Disney In Talks to Acquire Majority of 21st Century Fox

With such a huge price tag, how will Disney monetize this potential asset?... I know streaming makes money but $74Billion?! It looks like Netflix made just under 9 million dollars last calendar year, there has to be more in this for Disney other than a streaming service... what would justify such a big investment when the filmmaking industry is changing so rapidly?

Im not saying another gate will make anywhere near that, but maybe its a small part of a larger strategy?

Could they potentially sink a bunch of money into this to kill off Netflix and then sell off the Fox asset once Netflix is buried?
 
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With such a huge price tag, how will Disney monetize this potential asset?... I know streaming makes money but $74Billion?! It looks like Netflix made just under 9 million dollars last calendar year, there has to be more in this for Disney other than a streaming service... if not an eventual 5th gate, what else would justify such a big investment when the filmmaking industry is changing so rapidly?
Could they potentially sink a bunch of money into this to kill off Netflix and then sell off the Fox asset once Netflix is buried?
A fifth gate isn’t going to make them $74 billion either.
 
The reason Netflix doesnt have strong profits is because until very recently, and even now its a fraction of the total, they dont own their own content. Every movie, every tv series not produced by Netflix means they have to pay someone; Warner Bros, Sony, Fox, Disney, among many others, for the use of that content. In 2011, Netflix paid $200mil to Disney for limited access to its catalog for a single year. That year, their revenue was slightly over $800mil. Last year, Netflix revenue had grown to $8bil, but they still hemorrhage money paying for rights. Its why they are currently sinking billions more into generating original content preparing for a world where they dont have to hand over the bulk of their revenue to other companies for the ability and permission to show their content.

The entire point of this deal, if it goes through, is Disney will have a massive catalog of widely varying content that its paid for outright and wont need to worry about yearly licensing fees eating into their profits.
 
With such a huge price tag, how will Disney monetize this potential asset?... I know streaming makes money but $74Billion?! It looks like Netflix made just under 9 million dollars last calendar year, there has to be more in this for Disney other than a streaming service... what would justify such a big investment when the filmmaking industry is changing so rapidly?

Im not saying another gate will make anywhere near that, but maybe its a small part of a larger strategy?

Could they potentially sink a bunch of money into this to kill off Netflix and then sell off the Fox asset once Netflix is buried?

I believe it’s not going to be nothing immediate but between streaming services movies and/or reboots plus television they’re sure to make a bunch of money but not right away. A fifth gate will make a lot of money but I don’t see it happening. There is a lot of opportunity for money to be made back but it’s going to be over a period of years. And remember they can make money from what they already own too. Imo this seems like a huge price tag now but eventually it will 100% be worth it.
 


Disney paid $4 billion for Marvel, so far the movies have grossed $13.4 billion worldwide. Star War has recouped $3.1bil of the $4.5bil it was acquired for in just 2 movies, Ep 8 will probably get them to break even. Lord knows what they've generated in merchandise sales. Point being, Disney are experts in monetizing the IPs they obtain and they have a long view financially. Whether the retain the rights exclusively as a draw for their streaming service, license them out to multiple other services or sell off ones they arent interested in, Disney will spin this straw into gold.
 
Very curious to see the final details of the proposed deal in the next few weeks. Can't say I'm excited about a merger - and probably more sanguine than most.

1) Seems Disney is doing it because it has to - due both to its push into streaming as well as protecting its licensed IP. If it walks, someone else makes the play to Disney's long-term detriment. Disney's position over a barrel is highlighted if those valuations are true - you don't pay a 30% premium (to the tune of an extra $12-15B) otherwise. The premium also suggests that Disney might be worried about Fox shareholders approving the deal and/or a black knight (cough*Comcast*cough) entering the picture - overpaying reduces those risks.

2) Interested to see if this remains an all stock deal as anticipated. With a market cap around $160B, I'm assuming Disney isn't holding about 50% of that to hand over in this deal (which could suggest that dilution is on the way). I read this week that the Murdoch family owns about 17% of Fox's overall shares - which means that they'd take substantial interests in Disney with a great deal of influence over the surviving company (even if not managing it directly) if a merger converts those shares to Disney stock.

3) Mergers of this size have a tendency to shuffle the deck in terms of management and control. It's not an asset sale - Disney is picking up the managers and personnel that run those assets (plus a boatload of new shareholders). Combining the companies and eliminating redundancies and keeping the Fox personnel on board will shake things up for years while it gets sorted out (i.e. Iger's postponed retirement for several years to oversee the integration). And that's another piece of this - much of Disney's focus, resources, and money will be directed into making a $70B+ merger a success. I wouldn't expect to see much coming out of Disney over the next few years that's not related to that integration. And since the parks likely have very little in connection with this (other than some existing IP), they may not get a lot of attention for awhile (and fifth gate talk is very premature - on finances alone, Disney's not likely to devote a couple of billion and significant resources to develop a new park on the heels of a very expensive and time-consuming merger with Fox).

Whatever happens, we still have quite some time to watch what happens - between the official announcement, shareholder and regulatory approvals, market reviews and everything else, this will play out for awhile. Also curious to see how the FCC and DOJ react. On the whole, I have a hard time seeing a successful antitrust case - but it doesn't mean the DOJ won't try (having committed themselves to wonky antitrust policy with Time Warner).
 
The reason Netflix doesnt have strong profits is because until very recently, and even now its a fraction of the total, they dont own their own content. Every movie, every tv series not produced by Netflix means they have to pay someone; Warner Bros, Sony, Fox, Disney, among many others, for the use of that content. In 2011, Netflix paid $200mil to Disney for limited access to its catalog for a single year. That year, their revenue was slightly over $800mil. Last year, Netflix revenue had grown to $8bil, but they still hemorrhage money paying for rights. Its why they are currently sinking billions more into generating original content preparing for a world where they dont have to hand over the bulk of their revenue to other companies for the ability and permission to show their content.

The entire point of this deal, if it goes through, is Disney will have a massive catalog of widely varying content that its paid for outright and wont need to worry about yearly licensing fees eating into their profits.
Netflix has been spending much more on their own content than on licensing other peoples content. They spent 6 billion this year and are planning on spending 7 or 8 billion next year.
 


Disney paid $4 billion for Marvel, so far the movies have grossed $13.4 billion worldwide. Star War has recouped $3.1bil of the $4.5bil it was acquired for in just 2 movies, Ep 8 will probably get them to break even. Lord knows what they've generated in merchandise sales. Point being, Disney are experts in monetizing the IPs they obtain and they have a long view financially. Whether the retain the rights exclusively as a draw for their streaming service, license them out to multiple other services or sell off ones they arent interested in, Disney will spin this straw into gold.

That is what I have been thinking too ... like, it's easy to make fun of and have discussions about how bad Disney management is or what they should do differently, etc - but they aren't idiots ... they definitely could find other things to spend $74bn on if they really wanted to spend it - so how and why is this worth it to them.

Just because I don't see it doesn't mean it's not there
 
Sounds like kind of a bummer, but maybe Disney feels like the franchise is lost and they don't want to waste time or money trying to fix it. I guess time will tell if they acquire those rights or not I think they really want X-men rather than fantastic four but who knows.
It just depends. If Constantin can't distribute the movie, they would have to work with Disney/Marvel Studios. Probably not a bad deal for Constantin frankly. Owning the distribution rights is pretty darn important. I wouldn't sweat this as far as the Fantastic Four goes. If they want to make a FF movie, owning whatever rights Fox has will give them leverage to make it happen. If they don't, they can block anyone else from distributing another crappy version.
 
Sounds like kind of a bummer, but maybe Disney feels like the franchise is lost and they don't want to waste time or money trying to fix it. I guess time will tell if they acquire those rights or not I think they really want X-men rather than fantastic four but who knows.

The problem is not that Disney does not want it, because I assure you the do, but the rights. Its a common misunderstanding but FOX does not own the rights to the Fantastic Four. The rights are with Constantin Films which is a smaller studio not directly related to FOX. FOX owns the distribution rights to these characters. There is no way in knowing if these distribution rights will carry over but if not then Constantin remains with the characters. Honestly I still see Disney coming out with the four but really no one can say for sure.
 
With this looking somewhat likely I have one question to ask:

How did this rumor start? Was fox struggling? Is Murdoch’s health ok?
 
With this looking somewhat likely I have one question to ask:

How did this rumor start? Was fox struggling? Is Murdoch’s health ok?

I don’t think it started as a rumor - I think someone who knew about the meetings leaked the info to the press. Fox is supposedly interested in selling off its entertainment assets to focus all of its attention on Fox News
 
I don’t think it started as a rumor - I think someone who knew about the meetings leaked the info to the press. Fox is supposedly interested in selling off its entertainment assets to focus all of its attention on Fox News
But why though, why do they just want to focus on news when they know how great the studios do for them. They make up a huge percentage of the television product as well
 
By most accounts, entertainment is just an industry they want to divest from and they see now as a time to exert maximum price for what they own.
 
But why though, why do they just want to focus on news when they know how great the studios do for them. They make up a huge percentage of the television product as well

By most accounts, entertainment is just an industry they want to divest from and they see now as a time to exert maximum price for what they own.

Yeah, I don’t think there’s really any reason beyond “we don’t want to anymore,” at least not one that’s been publically given. Ive kind of been assuming it’s politics, since Fox News is conservative but a lot of Fox’s original entertainment is fairly liberal/progressive (modern family, family guy, etc), but that’s purely speculation on my part. It likely is just a business move that gets them out of a game they don’t want to play anymore.
 
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