Disney-Fox deal points to streaming wars

Updated 2017-12-15 17:01:11 Xinhua
A display with the stock trading data of the Walt Disney Company is seen in New York Stock Exchange, New York, the United States, on Dec. 14, 2017. (Xinhua/Wang Ying)

A display with the stock trading data of the Walt Disney Company is seen in New York Stock Exchange, New York, the United States, on Dec. 14, 2017. (Xinhua/Wang Ying)

The Walt Disney Company announced Thursday it would acquire key film and television assets of 21st Century Fox Inc. in a 5.24-billion-U.S.-dollar deal in stock, as part of its efforts to compete in the video streaming market.

The transaction includes 21st Century Fox's film and television studios, cable entertainment networks and international TV businesses, which brought popular entertainment properties including X-Men, Avatar, The Simpsons, FX Networks and National Geographic to Disney's portfolio.

"The acquisition of this stellar collection of businesses from 21st Century Fox reflects the increasing consumer demand for a rich diversity of entertainment experiences that are more compelling, accessible and convenient than ever before," said Robert A. Iger, chairman and chief executive officer of Walt Disney Company.

Disney's latest move to acquire Fox's repertoire is seen as a further step by the company to move towards a streaming service that has become rather mainstream and away from old-fashioned cable TV.

As analysts pointed out, Disney now has enough muscle to be a real competitor in the fast-growing market, posing a challenge to companies like Netflix, Amazon and Facebook.

The deal came four months after Disney announced its plans to launch a branded direct-to-consumer streaming service in 2019 and remove its movies from Netflix.

Disney has not hinted on the subscription price of its upcoming streaming service but said it will be substantially below Netflix's price, gaining a competitive edge against the latter, according to media reports.

In addition, the company will also launch its own ESPN video streaming service early next year. The platform, which will feature about 10,000 sporting events each year, will have content from Major League Baseball, the National Hockey League, Major League Soccer, collegiate sports and tennis' Grand Slam events.

Iger told media recently that the new company does not expect to reach the "scale of Netflix quickly," but aims to be a major competitor.

Analysts have seen many highlights in the Disney-Fox deal, including gaining a controlling 60-percent share in America's third-largest streaming platform Hulu.

"Disney is looking for a way to break into the new digital TV ecosystem and Hulu seems to be the answer," media analyst Alan Wolk said in his article published on Forbes' website.

Founded in 2007, the over-the-top media services platform is expected to reach 32 million viewers this year, according to media reports.

Although the number fell far short of Netflix's 128 million and Amazon's 85 million viewers, it still has a larger audience that many a new platform in the market.

Hulu, together with the upcoming over-the-top subscription plan for Disney, Pixar, Marvel and Lucasfilm content in 2019 and the ESPN streaming service starting in 2018, will accommodate the widest audience ever since they meet the criteria of being adult-oriented, family-friendly and sports-focused.

With the controlling share of Hulu, Disney hopes to direct the company and invest in more content, Iger told CNBC.

Meanwhile, the deal has yet to be approved by antitrust regulators.

Another major media deal, in which AT&T proposed to buy media and entertainment company Time Warner for 85.4 billion dollars, was stranded as the U.S. Department of Justice sued to block the merger last month.

The department argues that the AT&T/Time Warner merger would contribute to this anti-competitive trend.

"Mega-mergers such as AT&T and Time Warner will draw regulatory scrutiny simply due to the size of the companies involved. Today's economic environment has made regulators sensitive to concerns of potential monopoly issues and layoffs especially in the convergence media and telecommunications," Brendan Ahern, chief investment officer of Krane Funds Advisors, told Xinhua.

Iger on Thursday acknowledged that antitrust regulators would heavily scrutinize Disney's purchase but expressed confidence about winning their approval.

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