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Disney to buy key 21st Century Fox assets for $52.4 billion

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Disney CEO Robert Iger has made a grand addition to the house that Walt built.

The Walt Disney Co. said Thursday that it had reached a $52.4 billion deal to acquire a huge swath of assets from 21st Century Fox, including the historic 20th Century Fox movie studio, which has produced such classics as Miracle on 34th Street, The Grapes of Wrath, Patton, Alien, Titanic, Avatar and the original Star Wars film.

Also as part of the deal, Disney would also get Fox’s television studio (The Simpsons, Empire) and FX and National Geographic channels. As part of the Fox’s film division, Disney also gets Fox Searchlight, which has an Oscar hopeful in current film Three Billboards Outside Ebbing, Missouri.

This massive content influx sets up Disney for the future and its planned direct-to-consumer streaming services — the ESPN Plus sports subscription service next year and, in 2019, a Disney streaming offering with the newest Disney, Pixar, Marvel and Star Wars feature films as well as new Marvel, Pixar Monster and High School Musical TV series.

“This clearly will jumpstart those efforts (and) give us more content, give us more producing capabilities for those services,” Iger said on Good Morning America Thursday. “We are not really looking to necessarily reach the scale of Netflix quickly, but we certainly aim to be an able competitor to theirs.” 

More: Disney’s deal to buy Fox assets means your TV, movie and sports watching could change

Disney concurrently announced that Iger would remain in that post through 2021, further extending its stay amid uncertainty over his prospective successor.

The combination results in “one of the greatest companies in the world,” said 21st Century Fox executive chairman Rupert Murdoch in a statement. Along with his sons James and Lachlan, the media mogul has controlled 21st Century Fox.

Rather than signaling a retreat, the deal results in two stronger companies, Murdoch said in a conference call. “We are pivoting at a pivotal moment,” he said. 

The new 21st Century Fox maintains control of the Fox television channel, Fox News Channel and the Fox Sports channels including the Big Ten Network.

Speculation about the deal included the forecast that James Murdoch might gain a Disney executive spot. Iger said Thursday that Murdoch has been, and remains, integral to the process and the two will “continue to discuss whether there is a role” for him at Disney.

Disney is already a media and entertainment giant, with ABC, ESPN, Pixar and the Marvel and Star Wars film franchises in its portfolio. Last year, Disney was the first studio to take in more than $7 billion at the box office globally, with films including Rogue One: A Star Wars Story, Captain America: Civil War, Finding Dory, and live-action film The Jungle Book.

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Despite Disney’s already well-stocked portfolio of characters and franchises, the future requires an even stronger catalog. “This is all about acquiring content and control of it,” said James Rosener, a New York attorney with Pepper Hamilton LLP whose expertise is domestic and international mergers and acquisitions.

Consolidation with in the entertainment industry will likely continue, he says. “You have so many forms of media and so many ways to deliver it, whether it’s Netflix or any of the other outlets that people cutting the cord (use). If you have control over content delivery, I think you have a much better chance of keeping your customers and think you will see more of that.”

Beyond consolidation, which yields stronger content competitors for Disney, there’s a growing variety of other online services delivering movies and TV series to homes augmenting — and increasingly bypassing — the traditional pay-TV providers.

“It gives them a little more leverage to compete against new studios such as Netflix … against cable companies to try to figure out they are going to continue to make money off the declining traditional cable bundle,” said Dan Lyons, a Boston College Law School professor who specialities include telecommunications. 

The deal will face scrutiny by the Justice Department, which took a “surprisingly aggressive stance,” Lyons said, against AT&T’s bid for Time Warner — another example of content consolidation, which would bring channels such as CNN and TBS and characters such as Wonder Woman, Batman and Superman under the same content umbrella as Transformers. A federal court will hear AT&T’s case in March 2018.

“I would expect the DOJ to look pretty carefully at how much power this post-merger Disney will have in the content market,” Lyons said. The estimated U.S. box office share of about 40% ” not not clearly an antitrust violation, but I think it’s something that will make the regulators look more closely.”

Beyond that, Disney will now own a 60% stake in Hulu, which like Comcast (NBCUniversal) and Fox held a 30% stake in the service, with Time Warner holding 10%. As part of the approval of Comcast’s acquisition of NBC Universal, the combined company had to be a silent partner in Hulu (those conditions end in August 2018).

So the merger, “is not just a matter of content, it’s also a matter of controlling one of the potential content distribution channels in the future,” Lyons said.

But not all content is created equal, a fact that could hinder Disney’s goal of rivalling Netflix, BTIG analyst Rich Greenfield said in a note breaking down the expected deal Wednesday. Rather than bolstering its own original content creation rather than acquiring more sports networks and movies and TV studios with content “tied up in long-term distribution deals,” he said.

This deal “makes it feel like Disney is cementing itself in the past — what we call the legacy media world,” Greenfield said. While Disney and Fox focus on getting the acquisition approved and integrated over the next year or two, Netflix will be grow more than 155 million subscribers worldwide and “will be ramping its content spend meaningfully.”


More: Disney plans new ‘Star Wars,’ Marvel TV series via new streaming service

Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.

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