Excuse us for perpetrating this proverb as the hills of Los Angeles are currently glowing in the distance, but where there’s smoke, there is often fire. The reports earlier this week of renewed conversations between the Walt Disney Company and 21st Century Fox make it seem like a deal between the entertainment conglomerates is more likely than it was first rumored almost six weeks ago. And as talks continue and details are leaked about the transaction, many in the media are speculating on what Disney acquiring the 20th Century Fox film studio, FX, other Fox cable channels and, potentially, Fox Sports‘ regional networks would mean. One thing is clear, Rupert Murdoch‘s domestic holdings would be whittled down to almost exclusively news organizations and a good chunk of wealthy Disney stock (although not enough to influence the company). More importantly, why would Disney CEO Bob Iger want to pursue this game-changing acquisition? First and foremost, the onslaught of Netflix.
READ MORE: Disney Places Huge Demands On Cinemas That Want To Show ‘Star Wars: The Last Jedi’
Over the past decade, Iger and his team have witnessed Netflix turn into a global media monster. They have also seen Amazon and Hulu have some success in the streaming world, but not enough to put even the slightest dent in Netflix’s market-share. They are also now keenly aware that the next generation(s) are going to not just want, but expect to get their favorite content on demand and in a streaming model. They don’t want to buy it in the iTunes store on Google/YouTube’s marketplaces and they sure as hell won’t want to watch broadcast television if they don’t have to. And with four of the world’s most popular brands in the fold already (Walt Disney Studios, Pixar, Marvel, Lucasfilm), Disney realizes it has the opportunity to compete with Netflix long term. That’s why they announced Disney films would not renew the content agreement it has with Netflix that ends at the end of 2018. That’s because in 2019 Disney’s own streaming service should debut. Moreover, despite 94 years of creating content, Disney actually needs more of it. Bringing 20th Century Fox’s 82 year-old-film and television library could make them extremely competitive in the space.
I know what you’re thinking, “Wait, this isn’t just about reuniting Marvel’s properties under one roof?” Perhaps that’s 10% of the reason why. Maybe it’s a bit more or a bit less, but you don’t spend reportedly $63 billion just so Wolverine can appear in a future “Avengers” movie. Is it a bonus? Absolutely, but Iger is envisioning the “Avatar” sequels, Fox Searchlight’s library of Oscar winners and FX’s buzzworthy series such as “Fargo,” “The Americans” and “Feud” on their new streaming service. Moreover, Disney releases only seven to nine movies a year. 20th Century Fox and Fox Searchlight will release 23 combined in 2017. Content is king and Disney wants to have enough options to make the young and old pay a monthly fee for their service in addition to Netflix or, better yet, simply be the consumer’s first choice among the two.
As for picking up the Fox Sports regional outlets such as Prime Ticket in Los Angeles, Fox Sports Detroit, Fox Sports Southeast, etc. the reasoning is easy. Without huge national rights deals on their shoulders, these local networks are exceedingly profitable. The fact they are even in on the table when Murdoch would keep Fox Sports One (it’s cable sports network) and the FOX network, makes it clear how much ESPN values them. But honestly, unless you’re hoping for your local NBA teams home game graphics to get an upgrade and for that horrible theme song to go away this part of the deal isn’t that pressing to many in the entertainment industry.
Granted, a lot can change before any formal acquisition is made. Some elements may be removed and others added. The Department of Justice will have a say in whether this breaks anti-trust regulations, but considering how much the 45th president loves Murdoch and Fox News it would be surprising if they threw a wrench into the mix. With a potential announcement next week, it made sense to ponder some of the major questions the deal will create.
Will Disney make another Miramax mistake?
Iger would never admit it, but in hindsight, the decision for Disney to sell Miramax to a bunch of investors was a mistake. Disney had just acquired Marvel Studios for a pretty penny, the company insisted it was focusing on its “core” labels (even though it just signed a distribution deal with Steven Spielberg‘s reformulated DreamWorks Studios which quickly pivoted to just prestige flicks). The irony was that just two years earlier, and with the Weinstein Brothers out the door, the studio had released the profitable Best Picture winner “No Country For Old Men” and had a library of titles that could be exploited among a number of Disney/ABC properties. With the Weinsteins gone, Miramax was also an opportunity to foster creative relationships with up and coming filmmakers before having them dip their toe into Disney’s more family-friendly endeavors. Oh, and did we mention it was a brand that every young filmmaker at the time wanted to work with? Fast forward almost eight years later and a similar scenario could unfold. First off, it would be shocking for Disney to shutter the main 20th Century Fox studio considering the price tag it’s paying for it. Moreover, even gutting it like Paramount did with DreamWorks SKG (before it moved to Disney) doesn’t seem to make a lot of sense (and we’re not even considering the uproar from Disney’s theater owners “partners” with the loss of so much content). That does leave the spotlight on Fox Searchlight, however. Remarkably, the 22-year-old mini-major has won three of the last nine Academy Awards for Best Picture. It also tends to gravitate toward properties that would benefit from a streaming service destination (yeah, you’d watch “My Cousin Rachel” if it popped up on your streaming service homepage). And it has films that would have been bigger successes if they could have tapped into the gigantic Disney marketing machine (see “Step,” “He Named Me Malala,” “Gifted,” “The Best Exotic Marigold Hotel,” etc.) Like FX, Fox Searchlight can provide a steady flow of prestige content for the new streaming service, a recognizable brand with a “seal of approval” based on its pedigree, make money theatrically and give the company a regular seat at the Best Picture table it hasn’t had outside of DreamWorks’ short stay in the Mouse House. Iger wouldn’t make the same mistake again, would he?
