Analysis
DisneyBizJournal.com
July 16, 2018
Just before the end of this month,
we should see the completion of the Walt Disney Company’s deal to acquire the
movie and television studio assets of 21st Century Fox. That is, barring a Hail
Mary pass by Comcast as the clock ticks down.
Disney and Fox shareholders are
scheduled to vote on the latest version of this deal on July 27th.
When first announced in December of
last year, it was an all-stock deal valued at $54 billion. But in June, Comcast
stepped in with an unsolicited, all-cash bid of $65 billion. Disney responded
with a $71.3 billion offer – essentially 50 percent in cash and 50 percent in
stock for Fox shareholders. Comcast has been silent since, and one has to
wonder if the Department of Justice’s continuing challenge to the AT&T-Time
Warner merger – despite the government being slapped down by a judge – will
lead to Comcast stepping back from its interest in Fox. In the meantime, the
Justice Department okayed the Disney-Fox deal with the stipulation that Disney
divest Fox’s regional sports networks.
Assuming that the deal is approved
on July 27, the big question is: Does forking over more than $71 billion for
these assets make sense for Disney?
Financial and Fanboy Takes
From financial and fanboy
perspectives, the big, obvious plus is to reunite X-Men, the Fantastic Four and
Deadpool with the rest of the Marvel characters that Disney acquired when
purchasing Marvel Comics in 2009. Facing financial woes in the 1990s, Marvel
had licensed out various IP. Fox licensed X-Men, Fantastic Four, Deadpool, and
Daredevil. It allowed the Daredevil license to expire, and as a result, we have
the stellar Netflix Daredevil show.
The other licensing deal came with Sony, which controls the Spider-Man universe
– though Disney and Sony came to an agreement for Spidey to appear in the
Marvel Cinematic Universe (MCU).
The Disney-Fox deal on matters
Marvel will add wildly popular characters to the MCU, expanding opportunities
to tell superhero tales on the big screen, and via Disney’s forthcoming streaming
service (by the way, Disney gains Fox’s share of Hulu in this deal, resulting
in controlling ownership) on the small screen.
In addition, Disney’s control over Star Wars becomes complete, given that
Fox had retained rights to the original movie Star Wars: A New Hope.
Expanded Opportunity for a Host of Properties
One can envision other properties
being acquired from Fox having expanded potential with Disney. For example,
there is animated fare like The Simpsons,
Ice Age and Futurama, and edgier Family
Guy and American Dad!
Other major properties have received
little attention in the discussion, but could turn out big in this deal, such
as Planet of the Apes, The X-Files, and Night at the Museum. For good measure, consider that Joss Whedon’s
television franchises – Buffy the Vampire
Slayer, Angel, Firefly, and Dollhouse – will come to Disney. For good measure, the company that
gives us Mickey Mouse will also get Die
Hard, the Alien and Predator franchises, 24, and Kingsman.
All of this spells opportunity for
fans, Disney and its shareholders, as well as strengthening Disney’s streaming
services with a rich library and intellectual property (IP) for future
productions.
The Avatar Risk
As for potential problems, the big
one is Avatar. It was thought that
Disney went all in on Avatar by
opening the World of Pandora in Disney World’s Animal Kingdom theme park. By
all accounts, Pandora is a great experience at the park. (I haven’t checked it
out yet, but will be doing so soon.) Now, Disney will own the franchise. Keep
in mind that the movie came out in 2009, and it, of course, made an astounding
amount of money at the box office. However, the case can be made that those
dollars were overwhelmingly about the visual experience, which was impressive
at the time, and not so much about the story or characters. In fact, the film
itself was rather politically charged and divisive. For good measure, Avatar has had zero cultural impact.
Does anyone recall the names of the characters, for example? Very few. What
about Avatar toys and presence at
comic conventions? Nothing really. Have there been outcries for new movies?
Actually, troubling silence. James Cameron keeps promising sequels – the latest
“schedule” being four sequels with the first hitting theaters in 2020 – but one
has to wonder how many people care. Given its lack of lasting characters, story
or impact, these films could, once more, rise or fall based on its special effects.
If that turns out to be the case, is that a sound foundation for a franchise
and how far can Cameron push that in four more films? Is Avatar going to take the path of Star Wars or John Carter?
How Long?
When investing $71.3 billion in a
deal with a major component like Avatar
facing these and other questions, it highlights concerns as to how long will it
take Disney to get a return on this investment. Indeed, the ramped up price
Disney is paying leaves little room for error in how these assets are utilized.
While Disney certainly has the track record to make this happen, the
entertainment business is notoriously fickle. Indeed, it will be years before
we know if this purchase was a success, as we have to wait to see what Disney
does with the assets acquired from Fox. In the end, though, it would seem unwise
to bet against Disney.
Ray Keating is the editor, publisher
and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant
novels, with the two latest books being Reagan Country: A Pastor Stephen Grant Novel and Heroes and Villains: A Pastor Stephen Grant Short
Story. He can be
contacted at raykeating@keatingreports.com.
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