Jae C. Hong / AP
- A Disney/Fox combination would create lots of leverage when negotiating with cable distributors, advertisers, and increasingly tech giants like Apple, Netflix, and Amazon.
- But the limitations of the deal reportedly floated by Disney, which wouldn’t include the Fox network and Fox sports, would limit its impact.
- In either case, Disney & Fox would still be reliant on other companies’ distribution, whether through broadband pipes (e.g. Comcast) or digital platforms (e.g. Facebook, Netflix).
As the headlines flashed across Twitter earlier today – Disney might by Fox! – the easy first reaction was, ‘holy crap, is that really possible?
Ten — even five — years ago, such a deal would’ve been unimaginable for two reasons. Two of the biggest TV and movie companies on the planet wouldn’t be interested in merging when they still had the clout to beat each other’s brains in. Also, they wouldn’t be allowed to anyway, right? That would give one media entity way too much power.
But if the past half-decade has taught us anything, it’s that media giants don’t have the power they used to. Not in a world where they are suddenly battling Netflix, Amazon, Apple, Facebook and Google for people’s entertainment time, and for advertisers’ wallets.
A huge merger now might actually be necessary for big media survival.
“It’s a signal that all deals are possible,” said Dave Morgan, CEO of the data-centric TV ad company Simulmedia. “With Google and Amazon, and soon AT&T buying Time Warner, everybody in media is suddenly sub-scale. What would have been totally unthinkable and unnecessary is actually the only way to go for these companies.”
Thus, the potential deal (which according to CNBC and Bloomberg was rebuffed by Fox and is not actively being discussed) could make sense for lots of reasons. Let’s run through a few:
- Disney + Fox would own a cadre of movie and TV studios (from Marvel to 21st Century Fox), which would be a big help when trying to get movies in theaters and more importantly, for launching a direct to consumer streaming service to compete with Netflix – something Disney is already planning
- The same clout would prove powerful when trying to negotiate with cable distributors like Comcast and Charter as well as newer ‘skinny bundle’ players like Hulu Live and YouTube TV to make sure Disney and Fox’s channels carried.
- Ditto for making distribution deals with newer, could-be-huge-someday outlets like Facebook Watch and Snapchat and Amazon Video and of course, Netflix.
- The combined entity would also theoretically be better positioned for making content, as Netflix is planning to spend $8 billion on content and Apple a cool billion next year.
- From an ad sales front, the combination of Disney and Fox’s collection of networks would be a must buy for pretty much any TV advertiser, which could help command big pricing.
- If the two companies merge, the X-Men (which have been licensed from Marvel by Fox) might be able to start appearing in Marvel movies.
But, there are reasons to be underwhelmed with what’s reportedly on the table now:
- At first glance, you might think that the Disney/Fox entity would command a huge chunk of the broadcast TV market. But the deal wouldn’t include Fox Network, reported CNBC. What does it say about broadcast TV’s place when that’s seemingly not the crux of the merger?
- Same deal for sports. Before you start thinking of the potential clout formed by ESPN and Fox Sports negotiating with the NFL or the World Cup, Fox’s sports assets wouldn’t be part of the acquisition, according to CNBC – nor would cable TV heavyweight Fox News. Does Disney want to make this kind of deal just to get its hands on FX and National Geographic?
- This doesn’t get Disney/Fox distribution in people’s homes in the U.S. While Fox does own a chunk of the satellite service Sky in the U.K., neither Fox nor Disney own the pipes that push content into people’s homes in the states.
- That’s still where lots of the power lies. Consider Comcast, which purchased NBCUniversal last decade. Even as more people cut the cord, Comcast still sells broadband to millions, which means companies still have to make deals with it, not necessarily the other way around.
“If nothing else, this is Disney saying to the world, ‘I’m a buyer,” said Morgan. “And Fox is saying, ‘I’m listening.'”
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