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How Disney and Fox Are Causing an Industry Shift

December 15th, 2017   ||    by Karlyn Borysenko

In a field crowded with big news stories, one of the biggest is Disney’s $52.4 billion acquisition of 21st Century Fox’s film and TV divisions. The deal may prove to be a seismic shift for an industry that’s already facing a rapidly evolving digital landscape, as well as regulatory change that will have financial and behavioral impacts on companies and consumers alike.

Disney and Fox: Reasons for Selling

Rupert Murdoch, the executive chairman of News Corp., is better known for his acquisitions and business expansions than his sales. According to NPR, the sale of 21st Century Fox may have a twofold purpose: cash in on a financial opportunity during a period of industry uncertainty and solve the problem of dynastic change in Murdoch’s empire, where his children Lachlan and James may compete for dominance.

According to TechCrunch, the sale includes Nat Geo Network, Star TV in India and China, Fox’s movie and TV studios, a greater stake in Sky in Europe, a majority stake in Hulu, and even some regional sports. Notably, Fox News, Fox Broadcast, and national sports are not part of the sale.

Disney and Fox: Reasons for Buying

For Disney, the acquisition is an opportunity to acquire more content in a world where content is king. It complements the company’s recent move into over-the-top (OTT): Its streaming service, scheduled for 2019, will benefit from more content. Disney also gains a controlling presence in Hulu, which could develop into a direct-to-consumer service.

It’s an aggressive market move, placing Disney in more direct competition with Netflix in the streaming ecosystem. Disney CEO Bob Iger almost said as such, according to TechCrunch, noting Hulu now has a chance to “become an even more viable competitor” to other services.

Synergies with Disney properties are also possible, with a nod to augmented reality at Disney theme park attractions. According to a recent announcement, Disney’s Animal Kingdom Park can now “experience the magic of Pandora—The World of Avatar, a new land inspired by the Fox film franchise that opened earlier this year.”

Changing Regulations

Adding to this competitive jockeying is a shift in the regulatory environment: The Federal Communications Commission (FCC) has just voted to end net neutrality. While the ramifications of such a policy rollback are yet to be seen, we anticipate it will impact consumers’ choice of services and the accessibility of specific content streams.

Off-the-record conversations with broadcasters suggest guarded optimism for a potential viewer return to linear television. But this might be offset by more cord-shaving as consumers seek cost efficiencies.

While net neutrality has been overturned—and the specter of a freewheeling regulatory environment looms large—there’s still the possibility the Disney-Fox acquisition will not see federal approval. Keeping in mind the Justice Department’s legal challenge to the purchase of Time Warner by AT&T, several news outlets believe there may be some pushback to the deal. As with net neutrality, the best strategy at this point is to stay alert—and informed.

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