Disney set to close deal for 21st Century Fox

LOS ANGELES • The Walt Disney Co is poised to complete a onceunthinkable deal to swallow most of Mr Rupert Murdoch's movie and television empire, a more than US$60 billion (S$81 billion) acquisition that would supercharge Disney's global streaming-service ambitions, threaten to undercut Silicon Valley's entertainment aspirations and most likely prompt further consolidation in Hollywood.

Disney was closing in on Tuesday on an all-stock transaction to cleave out most of the assets of 21st Century Fox, which is controlled by the Murdoch family, with an agreement possibly coming as soon as today, according to two people briefed on the matter, who spoke on the condition of anonymity because the talks - now down to the final details - were private.

"This is a massive, out-of-the-blue idea with enormous ramifications," said Mr Michael Nathanson, a long-time media analyst. "Direct-to-consumer services like Netflix will face more challenges for market share. For Hollywood, it begs for more consolidation. There will be one or two fewer studios a year from now. What happens to CBS and Viacom?"

Under the contours of the discussions, which could always hit a last-minute snag, Disney would buy the 20th Century Fox movie and TV studios; 22 regional cable networks dedicated to sports; Fox's stake in the Hulu streaming service; cable networks such as FX and National Geographic; and stakes in two behemoth overseas television-service providers, Sky of Britain and Star of India.

That would leave Mr Murdoch's 21st Century Fox with three properties: Fox News, the relatively young FS1 cable sports channel and a broadcasting unit formed by the Fox network and local TV stations. His plans for those operations were unclear, but almost all of them involve news, a business that has long been dear to his heart. Analysts have suggested that they could be combined with the family's newspaper-focused company, News Corp.

Disney did not respond to queries on Tuesday. A Fox spokesman declined to comment.

Behind Disney's interest in the deal is a zealous effort to dramatically lessen its reliance on traditional television, a business built on third-party cable and satellite subscriptions that surged for the last two decades, but is now in decline. Instead, it has begun pivoting towards what it sees as a new growth engine: subscription streaming services that bring its movies and TV shows directly to consumers.

Controlling the Fox library - which includes the X-Men movies, TV shows such as The Simpsons (left), FX series such as The Americans and classic films such as The Sound Of Music - would help Disney fortify itself against competition.
Controlling the Fox library - which includes the X-Men movies, TV shows such as The Simpsons (above), FX series such as The Americans and classic films such as The Sound Of Music - would help Disney fortify itself against competition. PHOTO: SINGTEL

Disney's first major streaming effort, ESPN Plus, will arrive in the spring. A second and still-unnamed offering, built around the company's Disney, Marvel, Lucasfilm and Pixar brands, will roll out late next year.

Disney has sought the 21st Century Fox assets to bolster those efforts and add a third service to its streaming portfolio. That would be Hulu, which focuses on older viewers with programming that includes ABC shows and original programming such as The Handmaid's Tale. Disney, which already has a stake in the service, would own about 60 per cent of Hulu if it completes the deal with 21st Century Fox.

By self-distributing content in a major way, Disney would help fortify itself against competition from Netflix, Amazon, Apple and Google. Those companies have built online entertainment operations that have become wildly popular, particularly with the young viewers coveted by Disney.

Disney, for instance, has already said it will eventually pull Disney, Pixar, Marvel and Star Wars movies from Netflix and offer them on its own service. Controlling the Fox library - which includes the X-Men movies, TV shows such as The Simpsons, FX series such as The Americans and classic films such as The Sound Of Music - would give Disney more leverage. 21st Century Fox has lately been moving its library content to Hulu in the United States, but Netflix relies on Fox licensing deals in many other countries.

Netflix has shrugged off the loss of Disney content by noting that it has aggressively moved towards making its own movies and shows. Next year, it will spend an estimated US$7 billion on original programming. A Netflix spokesman declined to comment on Tuesday.

Since taking over as Disney's chief executive in 2005, Mr Robert A. Iger has dramatically expanded its theme park operations, opening the Shanghai Disney Resort against all odds and nearly tripling the size of Disney Cruise Line. Walt Disney Studios, bolstered by his acquisitions of Pixar, Lucasfilm and Marvel, has become Hollywood's runaway leader.

But pulling off the acquisition of 21st Century Fox would be another matter entirely, dwarfing his previous deals and creating complex integration challenges. Some executives who work at Fox's studio offices in Los Angeles have been complaining bitterly about the prospect of Disney management.

"Power outages here at the office," one Fox executive wrote on Twitter last week. "Not sure if it's related to the fires or just the first phase of Disney cost-cutting measures."

The Murdochs were not seen as sellers as recently as October. "This potential about-face is startling," Mr Nathanson, the analyst, said.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on December 14, 2017, with the headline 'Disney set to close deal for 21st Century Fox'. Print Edition | Subscribe