More on the Disney / Fox Proposed Merger

A while back, we looked at rumors of the possible merger between Disney and Fox. It amounts to Disney buying most of Fox's assets, leaving the television network and news divisions behind.

Rumors of a deal have picked up steam again, and things are getting real. Reuters had reported yesterday that Comcast was also interested in purchasing Fox, but that Fox execs were more interested in a sweeter deal offered by Disney. Besides the execs getting Disney stock (preferable to comcast stock), the rumors are that James Murdoch would possibly take over as Disney CEO when Bob Iger steps down in 2019.

It's an interesting time, because recently the Department of Justice blocked a deal that would have had AT&T acquire most of Time Warner. The deal had seemingly cleared some bureaucratic hurdles, but the DOJ stepped in and is investigating possible anti-trust issues. Many experts believe that a deal that would have Disney buy Fox would have less anti-trust concerns, particularly since the Fox Network would be left out, as Disney, already the owner of the ABC, is not allowed to own two television networks. The rest of the deal is seemingly less complicated, although as Variety points out, these are interesting times, and a huge media merger might still attract interest from the DOJ.

A Disney-Fox combination would certainly raise scrutiny over the power that the combined company would have over content, and past big media mergers have focused on issues like the impact on cable advertising and sports rights.

Additionally, Disney is already a monster at the box office, according to Forbes:

According to BoxOffice Mojo, Disney's Buena Vista studios has about 18 percent share of the U.S. box office, ranking second behind Time Warner's Warner Bros. Fox's 20th Century Fox studios was fourth with 12.3 percent.

Giving Buena Vista a roughly 30% stake in Hollywood would be huge. And that number is only 2017 year-to-date, meaning it doesn't include numbers from The Last Jedi. In 2016, Disney and Fox combined to own a 40% box office share. 2017 will probably shape up to be something similar.

There has been a lot of criticism (both economic and political) of the DOJ approach to the AT&T - Time Warner deal, which may indicate a new paradigm in the world of big time mergers and acquisitions. One (of many) critic quoted by Variety stated that the reasons for these two big deals currently on the table is completely logical, possibly even necessary, from an economic standpoint:

Traditional content producers including Disney, Fox, and Time Warner have lost substantial competitive leverage in the wake of disruptive new entertainment products and services from the likes of Amazon, Apple, YouTube, Netflix, SnapChat, Twitch and Vevo. Consumers now have new ways to enjoy even more content on new devices, new networks, and in new formats.

“These deals are the direct response. In challenging them on vague ‘big is bad’ grounds, the DOJ will cause significant harm to consumers, not save them from it.”

He went on:

If the Department is going to pursue this radical new theory of antitrust, it will have to be consistent.

In order to be consistent, then the DOJ would have to intervene in a Disney/Fox deal just like it did for AT&T/Time Warner.

Reports are that a deal (pre-DOJ intervention) could be announced as early as next week.

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