“You maniacs! You blew it up! Ah, damn you! God damn you all to hell!”
That seems to sum up most people’s reaction to the status-quo-shattering acquisition of the entertainment assets of Twentieth Century Fox. It’s also, ironically, a quote which will become the property of the Walt Disney Corporation if the deal goes through. Both sides seem confident it will, although there are still a few regulatory hurdles the $52bn deal needs to pass.
Ultimately much of the hand-wringing and prophesising of doom has centred on casting Disney as the villains of the piece, the predatory behemoth sinking its claws into its rival and draining the lifeblood from it. But it’s a pejorative and unfair misreading of the situation. Ultimately, Disney has ended up buying 20th Century Fox not because they aggressively made a bid but because Fox decided to sell off its entertainment division.
While it may seem counter-intuitive to outsiders, given 20th Century Fox was, to all intents and purposes, profitable, the fact remains that the management of Fox have looked at their business and the industry as a whole and decided that their entertainment division is not sustainable and no longer fits with their corporate strategy. It’s not – and has never been – about which toy box various superheroes are kept in. That may end up being one of the fringe benefits from the deal but this is all about two companies taking the actions they deem necessary to survive and thrive in an industry undergoing unprecedented change and disruption on nearly every level.
In industries under such intense disruption, consolidations are commonplace and eminently predictable. This may be the largest deal thus far, but it probably won’t be the last. How long will Sony continue to tolerate its troublesome and underwhelming feature film division? Universal look healthy enough – even with the second failure of its Dark Universe – for the short term but Paramount is perilously close to terminal decline and seems unable to fully capitalise on its few remaining franchises while singularly failing to create new tentpoles in this brave new world of mega-franchise blockbusters. Warner Brothers have already made their big consolidation move, although their merger with AT&T still hangs in the balance and has already taken a toll on the recent “Justice League” thanks to panicky executives fretting about their bonuses in a post-merger world. Who, then, would have been in a position to pick up Fox’s entertainment assets had Disney not swooped in? Warners are out, it would be operational suicide to try and pull off two mega-mergers simultaneously. Universal maybe, Paramount unlikely and Sony probably want less Hollywood involvement, not more. Without Disney, the precious legacy and IP of Fox would most likely have ended up in the hands of venture capitalists who would be just as likely to strip mine the illustrious back catalogue as preserve it for future generations.
Are Disney evil? No. They are a tremendously effective and efficient entertainment conglomerate who have, despite many naysayers, proved themselves to be shrewd and responsible custodians of their acquisitions thus far. Pixar hasn’t suffered unduly by being fully taken over by Disney. Marvel has positively flourished and Lucasfilm is powering ahead too. Away from the veteran franchises, Disney already has an interest in some of the IPs it would be acquiring. In terms of investment, thanks to theme park attractions, Disney has already poured far more capital into James Cameron’s “Avatar” than Fox has to date. Fears of monopoly and domination are reasonable, and appropriate but the belief that not allowing it to happen would somehow protect and preserve the current Hollywood balance of power is misguided. If Fox’s intentions to sell as a whole are frustrated, they may have no alternative but to break it all up and sell it off piecemeal to divest itself of the assets and operations which no longer fit with the business strategy which could prove more disastrous for the long-term viability of various business units and IPs.
Away from the business side of things, and there are, of course, very real impacts on real people and their livelihoods as mergers and acquisitions play out, there’s been a lot of focus on what the potential Disnification of Fox’s IPs could mean. A specific fear that’s been raised time and again is that Disney will quickly snuff out the line of R-rated superhero movies like “Logan” and “Deadpool” which have only just broken through to mainstream success. It’s a profoundly naive line of thinking. Successful companies are not generally in the business of shelling out $52bn in cash (and $14bn in debt) with the intention of killing the goose that lays the golden eggs. There is clearly a market for R-rated superhero movies and Disney will find a way to exploit it. They are buying a reasonably successful movie production operation, why would they interfere unduly. They can easily insulate the core Disney brand by retaining the 20th Century Fox banner, Fox Searchlight or creating new niche marques such as, say, ‘Marvel Knights’. While its true that recently Disney hasn’t done much in the non-family oriented movie market of late (its TV operations are another matter), it has done so in the past to both commercial success and critical acclaim, for example under the Miramax label, and there’s no reason to think it won’t in the future. If the market and profitability is there, Disney will find a way to serve that audience.
Of course, for Marvel, the deal is a dream come true. It returns to the studio the rights not only to the X-Men, who Fox have successfully exploited but also The Fantastic Four with whom Fox has had a more troubled stewardship. This will bring a very welcome headache to Kevin Feige as he looks, no doubt, to re-plan the ‘Phase 4’ slate of the MCU. It’s not the be all and end all of the deal and on its own is nowhere near sufficient to unquestioningly welcome the news but I won’t pretend I’m not happy to see the Marvel family reunited.
This isn’t the end of the transformation sweeping through the entertainment industry, just the latest manifestation of legacy corporations finding a way to remain relevant, competitive and sustainable while under siege by the likes of Netflix, Google and the rest. The very foundations of the industry are shifting and Fox’s revenues were being eroded by streaming services and a wholesale flight to online from traditional advertising media. This deal gives both companies the scale (Disney) and the agility (Fox) the respective management teams believe is necessary to compete.
Strategically, the deal makes sense. Industry-wise, it raises important but not insurmountable questions. Artistically? Only time will tell but one thing is for sure: Disney are not the bad guys here.