeting, Lachlan Murdoch had stated that 21st Century Fox was not a "sub-scale" company "finding it difficult to leverage their positions in new and emerging video platforms", but had "the required scale to continue to both execute on our aggressive growth strategy and deliver significant increased returns to shareholders".[8]

On November 28, 2017, negotiations between Disney and Fox had reportedly resumed and at a rapid pace regarding Fox's key assets. Mike Fleming Jr. of Deadline.com commented that "given how Disney made the Marvel and Lucasfilm deals under the cone of silence, if this happens we'll probably only know it when it's announced. It is certainly being talked about today."[9] Rumors of a nearing deal continued on December 5, 2017, with additional reports suggesting that the FSN regional sports networks would be included in the resulting new company (assets that would likely be aligned with Disney's ESPN division).[10][11][12][13]

On December 11, 2017, it was announced that Comcast had dropped their bid on the Fox assets.[14] On December 14, Disney and Fox confirmed the $52.4 billion deal, pending approval from the European Commission and the United States Department of Justice Antitrust Division.[15]

Antitrust concerns

The deal is currently awaiting approval by the United States Department of Justice Antitrust Division, which has already blocked a merger between AT&T and Time Warner. This operation, which would be studied for 12 to 18 months, may become controversial. The deal is a horizontal merger (i.e., in which a company buys up another corporation that produces the same goods and products) as opposed to a vertical merger (i.e., two companies that operate at separate stages of the production process for a specific finished product) like the AT&T-Time Warner and Comcast-NBCUniversal mergers. As such, horizontal is much more criticized and more investigated than vertical, as it reduces competition and allows a giant media to increase the market share and prices which benefit the higher-ups but hurts the consumers and the job market.[16]

As both Disney and 20th Century Fox produce films and TV series, the deal would reduce the number of major film studios in Hollywood from six to five. Richard Greenfield, the BTIG Research analyst, wrote that the combined Disney and Fox assets would have a 39% theatrical market share: Disney is already using its box office muscle to bully movie domestic exhibitors, extracting financial terms far beyond their studio peers... Adding Fox, which controls portions of the Marvel universe (X-Men, Deadpool and the Avatar franchise, would enable Disney to gain unprecedented market power.[17] Box Office Mojo estimates that Disney/Fox would represent 40% of the fifteen highest-grossing domestic films of 2017, as well as 31% of box office revenue.[18]

Rep. David Cicilline of Rhode Island, the ranking Democrat on the House Antitrust Subcommittee, expressed concerns over the transaction. He said in a statement that “Disney’s proposed purchase of 21st Century Fox threatens to put control of TV, movie, and news content into the hands of a single media giant. If it’s approved, this merger could allow Disney to limit what consumers can watch and increase their cable bills,” he said. “Disney will gain more than 300 channels, 22 regional sports networks, control over Hulu, and a significant portion of Roku.”[17] The inclusion of regional sports network would give Disney greater leverage with cable and satellite distributors. David Balto, an antitrust lawyer and former policy director at the Federal Trade Commission, said that "[a]ny increase in Disney sports programming will be extremely problematic and will get intense scrutiny".[19]

The deal quickly drew opposition from critics, including the Writers Guild of America West, the union that represents writers of movies, TV, and other media. "The antitrust concerns raised by this deal are obvious and significant" by "substantially increasing the market power of a combined Disney-Fox corporation," the union said. The union added that it would "work to ensure our nation's antitrust laws are enforced."[19] On the other hand, it may also be argued that the operation still leaves many competitors around and that with its new properties, Disney may compete with Netflix in the online streaming market in equal conditions.[17]

Assets

Included in the deal are the majority of Fox's entertainment businesses.[1] These include:[clarification needed]

Fox's broadcast, news and sports businesses will not be included in the deal.[2] They include:

References

  1. ^ a b >"The Walt Disney Company To Acquire Twenty-First Century Fox, Inc., After Spinoff Of Certain Businesses, For $52.4 Billion In Stock" (Press release). The Walt Disney Company. 2017-12-14.
  2. ^ a b Nolter, Chris (2017-12-14). "Disney Acquires Most of Fox's Assets in Blockbuster $52.4 Billion Stock Deal". TheStreet. Retrieved 2017-12-14.
  3. ^ "Disney Explored Buying Fox Assets; Talks Now Dead". Bloomberg.com. November 6, 2017. Retrieved November 6, 2017.
  4. ^ White, Adam (November 7, 2017). "Why Disney buying 20th Century Fox could be good news for Marvel and Star Wars fans". The Telegraph. ISSN 0307-1235. Retrieved December 3, 2017.
  5. ^ Moyer, Liz (November 10, 2017). "Fox shares jump as 'pencils aren't down' on possible Disney deal". CNBC. Retrieved November 10, 2017.
  6. ^ James, Meg (November 16, 2017). "Comcast jumps into bidding war for 21st Century Fox's media assets". Los Angeles Times. Tronc. Retrieved November 16, 2017.
  7. ^ Bond, James (November 17, 2017). "Sony Also Inquiring About 21st Century Fox Assets". Hollywood Reporter. Eldridge Industries. Retrieved November 17, 2017.
  8. ^ Littleton, Cynthia (November 16, 2017). "21st Century Fox Shares Soar on Reports of Comcast Acquisition Overture, Verizon Interest". Variety. Retrieved November 17, 2017.
  9. ^ Fleming Jr., Mike (November 28, 2017). "Bart & Fleming: Sparks Rekindling On Disney-Fox Deal? Should Shamed Artists & Execs Be Stricken From History?". Deadline.com. Retrieved November 28, 2017.
  10. ^ Faber, David (December 5, 2017). "Disney and Fox are closing in on deal, could be announced next week: Sources". CNBC. Retrieved December 5, 2017.
  11. ^ Jackson, Eric (December 5, 2017). "Disney's latest proposal to Fox is a big bet on local TV sports -- and ESPN". CNBC. Retrieved December 5, 2017.
  12. ^ Andreeva, Nellie; Fleming, Mike (December 6, 2017). "Disney-Fox: What Happens To FBC, Will Disney Become OTT Powerhouse & How Will Teams & Cultures Mesh If Deal Makes". Deadline.com. Retrieved December 7, 2017.
  13. ^ Littleton, Cynthia (December 8, 2017). "Disney, Fox Huddle With Bankers as Deal Talks Progress". Variety. Retrieved December 8, 2017.
  14. ^ Littleton, Cynthia (December 11, 2017). "Disney Nearing Finish Line With 21st Century Fox as Comcast Bows Out of Acquisition Hunt". Variety. Retrieved December 11, 2017.
  15. ^ Castillo, Michelle (December 14, 2017). "Disney to buy 21st Century Fox assets in a deal worth more than $52 billion in stock". CNBC. Retrieved December 14, 2017.
  16. ^ Dan Primack, Sara Fischer (December 14, 2017). "Trump steps into Disney-Fox fray". Axios. Retrieved December 14, 2017.
  17. ^ a b c Ted Johnson (December 14, 2017). "Disney-Fox Deal Lands at Uncertain Time for Antitrust Enforcement". Variety. Retrieved December 14, 2017.
  18. ^ "Disney-Fox Acquisition, 40 Percent Box Office Hits". Recode. December 12, 2017.
  19. ^ a b Meg James and James F. Peltz (December 14, 2017). "Massive Disney-Fox deal expected to get close antitrust scrutiny". Los Angeles Times. Retrieved December 14, 2017.
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