Post by The Ultimate Nullifier on Dec 16, 2017 21:20:43 GMT -6
variety.com/2017/film/news/disney-fox-studio-arms-race-1202641606/
The Disney, Fox Deal Just Set Off a Studio Arms Race
Disney’s $52.4 billion purchase of Fox is sending shockwaves throughout the movie business, with many industry observers believing that the marriage between the two iconic companies could inspire a fresh round of media mergers.
“The word tectonic has been overused to describe many deals, but in this case it applies,” said Hal Vogel, a veteran media analyst. “It’s one of those rare times you can feel the tectonic plates moving.”
The combined companies will have access to a blue-chip list of popular film franchises; their vault will encompass the Simpsons, X-Men, the Avengers, Avatar, Family Guy, Star Wars, Alien, and scores of family entertainment titles. That leaves the likes of Sony and Paramount looking downright scrawny in comparison. It also helps explain why Lionsgate tried to merge with Hasbro earlier this year only to abandon the plan after a dispute arouse over the price.
“These studios are all looking a lot smaller than they used to and less dominant and less powerful,” said Vogel.
It’s not that Disney is the only superpower. There are other media conglomerates that can nearly match its heft. Comcast, with NBCUniversal in its quiver and a whole lot of cable subscribers, is a formidable adversary. Time Warner stands to get a lot more dangerous if the Justice Department is unsuccessful in blocking its sale to AT&T. And the Apples and Amazons of the world, which are now moving into producing movies and shows, have a treasury and technological know-how that cannot be equaled. Hollywood, it seems, is increasingly controlled by giants.
A frank assessment of this radically changed landscape could lead the Sonys and Paramounts of the world, and their parent companies, with no choice but to join forces or sell.
“It puts pressure on the smaller studios to look for ways to gain more scale,” said Tuna Amobi, director and senior equity analyst at CFRA Research. “Many of these players would capitalize on any opportunity to combine their assets in a heartbeat.”
That’s not the only way the earth could move below the film business if the companies get hitched. Even before it announced it was buying Fox, Disney had been notorious for driving hard bargains with theater owners and insisting that if they wanted access to the next Marvel or Star Wars movie they had to surrender more of the profits. If the Fox deal goes through, Disney will have increased its leverage and could be able to demand and receive and even richer deal from exhibitors.
There’s another issue. Disney made fewer than 10 films in 2017. In contrast, Fox made more than 20, some through its main studio and others from its indie label, Fox Searchlight. It is highly unlikely that the combined studio will release as many movies, potentially depriving exhibitors of content to show on their screens. However, some analysts believe the deficit will be quickly filled, potentially by a Silicon Valley player or an indie studio with grand ambitions.
“What has happened historically is that when one studio goes away someone else emerges to replace that content,” said Erik Handler, an analyst with MKM Partners.
Despite the negotiating headaches they’ll inevitably face, theaters do benefit from a marriage between Disney and Fox in one important respect. Fox has been one of the most aggressive studios in pushing to shorten the amount of time that films appear exclusively in theaters. Along with the likes of Warner Bros. and Universal, Fox has been trying to entice theater owners to agree to let these movies appear on-demand in return for cutting them in on the profits. Disney, however, disagrees with this approach. It likes having its movies in theaters for the standard 90 days and believes a longer theatrical run helps drive home entertainment sales and rentals. This gives theater owners a potential ally in the battles to come.
“The new company will be more aligned with exhibitors philosophically,” said James Goss, an analyst with Barrington Research. “You took away a nay vote and put it in the hands of a company that wants to keep things the way they are.”
That may be one of the rare cases where Disney will be happy with maintaining the status quo. An arms race is brewing and Disney’s arsenal is about to get a whole lot bigger.
The Disney, Fox Deal Just Set Off a Studio Arms Race
Disney’s $52.4 billion purchase of Fox is sending shockwaves throughout the movie business, with many industry observers believing that the marriage between the two iconic companies could inspire a fresh round of media mergers.
“The word tectonic has been overused to describe many deals, but in this case it applies,” said Hal Vogel, a veteran media analyst. “It’s one of those rare times you can feel the tectonic plates moving.”
The combined companies will have access to a blue-chip list of popular film franchises; their vault will encompass the Simpsons, X-Men, the Avengers, Avatar, Family Guy, Star Wars, Alien, and scores of family entertainment titles. That leaves the likes of Sony and Paramount looking downright scrawny in comparison. It also helps explain why Lionsgate tried to merge with Hasbro earlier this year only to abandon the plan after a dispute arouse over the price.
“These studios are all looking a lot smaller than they used to and less dominant and less powerful,” said Vogel.
It’s not that Disney is the only superpower. There are other media conglomerates that can nearly match its heft. Comcast, with NBCUniversal in its quiver and a whole lot of cable subscribers, is a formidable adversary. Time Warner stands to get a lot more dangerous if the Justice Department is unsuccessful in blocking its sale to AT&T. And the Apples and Amazons of the world, which are now moving into producing movies and shows, have a treasury and technological know-how that cannot be equaled. Hollywood, it seems, is increasingly controlled by giants.
A frank assessment of this radically changed landscape could lead the Sonys and Paramounts of the world, and their parent companies, with no choice but to join forces or sell.
“It puts pressure on the smaller studios to look for ways to gain more scale,” said Tuna Amobi, director and senior equity analyst at CFRA Research. “Many of these players would capitalize on any opportunity to combine their assets in a heartbeat.”
That’s not the only way the earth could move below the film business if the companies get hitched. Even before it announced it was buying Fox, Disney had been notorious for driving hard bargains with theater owners and insisting that if they wanted access to the next Marvel or Star Wars movie they had to surrender more of the profits. If the Fox deal goes through, Disney will have increased its leverage and could be able to demand and receive and even richer deal from exhibitors.
There’s another issue. Disney made fewer than 10 films in 2017. In contrast, Fox made more than 20, some through its main studio and others from its indie label, Fox Searchlight. It is highly unlikely that the combined studio will release as many movies, potentially depriving exhibitors of content to show on their screens. However, some analysts believe the deficit will be quickly filled, potentially by a Silicon Valley player or an indie studio with grand ambitions.
“What has happened historically is that when one studio goes away someone else emerges to replace that content,” said Erik Handler, an analyst with MKM Partners.
Despite the negotiating headaches they’ll inevitably face, theaters do benefit from a marriage between Disney and Fox in one important respect. Fox has been one of the most aggressive studios in pushing to shorten the amount of time that films appear exclusively in theaters. Along with the likes of Warner Bros. and Universal, Fox has been trying to entice theater owners to agree to let these movies appear on-demand in return for cutting them in on the profits. Disney, however, disagrees with this approach. It likes having its movies in theaters for the standard 90 days and believes a longer theatrical run helps drive home entertainment sales and rentals. This gives theater owners a potential ally in the battles to come.
“The new company will be more aligned with exhibitors philosophically,” said James Goss, an analyst with Barrington Research. “You took away a nay vote and put it in the hands of a company that wants to keep things the way they are.”
That may be one of the rare cases where Disney will be happy with maintaining the status quo. An arms race is brewing and Disney’s arsenal is about to get a whole lot bigger.