Disney announced its acquisition of a major portion of 21st Century Fox this morning in a deal that dramatically remakes the entertainment landscape and positions the media giant for the future.

The deal, officially valued at $66.1 billion including assumption of debt, will create an entertainment colossus that expands Disney’s footprint in every area. The agreement encompasses Fox’s prolific film and television studios, its FX and National Geographic cable networks, Fox’s regional sports networks, its 39% stake in UK satellite television provider Sky and its international cable networks, including Star India. It also includes one of the most coveted film libraries in the game — something that will be important as Disney pursues its ambitions to become a streaming media giant that challenges Netflix and forges direct relationships with consumers.

Disney is paying $52.4 billion in stock for Fox assets in an all-stock deal that would leave Fox investors owning a 25% stake of Disney. Fox’s shares closed at $32.75 yesterday. The deal gives Fox shareholders 0.2745 Disney shares for each Fox share they own.

In an interview on ABC’s Good Morning America, Disney CEO Bob Iger said the deal will give Disney a “much larger international footprint” and enable it to “use cutting-edge technology and we know how important that is in this world.”

Iger will stay in his role through the end of 2021, Disney said.

Disney will discuss the deal in a conference call with investors at 5 AM PT. Fox will conduct a call an hour later.

The deal doesn’t include Fox News, the broadcast network or local stations, or the studio’s 50-plus acre lot in Los Angeles (though Disney may lease offices on the Century City lot because there’s not enough space in Burbank). Insiders expect the remaining Fox assets to eventually merge with News Corp, whose holdings include the Wall Street Journal, the New York Post and the Times of London. Though that combination won’t occur immediately.

Disney agreed to pay a $2.5 billion breakup fee to Fox if the deal gets blocked by federal regulators, according to regulatory filings.

Disney Fox Hollywood

The sale represents a dramatic about-face for Rupert Murdoch, who spent decades building a media empire through global acquisition. James Murdoch, who friends say has grown increasingly unhappy with the triumvirate of executives running Fox, plans to leave the family business to join Disney, possibly as head of television. In the GMA interview, Iger said Murdoch would be involved in the transition for a period of months and the two would be talking about “whether there’s a role” for the scion in the combined entity.

Disney’s bid to strengthen the company’s television business, and better position the media company for the digital future, has created high anxiety in the present. Even though it will take 12 to 18 months to gain the necessary approvals to fuse the company, there has been heightened uncertainty since word of the talks came back around two weeks ago for anyone at Fox whose job might be considered “redundant” after the studios combine.

That was on the mind of rank-and-file employees at the annual Fox Holiday Party held Tuesday night. “It was a melancholy affair,” one staffer told Deadline. “People seemed to be drinking more heavily this season, many people wondered whether this will be the last Fox holiday party.”

A few tried to make light of the situation. While waiting in long lines for food and drinks, “somebody joked about wanting a ‘Fast Pass,’ a reference to Disneyland,” the employee said. “One person walked around wearing Mickey Mouse ears, which drew tense laughs.”

Combining Disney and Fox’s Film Operations Will Create Box-Office Giant

Walt Disney Studios chairman Alan Horn is expected to guide the integration of the Fox film operation into Disney’s highly efficient silo system that houses Marvel, Lucasfilm, Pixar, Walt Disney Studios Motion Pictures (which makes live-action family films and is remaking animated Disney classics), and Walt Disney Animation Studios. Rumors are rampant that WDSMP president Sean Bailey will become the head of all live-action films, and that his lieutenant, Tendo Nagenda, is a strong candidate to replace him as head of production.

Completely unclear then — while Disney higher-ups know the plan, it is believed their Fox counterparts are still waiting to hear — is how Fox and its creative executives fit into the mix. The expectation is that when Disney absorbs Fox, there could be much bloodletting include marketing and distribution, physical production, legal, HR and casting.

If Horn steers film, there would seem to be no post worthy of Stacey Snider, the 20th Century Fox chairman and CEO who brought the Steven Spielberg-directed The Post into the studio fold. Speculation has Disney possibly creating a silo to make adult dramas, and that could be steered by Snider or 20th Century Fox Vice Chairman Emma Watts, the latter of whom oversaw the X-Men, Deadpool, Planet of the Apes and other Fox live-action hits. Will that be enough for either of those talented executives?

The Disney-Fox combination may well flood the market with top studio talent — a potential boon to tech companies like Amazon or Apple that are bankrolling original content. Small wonder that Snider has been rumored for such posts as Amazon and Apple, and Watts to possibly move to Warner Bros, a studio whose film operation can use a strong hand.

Also unclear are the futures of Fox 2000, the Elizabeth Gabler-run shingle that generated Best Picture nominee Hidden Figures; and Fox Searchlight, the Steve Gilula- and Nancy Utley-headed prestige unit behind 12 Years A Slave and most recently The Shape of Water. Chatter in the community is that Searchlight might find a fit, giving Disney its most viable adult-themed prestige company since the studio sold Miramax. The diverse programming provided by both Searchlight and Fox proper could appeal to Iger and his deal architects as they plan their streaming service.

Star Wars: The Last Jedi

The deal comes on the eve of the release of Disney’s Star Wars: The Last Jedi, which is expected to be the studio’s latest billion-dollar global grosser that will dwarf anything else coming out for the holidays. That somehow seems appropriate, given that Disney — which already is expected to finish first in studio market share — takes on Death Star dimensions of dominance, by adding key franchises that belong to Fox.

James Cameron’s four sequels to the box-office blockbuster Avatar will now fall under the Disney banner. The films, estimated to be a collective investment of more than $1 billion by Fox, creates a fantasy tentpole as potentially significant as Star Wars. Disney already has tapped into the lucrative world of Pandora with a themed area at Walt Disney World’s Animal Kingdom in Orlando. And speaking of Star Wars, Disney regains ownership of the George Lucas-directed 1977 original Star Wars: Episode IV – A New Hope, which Fox owned and planned to keep until rights reverted several years from now.

Disney has bought for Marvel and its chief executive Kevin Feige a reunion of the X-Men and Fantastic Four franchises to a comic-book-inspired portfolio that has generated an uncanny streak of blockbusters, with Avengers: Infinity War coming next May. The Burbank media company’s already robust roster of animated Disney and Pixar characters would gain the longest-running animated television show in history, The Simpsons, and some prehistoric mastodons from Ice Age as it takes over the Blue Sky computer animation facility that has been the core of Fox’s feature animation business.

Taken together, the Disney and Fox film assets will create Hollywood’s most dominant studio, dominating the release slate and commanding as much as 40% of the domestic box office.

Adding 20th TV & FX Networks To Disney-ABC Creates Crowded Echelon Of Top Execs

Consolidating the Fox and Disney TV studio operations is not a marriage of equals. We have the larger and more established 20th TV, home of such series as This Is Us, American Horror Story, Empire, Modern Family, The Simpsons and Family Guy and of top producers Ryan Murphy and Seth MacFarlane, as well as its cable division Fox 21 TV studios (Homeland, The Americans). On the other side is Disney’s younger ABC Studios, whose portfolio includes ABC’s TGIT dramas, comedy Black-ish, Netflix’s Marvel series and Showtime’s breakout SMILF. 

The acquisition gives Disney access to one of the largest and most lucrative TV libraries, which includes such titles as The Simpsons and Family Guy. But there is a lot of overlap between the two studios, with duplicated creative and business teams, so layoffs are inevitable.

Blending together the two corporate cultures also will be a challenge, sources say. It is exemplified by FX Networks, where longtime CEO John Landgraf has built a close-knit team and a very specific culture that would not easily fit into with the new parent company. The FX group includes the third Fox production division, FX Prods., which will join Disney alongside 20th TV and its Fox 21. It is behind such shows as comedy juggernaut It’s Always Sunny In Philadelphia. The three of them combined bring a lot of edgy fare to the family-friendly Disney brand.

Incorporating the Nation Geographic networks would be easier as they have strong family appeal and global recognition.

Combining the Disney and Fox TV assets will lead to an excess of top-level TV executives: 21st Century Fox president Peter Rice, who has both TV and film experience and could get a dual role; Fox TV Group chairmen Dana Walden and Gary Newman, who have been overseeing 20th TV and Fox Broadcasting; FX’s Landgraf; as well as Disney-ABC TV Group president Ben Sherwood.

With Fox Broadcasting, FS1 and FS2 staying behind, Rice, Walden and Newman would oversee smaller portfolios if they are to simply move to Disney without bigger responsibilities. Walden and Newman, who have partnered for the past 26 years, as well as Landgraf, are believed to have their contracts coming up within the next year, so there may be some tough negotiations ahead. It is hard to imagine that the newly expanded Disney-ABC TV Group would be large enough for the three of them and Sherwood in top roles.

Walden in particular, a rare CEO-level female TV executive who has strong relationships with A-list creative talent, already has been courted for other jobs.

Deal Positions Disney As Potential OTT Heavyweight

The deal strengthens Disney’s content hand as it plans to launch a pair of streaming services, one an ESPN-branded sports offering planned for next year, and a Disney-branded entertainment service to rival Netflix in 2019.

“Fox’s TV assets, including FX, are a leading foundation of Netflix’s library and we think that Disney realized you couldn’t build a global over-the-top product without them,” wrote media analyst Michael Nathanson in an analyst note published  Monday.

Disney also would gain controlling interest in the TV streaming service Hulu, adding Fox’s 30% stake to its own equal share. That would give it a decisive voice in the future direction of the service, which also is owned by Comcast’s NBCUniversal unit and Time Warner.

BTIG Analyst Richard Greenfield said some investors expect Hulu to be folded into Disney’s planned streaming service, giving it an estimated 16 million-subscriber head-start with the new direct-to-consumer offering.

“We believe this is simply not possible without Comcast’s consent and we see no reason why Comcast would want to enable Disney to have a more successful streaming service that hampers the legacy bundle that is vital to Comcast,” Greenfield writes.

Other corporate suitors expressed interest in the Fox assets after Disney walked away from the bargaining table this fall. Comcast, Sony Corp’s entertainment unit and Verizon Communications explored a possible deal, sources say. Though the U.S. Justice Department’s decision to file a suit to block the planned merger of AT&T and Time-Warner had a chilling effect on some of the would-be combinations.

Antitrust-regulators said the merger of a powerful television distributor like DirecTV parent AT&T and a major film and television studio would be bad for competition and consumers. It remains unclear whether the Disney-Fox deal will pass antitrust muster, under the Trump Administration.