Disney & Fox: When you pass Go, collect 200+ intellectual properties

“A Disney takeover of Fox’s entertainment assets would create a Hollywood powerhouse. Fox’s recent hits have included The Planet of the Apes and X-Men franchises while Disney controls Pixar and the Star Wars series.”

The Guardian – Sarah Butler, 3rd December 2017 


We’ve been here before, just under a month ago in fact, where rumours were abound of the gluttonous mouse buying the fox. And here we are again, where it is looking more and more likely that in 2018 Disney, who are already the largest film studio, will become even bigger by buying up a portion of 20th Century Fox’ assets for a huge $60bn. Portion is perhaps underestimating the deal, because if the deal were to go ahead the ramifications for the film and television industry could be huge. Details on the deal are not concrete, but reported to be included in the deal is their film and television divisions in 21st Century Fox, along with their 30% share in Hulu (Disney already owns 30%, giving them the controlling stake) and interestingly a 39% share of Sky TV, the UKs largest pay-tv broadcaster. Not included is Fox’s sports division, and with the way Disney has handled ESPN (they are the majority owner with 80% share), that’s probably a good thing.


So if the rumours are true, and Fox has actually approached Disney for a sale this time around, why are they so keen to sell? For the past couple of years, Rupert Murdoch, I know; we all shudder violently when we read the name, has been trying to buy Sky TV in the UK. The deal has constantly hit hurdle after brilliant hurdle from the people at Ofcom, who are not willing to bend to his narcissistic power in the fear that we will get another Fox News. It would appear that this has led to frustrations at the top. Consider this, Fox has an extremely successful news model, even if its deplorable to many, Fox News is (unfortunately) the most watched cable news network in America. They also have their sports network, which appears to be thriving amid the controversial actions of rival ESPN. But what they can’t figure out, or keep pace with, is a new studio model that is all about 360 brand experience, and it shows in their box office numbers vs. their potential suitor.




Since 1995 until now, Walt Disney has dominated the domestic box office figures with a 15.38% share of business, just about shading Warner Bros who has a 15.32% share and 2ist Century Fox which has a share of 11.63%. Interestingly however, Disney have achieved their share with 156 less films produced than Warner Bros and 57 less than Fox. That means they have averaged a box office haul of nearly $60m per film, Warner Bros $45m and Fox $50m. It is important to note that Disney acquired Marvel studios (2009) and Lucasfilm (2012) within the last 10 years. Both of which have numerous profitable and critically acclaimed projects under their belt, with a following that only grows larger and larger with each film or TV show. In a recent earnings call, Bob Iger announced that the average box office for an animation is $660m, a Marvel film $840m and films from the Star Wars universe (A Force Awakens and Rogue One) they have taken over $3bn. Those figures are astonishing and most important of all consistent. After all, you have a faltering and potentially terminally ill DC cinematic universe and multiple confused spiteful stabs with properties that Fox won’t let go vs. a Marvel universe who had the confidence to tease a trailer for the upcoming Avengers: Infinity War with amateur reaction footage of previous trailers; oh and Star Wars around the corner.


If we take the studios top 10 films during this period it is clear to see where the momentum is. For Disney 7 of their top 10 grossing films have all come since 2010, with Star Wars: The Last Jedi soon to make that 8. Warner Bros of the other hand have 3 out of 10, and so far Justice League is showing no signs of joining them. And Fox, well, they have 1 in their top 10 (Surprise hit Deadpool) and 4 in their top 25. In fact, such is Disney’s momentum that in the last 5 years (2012-2016) they have taken almost 32% of their total box office since 1995. Let that sink in for a minute. So it would appear that they are not willing to, or perhaps don’t wish to enter this new age battle. Their position in this marketplace has deteriorated, and without a powerful figurehead to guide their intellectual properties the results have been a mess; they pretty much ruined Josh Trank’s once promising career. It appears that they don’t want to turn up to a gun fight with a blunt knife and no one to even sharpen it; right now that is their arsenal.


Instead they are opting to focus on what they do well; (fake) news and sports. In an arena where getting each ticket sale feels like the equivalent of the final scene in Lethal Weapon, perhaps this is a wise decision. It is easy to point to the internet and yell, ‘You’re the reason we don’t make money anymore, I am going to throw you in jail for downloading a torrent of Boss Baby‘, and this may still be an issue, but in actuality it appears that what studios weren’t doing for many, many years, was adapting to a new market, one which Netflix has helped bring to the fore. But for Murdoch and 20th Century Fox apparently you can’t teach an old dog, new tricks (try telling Jerry Hall that) and Fox feels that don’t have the infrastructure or desire to compete anymore. Layer on top poor handling of sexual assault allegations in the Fox business and you have a brand which shows no signs of adapting to the current state of the industry. The irony can’t be lost on the fact that their Film and Television division comes under the 21st Century Fox banner, suggesting a modernisation that they severely lack.




If Fox have shown that they can’t adapt, Disney have and are putting in place plans which show they understand their market and how to squeeze juice out of the remainder of the rind. In 2006 they made the decision to buy Pixar for $7bn from amongst other investors; Steve Jobs. The purchase was a decision few nowadays would question with an ever growing filmography of unquestionable class under their belt. Three years later in 2009 they acquired Marvel Studios for $4bn, a few months following this reports came out of plans for numerous Marvel films based around their plethora of comic book properties, to form what we now all know as the MCU. However they weren’t done yet, and in 2012 they acquired Lucasfilm for $4bn and all of their properties (Originally Lucasfilm helped to form Pixar, it is all quite incestuous) giving them the keys to the biggest 360 franchise their is, and their biggest ever box office hit with Star Wars VII: A Force AwakensIt really is amazing how much you can get for a mere $15bn, and it really makes you appreciate how much of an arsehole Steve Jobs must have been to negotiate with.


It is also Disney that is leading the way with an important and impressive red thread of diversity that runs throughout their projects. Disney have not shied away from a diverse talent pool, they have embraced it. Black Panther arrives next year helmed by African American director Ryan Coogler and starring an almost 100% black cast. Ava DuVernay has been chosen to direct one of their biggest properties for next year A Wrinkle in Time. Pixar just released the hugely successful Coco, a story based around the Mexican Holiday; Day of the Dead. And most recently they led the way in an industry constantly facing (rightfully so) accusations of whitewashing by casting Chinese actress Liu Yifei for their live action remake of Mulan. They have a chequered and beleaguered past when it comes to issues of race and gender, but in an industry that has required adaptation, Disney has also been a beacon of strength for a more diverse array of talent. Long may it continue.




Bob Iger, who became CEO in 2005, has implemented a strategy which has pushed Disney to the top of the industry. the issue now is staying there. For a company that releases state of the art top quality animation via Pixar, has a slate of 7 films over the next two years via Marvel properties and a guaranteed billion dollar franchise in the Star Wars sage (Another trilogy helmed by Rian Johnson has recently been announced), it is crazy to think that they could look enviously upon any other company. But the company which causes their eyes to turn a hulk like green is Netflix. Having used the platform to enable a 360 Marvel experience with the expansion of the cinematic universe which started in 2013 via Agents of Shield, Disney recently announced that they would be cancelling their current deal with Netflix to release their own streaming platform for their properties. Netflix may be able to take the hit, especially as this only really affects a deal they signed in 2012, which only came into effect in 2016 and most importantly only affects their Disney theatrical films, not their extremely popular Marvel TV universe.


“At some point, we felt it would be necessary for us to not only be disrupted, but to disrupt our business ourselves. We felt that we were no longer seeing a speed bump of disruption … What we were seeing instead was real, profound and permanent change.”

Bob Iger – Disney CEO at Vanity Fair’s fourth annual New Establishment Summit 


As Disney have proven with their acquisitions, the need for evolution and adaption in this industry is key. The change we are seeing via streaming is permanent, it is not going anywhere and they themselves have identified a way in. So as much as it isn’t all doom and gloom for Netflix, but if the Fox deal were to go through, Disney would be the majority stakeholder in Hulu an already established streaming service and with the addition of numerous Fox licenses such as X-Men, The Simpsons and Avatar for example, the intent is clear to see.  At one point there were even reports that they were looking at directly buying Netflix, only to be put off by its soaring valuation. How a streaming service by Disney will look is anyone’s guess. Could it be driven by the traditional Disney family friendly content? Might they use their ever growing catalogue of licenses to create episodic content? The benefit they have is that they are entering into a league where they have the ability to scout out their opponents, pick up on their weaknesses and take their strengths and utilise all of this information for their own launch (so far confirmed as 2019).


Whatever they decide the Fox deal is clearly a large piece of the puzzle that they feel will give them the edge. They already have an incredible back catalogue which even now they still treat as precious heirlooms. Even as DVD and Blu-Ray sales continue to decline in favour of the more modern streaming model, Disney maintains its Vault concept. Every Disney film is released for a certain period of time, let out of the vault for a ‘new edition’ with limited numbers and then placed back in. There was a time when you could not buy Aladdin for love nor money, a strange strategy but one that imbued a certain element of esteem. Now imagine a streaming platform where they can control this in an advantageous way through marketing, and the possibilities are endless. I don’t imagine that Netflix are too frightened by this right now with their growth continuing, but as soon as Iger and co. start announcing more concrete plans, or a slew of original content, that fear should start creeping in.




The other potentially massive ramifications for the industry are the IPs (intellectual properties) that Disney would now have access too. With Marvel comic book movies extremely dominant in mainstream Hollywood in both volume and box office earnings, Marvel is the blueprint that all others are attempting to copy. This blueprint is not even limited to other comic book universes, with seemingly every IP trying to replicate the cinematic universe that Marvel have patiently crafted. With Disney’s IPs in tow their grip on the industry would only become stronger, their arsenal slowly becoming Galactus-like (He ate planets and absorbed their power). You only need to look at how they managed to persuade a rival studio to lend them one of the biggest characters of all; Spiderman. If the deal were to go ahead they would have access to amongst others, Deadpool and X-men.


So it’s no wonder they act so nonchalant at the prospect of retiring Robert Downey Jr’s Iron Man and Chris Evan’ Captain America when you can bring in a brand new Wolverine and access to what is looking to be an incredibly profitable R-rated franchise in Deadpool. Marvel fans will be frothing at the mouth at the prospect of seeing The Avengers square off against The X-men. Going further you would also have Disney, the company that almost singlehandedly created cinematic animation, having access to the most famous animation show of all time in The Simpsons. And also would put Disney at the helm of James Cameron’s Avatar, if we actually ever get to see them. It is merely speculation to discuss how they may use these IPs, and Kevin Feige has been extremely cautious (if a little bit excited) when discussing the prospect. Being the family friendly company they are, Disney may choose not to pursue the recent success of R-rated movies such as Deadpool. But with their track record on recent decision making, this seems highly unlikely.




The deal almost looks like a no-brainer for Disney where the $60bn cost will surely be recouped quickly. But what does it mean for the rest of the industry. Firstly a lot of jobs are sadly, likely to be lost as is the case with many merger purchases. Would Blue Sky Studios, Fox’s competitor to Pixar that created Ice Age, be wiped out? Most probably. With a limited amount of time in a year to produce, market and sell the films to audience we may see Disney fully lean towards tentpole movie production only. With so many franchises needing attention, it would be easy to see Disney neglect the mid-budget film, seeing these as properties which don’t produce enough capital to justify their time and investment. What is also incredibly sad, if the deal were to go through, is that we would also lose a massive part of film history. Fox is known as one of the big six film studios with a rich history that dates back to 1935 (we all recognise the fanfare and spotlights), and although we cannot rewrite history or it’s impact on the industry, there is a certain level of sentimentalism that comes with this merger. It is likely that Disney would still keep the Fox name, after all its cultural weight gives Disney a whole other artistic currency to play with, but as with any merger; change will come and the landscape of the film industry will alter forever.




Looking at this deal from an economic perspective however, questions have to be asked about this potentially creating a cinematic monopoly. All other major studios from the big six are struggling to keep the pace with Disney as it currently stands with the reliance on tentpole releases becoming more and more important. Taking a look at the above graphs from last year, Disney profits stood for 27% of their total revenue, their nearest rival Warner Bros had $3.8bn of revenue but made -$0.8bn to Disney’ level of profit. With Justice League officially labelled a critical and financial flop and Star Wars: The Last Jedi tracking for a record breaking opening weekend it is clear that 2017 will end with an even wider profit gap. It is a worrying sign for the other studios, especially as the number three on the graph is willing to sell to the number one. Fast forward to 2019 and Disney will be releasing Toy Story 4, Frozen 2, Star Wars IX, Avengers: Infinity War II, Aladdin, The Lion King, The Jungle Book 2 and Mulan. It is not an unlikely scenario to see all eight of these films hit +$1bn worldwide grosses. With this merger and their current catalogue of acquisitions, and this slate could be replicated year on year going forward.


There is a legitimate fear of a monopolised industry, and rightly there should be. It was only recently that Disney, due to bad press over their Anaheim theme park, banned the LA Times from press screenings of their films. A decision which was rightly met with derision from many other critics, a bully boy tactic which is something we would associate with Murdoch’s company, not the cute mouse. It is a dangerous precedent to set and one which becomes even more worrisome if the deal does go through. How else might they try and throw their weight around? They have already had their fair share of run-ins with their Star Wars properties. Josh Trank has essentially been blacklisted and was thrown off one project, Lord and Miller another, Gareth Edwards had a lot of his film Rogue One reshot with the (forced) help of Tony Gilroy and most recently Colin Trevorrow was dumped from Episode IX. With Disney having more control than ever once this deal goes through, these talented directors may lose consideration for jobs given their fractious relationships.




The other concern is the creative output from competitors that this deal will have an affect on. If we take Blade Runner 2049 for example, an extremely well-reviewed film that was as beautiful of a spectacle as you could have seen in the cinema this summer; it has been deemed a box office failure. Harshly in my opinion. But if this deal existed a year ago say, the question would be asked; would Blade Runner 2049 existed? In an industry that is taking less and less risks with high budget films, it would be hard to see executives from Warner Bros giving the film a green-light. In a crowded field where every bum on seat counts, the risk would outweigh the gain, after all it cost the same amount to market the film as it did to make it. In essence this deal may mean that studios will move even further away from original stories by instead opting for films with a guaranteed wide audience. You only need to look at how many Stephen King films have been green-lit since Warner’s success with IT, currently at 8 features announced. Hopefully the effect is the opposite to this and that actually studios such as Warner can focus on the neglected mid-budget audience which encourages more liberated pieces of cinema.


To conclude, I can’t help but be impressed (to an extent) with Disney. Buying these companies is easy, strategising them is another thing completely. Pixar has only got stronger and stronger as the years have passed, Marvel and Kevin Feige have proven that comic book films are not a flash in the pan and Lucasfilm have ensured that a certain level of high quality has come back to the franchise. We must not forget that this deal will mean that many people will likely lose their jobs. We must also not forget how big a part Fox has played in the history of cinema, so it is sad to see a part of cinematic history potentially fade away into obscurity. It also means that its competitors at Warner Bros and Sony will have to step up and assess their future slates because it is going to become increasingly difficult to compete with Disney compendium of content. The winners will be the audience, who now have their IPs in extremely capable hands. Because if Disney have displayed one thing over the past 10 years it is that they know how to produce, market and sell a franchise to its audience.


For me the most worrying thing about the deal is the $60bn going to the Murdoch family to invest back into their depressingly growing news network; Fox News. Because if Donald Trump had his way, that is one company that he would love to have a monopoly; in his rhetoric, they already do.



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