Today’s final confirmation of the Disney deal to acquire much of 21st Century Fox has been quite a while in gestation, but a deal of this size should take a while to birth. It is really transformational for Disney and guarantees the House of Mouse will continue to be the preeminent media content company.
An earlier iteration of this deal at the beginning of November had me a bit concerned about potential impact on the Disney brand. But the truth is that the overall strategy seems to make sense, even if the Disney brand is diluted.
- Disney gets more content to feed the maw of its nascent SVOD service.
- Disney gets National Geographic channels, a good fit with its Disneynature brand, and a prestige (if sometimes raw) cable network in FX
- Disney gets a controlling interest in Hulu. This is a place its network programs can continue to reside, assuming they will not be included in the new Disney SVOD service
- Disney gets to reunite the last piece of the licensed Marvel universe (X-Men) with its stable of Marvel characters (after its partnership with Sony that bring Sony’s licensed Marvel characters into the MCU). This is not an insignificant outcome, given the performance of Marvel for Disney.
- Disney’s inclusion of the Fox Sports regional sports networks (RSNs), a new aspect of this deal compared with the previous iteration, is an interesting choice. Although ESPN has had spotty luck trying to operate at a local level, having outlets tied to local home teams’ games may be more successful. It may also be a way to reinvent SportsCenter as a hyper-local service. This leaves the national SportsCenter to pursue its seeming strategy of becoming a personality-driven program rather than a rundown of sports news and highlights.
— The RSNs may also provide more value and content for the upcoming ESPN SVOD service, depending on what shape that takes.
Other pieces of the agreement may or may not last long in the Disney inventory, such as the Fox pieces of SKY in Europe and STAR in India. Does Disney want to jump into managing legacy satellite program distribution services while at the same time forging ahead on streaming? To me, that does not make strategic sense, but then again I’m not getting ~$45 million a year to make these decisions like Mr. Iger.
There are undoubtedly changes and tweaks that will be made to the deal before it is finally consummated, either voluntarily or as forced by the US, EU, or other regulators. But the end result should be a Disney more capable of taking on the Netflixes and Amazon Primes of the world.
David Tice is the principal of TiceVision LLC, a media research consultancy.
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