Disney Announces $52.4B Deal For Many 21st Century Fox Assets; Iger Staying Through '21
Disney today formally announced it will purchase several properties of 21st Century Fox for $52.4B, which could be a "game-changing deal in the entertainment history," according to ABC's Rebecca Jarvis. Jarvis: "The new combined company will include Fox' movie and TV studios and cable networks." Jarvis noted Fox News, Fox Business and the Fox Sports division were not part of the deal, and those assets "they will be offered to existing Fox shareholders in a new company." Disney Chair & CEO Bob Iger said the deal "gives us a much larger international footprint and it enables us to use cutting-edge technology to reach consumers in far more compelling ways and we know how important that is in today's world." He added, "We're going to launch an ESPN direct service in 2018 and a Disney branded service in 2019. This clearly will jump-start those efforts, give us more content, more producing capabilities for those services." Iger also noted he is "going to stay" until the end of '21 ("GMA," ABC, 12/14). The WALL STREET JOURNAL's Prang, Fritz & Mattioli note Disney "will also assume" about $13.7B of debt from Fox. Disney will get Fox’ stake in Hulu and its RSNs. Disney noted FS1, FS2 and Fox' stake in the Big Ten Network will remain with Fox (WSJ.com, 12/14). CNBC's David Faber notes the RSNs alone would be valued at $20B, which is the largest portion of the deal ("Squawk on the Street," CNBC, 12/14). In L.A., Meg James notes Disney would gain 22 RSNs, which could "help entice more sports fans to sign up for the proposed ESPN streaming services" (LATIMES.com, 12/14).
REGULATORS, MOUNT UP: Former DirecTV Chair & CEO Mike White said there will be "a lot of focus" on the RSNs, which is the most lucrative part of the deal. White: "I presume this goes through both the FCC and DOJ. You can never take for granted anything in that process." White added BTN was "probably" excluded from the deal for "exactly that reason" (“Squawk on the Street,” CNBC, 12/14).
GETTING EVERYONE TOGETHER: Iger said of now having ESPN and 22 RSNs, "You have to look at the regional sports networks as a complement to ESPN, not an overlap. ... There will be a sharing of product so we can infuse ESPN national with some more local content and infuse the local regional sports networks with more national content, and the result of both will be better for the consumer than it is today” (“Squawk on the Street,” CNBC, 12/14). YAHOO FINANCE's Daniel Roberts writes Iger is "doubling down on live sports television, rather than back away from it, as some analysts have suggested or predicted Disney might." Adding Fox' RSNs is a "potential boon to ESPN," as they "produce more than 5,500 live games per year." Iger clearly "sees the value and has a plan for them." Expect Disney to "swiftly rebrand the Fox RSNs as ESPN channels." ESPN can use the RSNs to "bring new life" to the "SportsCenter" franchise. Roberts: "Imagine regional versions of SportsCenter, like a SportsCenter Tennessee that airs on the ESPN Tennessee channel, covering only news about the Titans, Grizzlies, Predators, Volunteers, and Commodores. And vice-versa: Disney can pull some of the local content from RSNs into national ESPN broadcasts." The RSNs also could "feed at least some content" to the planned ESPN Plus OTT product, "although there are obvious questions about how much content and what content." Meanwhile, the deal also contains sports assets for ESPN's international brand, including the U.K.'s Sky Sports -- which Fox is expected to close on by the end of June -- and India's Star Sports (FINANCE.YAHOO.com, 12/14).
GIVING FANS WHAT THEY WANT: In DC, Matt Bonesteel writes under the header, "Disney-Fox Deal Gives ESPN A Local Strategy To Combat Its Financial Woes." All the talk of games on the Fox RSNs "doesn't even include college football and basketball," plus MLS and the WNBA. Cable subscribers also "view RSNs as essential." A Nielsen survey in '16 of 1,500 pay-TV subscribers found that the local RSN "ranked as the fifth-most-important cable channel in their lineups, ahead of any other cable channel (including ESPN)." In some markets such as St. Louis and Detroit -- both of which are served by Fox-owned RSNs -- the local RSN "ranked higher in importance to cable customers than broadcast networks such as NBC, CBS, ABC and Fox" (WASHINGTONPOST.com, 12/14).
NOT WITHOUT RISK: VARIETY's Littleton & Steinberg note the purchase is "not without risk for seller and buyer." Littleton & Steinberg: "Can Fox make a go of things with an early-stage cable-sports operation; two cable networks that aim for a particular broad niche of people with the same political leaning; and a broadcast network that has flailed since the demise of the original 'American Idol' in 2016? And will the new properties offset some of the operating troubles Disney has had with its two best-known properties, ESPN and ABC?" ESPN remains the king of sports TV, but in recent years it has "lost subscribers while under obligations to pay out millions in lucrative rights fees to the nation’s sports leagues" (VARIETY.com, 12/14). Former TiVo Chair, President & CEO Tom Rogers said the deal makes a "very tough statement about traditional media and where it is in the world right now." Fox was "probably No. 2 worldwide in terms of advertising” after Google and “had the fastest-growing affiliate fees of anybody out there ... and yet they did not think they could make it in the future world" ("Squawk Box," CNBC, 12/14). Former YES Network Chair & CEO Leo Hindery said of whether acquiring the RSNs helps alleviate subscriber losses for ESPN, “They still have a problem. This transition from the big bundle to a world of 8-15 streaming services over-the-top is going to be a rockier road than (people) ... have talked about." Hindery: "It’s really hard to anticipate this OTT transition being as smooth as this transaction is suggesting it's going to be” (“Squawk Alley,” CNBC, 12/14).