Disney’s Bid for Fox Shows Content Consumption Is Changing
This past summer we wrote about Disney’s move to launch its own direct-to-consumer video streaming services. That announcement was a double affront to Netflix, as Disney was not only creating a rival streaming service, but also pulling its content from the platform (see Disney breaks Netflix’s Heart). For Netflix, this meant more competition and less attractive content.
The news last week that Disney entered into an agreement to acquire 21st Century Fox for $52.4 billion is another bold Disney bet on streaming services. It’s a significant move that would vastly broaden its portfolio of programming for its Internet-based video services, providing it with a wealth of additional TV shows, movies and documentaries. For example, the acquisition would give Disney the rights to The Simpsons, Avatar and National Geographic TV.
In addition to Fox’s film and TV studios, Disney would also gain Fox’s regional sports networks, its international businesses and its 30 percent stake in Hulu. Disney already owns 30 percent of Hulu and with this deal it would obtain a majority ownership in the US video-on-demand service. It’s not clear how Disney will reconcile such an established streaming service with a service yet to be introduced. The purchase also covers Fox’s satellite pay-TV businesses, such as Star TV network in India and Sky TV in Europe. Under the agreement, Fox would keep its broadcasting network channels including FS1, FS2 and Big Ten Network, as well as its Fox News and Fox Business brands.
The deal is a big development even in the current media market, which has become a huge moving target, and will be subject to the scrutiny of regulators in the US and beyond. It’s notable that the announcement comes as the US Department of Justice is challenging AT&T’s $85 billion acquisition of Time Warner, a vertical move that would provide a major telecommunications company with a major content portfolio. Disney executives say they’re confident the deal will win regulatory approval, but logic would suggest that the company should be prepared to make some adjustments along the way.
Disney has established a strategy of successfully expanding through merger and acquisition activity. During the past two decades, it has acquired US TV station ABC, sports broadcaster ESPN, Lucasfilm, Marvel, The Muppets Studio and Pixar, among other technology assets. The sun never sets on the Disney empire.
Whatever regulators decide, the pressure to create new types of bundle will continue. Faced with competition from Netflix as well as Amazon, Apple, Facebook and YouTube, traditional media companies are in challenger mode. Disney’s bid to buy Fox is the clearest sign yet that the media landscape is shifting quickly. Disney knows well, particularly through its ESPN subsidiary, that consumer behaviour is changing and consumers are shaving away content they don’t need.
Disney has a growing range of content and the marketing clout to create a robust streaming service, but it will have to develop a user experience that entices the newer generation of viewers, usurping rivals. For now, consumers will not benefit hugely from the acquisition. However, the announcement underlines the importance of distribution as well as great content. This is a significant move for Disney to compete with the threat posed by Web giants.
Subscribe to our blogMake sure you don't miss out on our fresh insights on topical news in the connected world
"*" indicates required fields