https://www.nytimes.com/2017/12/14/business/dealbook/disney-fox-deal.html

Disney Makes Deal for 21st Century Fox, Reshaping Entertainment Landscape

By BROOKS BARNESDEC. 14, 2017



LOS ANGELES — The Walt Disney Company said Thursday that it had reached a deal to buy most of the assets of 21st Century Fox, the conglomerate controlled by Rupert Murdoch, in an all-stock transaction valued at roughly $52.4 billion.

To complete the integration, a legacy-defining task, Robert A. Iger, Disney’s chief executive, agreed to renew his contract for a fourth time, delaying retirement from July 2019 to the end of 2021.

While the merger still requires approval by antitrust regulators — and the Justice Department recently moved to block a big media company from becoming even bigger — the once unthinkable acquisition promises to reshape Hollywood and Silicon Valley. It is the biggest counterattack from a traditional media company against the tech giants that have aggressively moved into the entertainment business.

Disney now has enough muscle to become a true competitor to Netflix, Apple, Amazon, Google and Facebook in the fast-growing realm of online video.

At the same time, the agreement means that one of moviedom’s most historic studios, 20th Century Fox, will be downsized, with some operations folded into Walt Disney Studios or refocused to make films designed for online distribution. Founded in 1935, the Fox studio championed Marilyn Monroe, produced classics like “The Sound of Music,” released the first “Star Wars” movie and, more recently, turned “Avatar” into the biggest ticket-seller of all time.

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But lately, like most of Hollywood, 20th Century Fox has struggled to keep pace with the changing way younger audiences view content — namely on an internet-connected device.

“We’re honored and grateful that Rupert Murdoch has entrusted us with the future of businesses he spent a lifetime building,” Mr. Iger said.

Disney, which owns ABC and ESPN, hopes 21st Century will supercharge its plans to introduce two Netflix-style streaming services. The company’s first major streaming effort, ESPN Plus, will arrive in the spring. A second and still unnamed offering, built around the company’s Disney, Marvel, Lucasfilm and Pixar brands, will roll out late next year. Rounding out its streaming portfolio will be Hulu, the already established service that focuses on older viewers with programming that includes ABC shows.

Mr. Iger is buying 21st Century Fox’s minority stake in Hulu, resulting in majority control of the streaming service by Disney, which previously owned 30 percent. Comcast and Time Warner also have stakes in Hulu.

“We’re going to launch big, and we’re going to launch hot,” Mr. Iger said in September when announcing Disney’s streaming strategy. At the time, it could have been viewed as old-fashioned exaggeration.

Not anymore.

Disney is purchasing the Fox television studio, which has 36 series in production, including “The Simpsons,” “Homeland,” “This Is Us” and “Modern Family.” Disney’s significantly smaller TV factory, ABC Studios, has delivered series of inconsistent quality and lost its biggest hitmaker in August when the “Grey’s Anatomy” producer Shonda Rhimes decamped for Netflix.

As part of the deal, Disney will also get the FX and National Geographic cable networks, and stakes in two behemoth overseas television-service providers, Sky of Britain and Star of India. That component of the deal would seem to contradict Disney’s push to lessen its reliance on traditional television, a business built on third-party cable subscriptions that is now in decline as people turn to streaming services for home entertainment.

But those assets serve another one of Mr. Iger’s strategic goals: making Disney more of an international player. Disney has major operations in Europe, Japan and China, where it opened Shanghai Disneyland last year. But most of Disney’s profit still comes from the United States, where ESPN dominates, despite recent struggles, and annual attendance at Walt Disney World in Florida and the Disneyland Resort in California totals 162 million people.


Since taking over as Disney’s chief executive in 2005, Mr. Iger has greatly expanded Disney’s theme park operations, opening in Shanghai against all odds and nearly tripling the size of Disney Cruise Line. Walt Disney Studios, bolstered by Mr. Iger’s acquisitions of Pixar, Lucasfilm and Marvel, has become Hollywood’s runaway leader.

But pulling off the acquisition of 21st Century Fox dwarfs those deals and will create complex integration challenges. Some executives who work at Fox’s studio offices in Los Angeles have been complaining bitterly about the prospect of Disney cost-cutting.