Disney-Fox: What Happens To FBC, Will Disney Become OTT Powerhouse & How Will Teams & Cultures Mesh If Deal Makes

By Nellie Andreeva, Mike Fleming Jr

Fox-Disney merger talks
21st Century Fox/ The Walk Disney Company

In what would be one of the most cataclysmic shakeups to ever happen to a traditional media company, 21st Century Fox is on the brink of selling the bulk of its assets — worth some $68 billion — to Disney. The Murdochs would take the remaining assets — Fox Broadcasting Co., Fox News and sports cable networks FS1 and FS2 — and form a smaller TV company. Negotiations have progressed, with a deal expected to be announced as early as next Wednesday. It would then take about a year from when the deal closes and regulatory approval is granted, and an acquiring company is legally prohibited in managing the pending acquisition, even though speculation is already rampant about which executives will stay and go. Even if it takes a full year to consummate, a Disney acquisition of Fox would redraw the business and make Disney far and away the most dominant studio Hollywood has ever seen.

Because of how this deal — if it closes  — came to be, Disney would cherry pick the Fox assets that best fit its existing portfolio. It would leave a hodgepodge of networks and would separate the broadcast Fox network from its leading supplier, 20th Century Fox TV. The TV studio is believed to be among the assets pursued by Disney, along with Fox’s movie studio, its 30% stake in Hulu, the FX and National Geographic cable networks group, and regional sports networks.

Besides a very small group at the top of Disney and 21st Century Fox who are involved in the negotiations, staffers at the two companies appear in the dark about their futures, leading to anxiety and speculation — like a rumor of a possible sighting of Disney CEO Bob Iger on the Fox lot over the Thanksgiving weekend, which has not been confirmed but has people buzzing. The deal is expected to be worth tens of billions of dollars, much of it coming in the form of stock, sources said. Key executives at both companies were in lock down mode, but they have all been briefed on what is coming, sources said.

Here are some of the big questions a combined Disney-Fox and slimmed down 21st Century Fox would face.

1. What will Fox 2.0 look like?

In the era of vertical integration, as linear ratings continue to decline — and with them TV advertising revenue — the network business only appears sustainable if a net is aligned with a studio so content can be also exploited internationally and on other platforms. That is why in 2014, 21st Century Fox moved to further integrate its Fox broadcast network and 20th TV by putting them under the same leadership: long-time studio heads Dana Walden and Gary Newman. Since then, Fox has increased the share of owned programming. Last year, the network picked up only one non-20th TV new scripted series, this past May, all new scripted shows came from the sister studio.


Now the network, along with its stations, is being separated from the studio, which provides 70% of its programming and also dominates its development for next season. If 20th TV moves to Disney, that company will technically control Fox’s primetime. It is conceivable Disney may keep some series that fit their brands, like Marvel’s The Gifted, or that are giant moneymakers, like tenure shows The Simpsons and Family Guy. But without a studio behind it, observers do not see Fox continuing as a network focused on scripted programming.

Given its potential new companions in the slimmed-down 21st Century Fox, Fox News Channel and FS1 and FS2, some speculate Fox’s primetime may be filled with live, primarily sports programming, news magazines and possibly reality shows. Few news reports focusing on a possible Disney-Fox deal have addressed the future of 21st Century Fox’s 50% stake in Endemol Shine. While it appears more likely that that interest would be included in the Disney package, keeping Endemol Shine North America aligned with Fox will give the network a pipeline to unscripted fare including current network series MasterChef and MasterChef Jr. 

There will be complications in the separations — several current Fox series have multi-year licensing deals in place including animated hits The Simpsons, Family Guy and Bob’s Burgers, and Fox recently renewed Seth MacFarlane’s space dramedy The Orville for next season. (The network has not yet pulled the trigger on a second season of The Gifted, which had been expected, as acquisition talks heated up.)

And then there is the Fox leadership. Several Fox Television Group executives oversee both the network and studio, led by Walden and Newman. The duo’s contracts are up this coming summer, which already had put them in play. Walden, a rare CEO-level female TV executive who has run both a network and a studio and has strong relationships with top creative talent, had already been rumored for other potential opportunities at traditional and streaming companies, including, as we previously reported, at Amazon Studios. It is unclear what Walden and Newman will do after a possible Disney-Fox deal as the two divisions they oversee are split. They, as well as their network scripted executives, are not likely to stay at Fox if it loses its main scripted supplier and changes programming strategy. Such a switch would bring disruption and instability to the network’s current executive team.

There has been talk about Rupert Murdoch, possibly joined by his son Lachlan, maybe taking the remaining Fox assets private. If there is a further sale for parts, studios that had been hampered by not being aligned with a major broadcast network, like Sony and Warner Bros, could potentially be interested in FBC.

Depending what opportunities there are at Disney with the combined assets, Walden and Newman could continue their successful 26-year partnership there or go their separate ways and start new chapters in their careers. A possible addition of the two would likely mean redrawing the TV leadership lines at a vastly expanded Disney-ABC TV Group, now led by Ben Sherwood.

There are also changes in store for their bosses, 21st Century Fox CEO James Murdoch and president Peter Rice, who at different times had been rumored as possible successors to Disney CEO Bob Iger. There is renewed chatter that Murdoch, who comes from international TV background and, along with the rest of the Murdoch clan, would have a sizable ownership stake in Disney, may be seeking a continuing role at Disney should the deal goes through. Meanwhile, Rice, who is currently running 21st Century Fox’s TV assets, is also well respected and has experience running both film and TV operations, which is an advantage for pursuing a leadership position in an entertainment conglom. While rare, it is not unprecedented for Disney to pick an outsider as new CEO – the company did it with Michael Eisner decades ago. Somewhat alleviating the pressure on a successor decision, word surfaced today that Iger is expected to stay beyond 2019 if the Fox deal goes through.

2. How do the Fox film assets fit with Disney’s silo system?

Between Marvel, Lucasfilm, Pixar, and the live action division Disney already controls the release calendar in a disproportionate manner. Between superheroes, Star Wars and live-action remakes of classic animated films and 3D computer animation, when Disney declares a release date, most other studios already moved out of the way. Add to that mix four Avatar sequels that are being directed by James Cameron, the multitude of characters in the X-Men universe and other Fox franchises, and it potentially constitutes the most dominant a movie studio has been in generations. The key will be to figure out how many of the piece Disney can absorb. Steered by Stacey Snider, Fox’s features come from three places. Fox proper, which is run by Emma Watts; Fox 2000 under Elizabeth Gabler; and the prestige shingle Fox Searchlight under Steve Gilula and Nancy Utley.

Jettisoning any one of those divisions or its executives would be a seismic shift — Searchlight for instance has been one of the most successful and respected prestige film operations for years — but it will all come down to the global contribution each division makes. Does Watts take the reins of a silo that generates the adult films like Deadpool that Disney doesn’t already make? Does Fox spin off Blue Sky, the animation factory behind the Ice Age films? Studios like Paramount (whose chief Jim Gianopulos helped build the animation studio) and Sony would salivate over Blue Sky as each studio tries to grow its family film/animation division, after watching how important Pixar is to Disney and Illumination is to Universal.

20th Century Fox

The Avatar sequels are crown jewels in this equation, followed by X-Men, because of its value to Disney as global theme park attractions. When Disney bought Pixar, Marvel and Lucasfilm for billions, critics of the deal at the time scoffed and felt that Disney overpaid, until the studio made back those billions with the first few films released under each silo. If the Avatar sequels match or better the $2 billion in global box office that the original achieve, that would go a long way to justifying the mammoth deal Disney will make for Fox. Marvel’s Kevin Feige has an almost unblemished track record for success in superhero movies at Disney, and he lent his magic to resuscitating Spider-Man in partnership with Sony. He’s said to be eager to get his hands on the X-Men universe — Fox has Deadpool 2, New Mutants, Dark Phoenix, Gambit, X-Force and the James Franco-starrer Multiple Man all on the assembly line — and cross-pollinate the rich swarm of characters with the existing Marvel franchise heroes who show up in each other’s films. Feige’s division is responsible for four of the 15 top grossing films of all time, worldwide.

Disney could also justify the prolific output of the Fox divisions if it sends some of those films to what would instantly become the most viable subscription streaming service this side of Netflix.

3. How will the TV assets and cultures mesh together?

If a deal closes, marrying the two brands and two very different corporate cultures could take awhile. You have the family-friendly Disney, which, for the most part, doesn’t even do R-rated movies, and Fox, whose movie studio produces unapologetically hard R-rated features like Deadpool and whose networks are considered the edgiest on the broadcast and the basic cable spectrum, as exemplified by such FX dramas as The Shield and Sons of Anarchy. This is different from previous Disney acquisitions of family entertainment-focused brands like Pixar, Marvel and LucasFilm.

FX Networks CEO John Landgraf, a very respected TV executive, has enjoyed great autonomy at 21st Century Fox, building a close-knit team and a very specific culture at FX Networks. It is logical to think that Landgraf, whose contract also is believed to be coming up, could be given a similar reign at Disney, which has two domestic basic cable networks, Freeform and Disney Channel. While FX Networks is more male-centered, it is conceivable for Freeform, whose demo target is somewhat similar with the youngest skewing FX Network, FXX, though far more female, to possibly be added to Landgraf’s purview. That’s unless the Disney leadership has even bigger plans for the executive, known for his thought-provoking state of the industry speeches and for coining the term “peak TV.”

While rare, Disney has made investments in edgier content. The company has a 20% stake in Vice, as does 21st Century Fox, so an acquisition could bring that ownership to 40%.

Consolidating two major film and TV operations would be tricky and would lead to overlap and inevitable executive departures. On the TV side, we have the larger and more established 20th TV operation, currently led by Walden and Newman, 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) overseen by Bert Salke. On the other side is Disney’s younger ABC Studios, led by 20th TV alum Patrick Moran, which also has a growing cable unit. Its portfolio includes ABC’s TGIT dramas, comedy Black-ish, Netflix’s Marvel series and Showtime’s breakout SMILF.

4. Will a deal make Disney an OTT heavyweight?

Disney, once rumored to acquire SVOD giant Netflix, instead opted to make a big investment in BAMTech and launch two new streaming services, an ESPN sports-themed one and a Disney-branded entertainment one. Now, by combining the Disney and 21st Century Fox’s stakes in Hulu, Disney will become a majority — and possibly full — owner of Hulu, with the remaining partner, Comcast, likely to divest its minority stake. Unless there are regulatory roadblocks, Disney, which was late to the Hulu party, joining long after NBCUniversal and Fox had launched the service, would get a big streaming footprint, backed by extensive film and TV libraries. (Disney recently announced that it would end its movie licensing deal with Netflix, redirecting the titles to its own upcoming SVOD platforms.) Disney’s streaming portfolio also would include the FXNow app of the FX Networks, which offers original and library content from the cable networks, including every episode of The Simpsons.

As the Disney stock had been hurt by cord-cutting concerns, the company has been looking to boost its direct-to-consumer offerings, and, while it may not be able to match Netflix’s size in the space right away, a deal with Fox would allow it to gain on the leader. Imagine a streaming service consisting of the film and TV library titles, along with a fresh output of content?

This article was printed from https://deadline.com/2017/12/what-happens-to-fox-if-disney-deal-happens-broadcast-news-sports-1202220975/