by Ray Keating
Analysis
DisneyBizJournal.com
July 16, 2018

Before the end of this month, we should see the completion of the Walt Disney Company’s deal to acquire the movie and television studio assets of 21st Century Fox. That is, barring a Hail Mary pass by Comcast as the clock ticks down.

Disney and Fox shareholders are scheduled to vote on the latest version of this deal on July 27th.

When first announced in December of last year, it was an all-stock deal valued at $54 billion. But in June, Comcast stepped in with an unsolicited, all-cash bid of $65 billion. Disney responded with a $71.3 billion offer – essentially 50 percent in cash and 50 percent in stock for Fox shareholders. Comcast has been silent since, and one has to wonder if the Department of Justice’s continuing challenge to the AT&T-Time Warner merger – despite the government being slapped down by a judge – will lead to Comcast stepping back from its interest in Fox. In the meantime, the Justice Department okayed the Disney-Fox deal with the stipulation that Disney divest Fox’s regional sports networks.

Assuming that the deal is approved on July 27, the big question is: Does forking over more than $71 billion for these assets make sense for Disney?

Financial and Fanboy Takes

From financial and fanboy perspectives, the big, obvious plus is to reunite X-Men, the Fantastic Four and Deadpool with the rest of the Marvel characters that Disney acquired when purchasing Marvel Comics in 2009. Facing financial woes in the 1990s, Marvel had licensed out various IP. Fox licensed X-Men, Fantastic Four, Deadpool, and Daredevil. It allowed the Daredevil license to expire, and as a result, we have the stellar Netflix Daredevil show. The other licensing deal came with Sony, which controls the Spider-Man universe – though Disney and Sony came to an agreement for Spidey to appear in the Marvel Cinematic Universe (MCU).

The Disney-Fox deal will add wildly popular characters to the MCU, expanding opportunities to tell superhero tales on the big screen, and via Disney’s forthcoming streaming service on the small screen. By the way, Disney gains Fox’s share of Hulu in this deal, resulting in controlling ownership.

In addition, Disney’s control over Star Wars becomes complete, given that Fox had retained rights to the original movie Star Wars: A New Hope.

Expanded Opportunity for a Host of Properties

One can envision that the other properties being acquired from Fox will offer expanded potential with Disney. For example, there is animated fare like The Simpsons, Ice Age and Futurama, and edgier Family Guy and American Dad!

Other major properties have received little attention in the discussion, but could turn out big in this deal, such as Planet of the Apes, The X-Files, and Night at the Museum. For good measure, consider that Joss Whedon’s television franchises – Buffy the Vampire Slayer, Angel, Firefly, and Dollhouse – will come to Disney. Also, the company that gives us Mickey Mouse will also get Die Hard, the Alien and Predator franchises, 24, and Kingsman.

All of this spells opportunity for fans, Disney and its shareholders, as well as strengthening Disney’s streaming services with a rich library and intellectual property (IP) for future productions.

The Avatar Risk

As for potential problems, the big one is Avatar. It was thought that Disney went all in on Avatar by opening the World of Pandora in Disney World’s Animal Kingdom theme park. By all accounts, Pandora is a great experience at the park. (I haven’t checked it out yet, but will be doing so soon.) Now, Disney will own the franchise. Keep in mind that the movie came out in 2009, and it, of course, made an astounding amount of money at the box office. However, the case can be made that those dollars were overwhelmingly about the visual experience, which was impressive at the time, and not so much about the story or characters. In fact, the film itself was rather politically charged and divisive. In addition, Avatar has had zero cultural impact. Does anyone recall the names of the characters, for example? Very few. What about Avatar toys and presence at comic conventions? Nothing really. Have there been outcries for new movies? Actually, troubling silence. James Cameron keeps promising sequels – the latest “schedule” being four sequels with the first hitting theaters in 2020 – but one has to wonder how many people care. Given its lack of lasting characters, story or impact, these films could, once more, rise or fall based on its special effects. If that turns out to be the case, is that a sound foundation for a franchise and how far can Cameron push that in four more films? Is Avatar going to take the path of Star Wars or John Carter?

How Long?

When sinking $71.3 billion into a venture, it seems obvious to ask: How long will it take Disney to see a return on this investment? Indeed, the ramped up price Disney is paying leaves little room for error in how these assets are utilized. The entertainment business is notoriously fickle, and of course, it will be years before we know if this purchase was a success. In the end, though, given the full set of assets being acquired, it would seem unwise to bet against Disney.

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels, with the two latest books being Reagan Country: A Pastor Stephen Grant Novel and Heroes and Villains: A Pastor Stephen Grant Short Story. He can be contacted at raykeating@keatingreports.com.