- 2018-09-26
Disney's counterattack
Rupert Murdoch's 21st Century Fox has agreed to sell its entertainment business to Walt Disney. If this landmark $66 billion transaction is approved by regulators, it will shake the global media landscape.
Disney will consolidate its position as the world’s largest media company, adding Fox’s 39% stake in the trans-European Sky Broadcasting Company (Sky) and Twentieth Century Fox Film Corporation into a large brand and Intellectual property portfolio, whose characters include Mickey Mouse, Buzz Lightyear, Captain America and Han Solo.
The transaction valued Fox’s equity at US$52.4 billion and included Disney’s takeover of US$13.7 billion in debt. For Murdoch, this deal is equivalent to acknowledging that the industry once dominated by him has been irrevocably changed by digital streaming and a new generation of competitors such as Netflix and Apple.
As part of this deal, Disney CEO Bob Iger (Bob Iger) has extended his contract to 2021. Murdoch said that he advocated this in order to implement the deal. "I am convinced that this merger... will create one of the greatest companies in the world," he said.
It is unclear whether James Murdoch will join Disney as part of the deal, but the Fox CEO is expected to end his professional work with his father and eldest brother Lachlan. "James and I had a lot of conversations about the future of the two companies," Eagle said. "In the next few months, he will be indispensable to us in integrating these two companies. During that time, he and I will discuss whether there is a role he can play here."
Fox shareholders will receive 0.2745 Disney shares for each Fox stock. Disney will issue approximately 515 million new shares to Fox shareholders, equivalent to 25% of Disney. Rupert and his eldest son Lachlan Murdoch will continue to operate the remaining Fox assets, including the Fox News Channel, which will be divested to Fox shareholders. Fox said it will become a "growth company" centered on live news and sports. "Those who know me know that I am a competitive journalist," Murdoch said. The new Fox company will also include its Los Angeles studio production center, which is not included in the transaction.
Murdoch added that this new company "derives from an important lesson I learned in my long media career, that is: the content and news that the audience cares about are always valuable."
Strengthen content and build channels by yourself
Why is Disney determined to make such a large acquisition? What is the motivation and logic behind it?
According to the Leichtman Research Group, in the first quarter of 2017, the number of Netflix subscribers in the United States has reached 50.9 million, surpassing the total number of subscribers of the top six cable companies in the United States (48.6 million). By the third quarter of 2017, Netflix's revenue increased by 30.3% year-on-year, net profit increased by 150% year-on-year, and the number of subscribers reached 109 million. The development of Netflix can be described as very rapid. At the 2017 Oscars, the films "Manchester by the Sea" and "Salesman" that Amazon participated in the release won three awards. In July, Amazon announced that it would set up a film distribution team to release Woody Allen's new film "Ferris Wheel." On November 14, Amazon announced the purchase of the television adaptation rights for Tolkien's novel "The Lord of the Rings" series.
Internet technology companies such as Amazon, Apple, and Netflix were originally Internet channels for film and television, and film companies such as Disney provided them with content. The two sides cooperated for a win-win situation. But now, each of them has a huge number of users, and they are not satisfied with just being a channel, they have begun to enter the content of film and television, and they have produced and promoted their own films. For Disney, these companies have gone from partners to competitors, and they are even more terrifying rivals than film companies such as MGM and Paramount. MGM and Paramount are at least their peers, each occupying a piece of land. Although there is competition, they will make money in harmony. Netflix is completely different. This company wants to transform the traditional film and television industry and pull down all the giants such as Disney, MGM, Paramount, and Warner Bros.
Since Internet companies as channels can intervene in content production, content giants can naturally also intervene in channels. As a result, Disney began a defensive counterattack.
Acquired Marvel in 2009 and Lucasfilm in 2012. Now that it has acquired 21st Century Fox, Disney will obtain the copyrights of blockbuster films such as "Avatar", "Deadpool", "Fantastic Four" and "X-Men", and further consolidate its leading position in film and television content. This is defense.
In August 2017, Disney announced that it would no longer provide new content to Netflix and would build two direct-to-consumer products: one ESPN streaming service focused on sports, and the other including major franchises such as "Star Wars" and Marvel. The product is in direct competition with Netflix. Disney CEO Robert Iger also said: The price of Disney's services will be significantly lower than Netflix. If the acquisition of 21st Century Fox is successful, Disney will also obtain 22 regional sports channels and other media channels, and hold 60% of the Hulu streaming media platform. This is a counterattack.
Holding a shield in one hand, continuously strengthening the advantages of content production and production, accumulating top IP, deepening the moat, and holding a spear, acquiring and building its own Internet film and television platform, directly facing users, and entering the territory of Netflix and Amazon. This is the counterattack of the Disney entertainment empire. . Therefore, the acquisition of 21st Century Fox, which has high-quality content and channels, is naturally reasonable.