Disney/Fox Deal Means More Streaming and Direct-to-Consumer Video

merger and acquisition

PALO ALTO, Calif. – If regulators approve Disney’s purchase of 21st Century Fox, analysts say it will transform Hollywood, accelerate the trend of media consolidation, and boost Disney’s streaming video ambitions.

Soon after the deal was announced last week, Disney CEO Bob Iger said the acquisition is part of a plan to “greatly accelerate” direct-to-consumer offerings, which are “a vital part of our long-term strategy.”

The combined company would own a controlling stake in Hulu and its live and on-demand video services. It would also give Disney plenty of content to bolster its streaming video services. 

If the deal closes, Disney’s ownership share of Hulu would become 60 percent, with Comcast owning 30 percent, and Time Warner owning 10 percent. Iger said the companies will expand the streaming service, funneling more Disney and Fox content to it to compete with Netflix and Amazon.

“Having control of it will enable us to greatly accelerate Hulu into that space, and become an even more viable competitor to those out there,” Iger said. “Managing Hulu becomes clearer, more efficient, and more effective with a controlling shareholder rather than equal partners.”

The deal would give Disney three U.S. streaming products: the family-focused Disney; sports-focused ESPN; and Hulu, which also will include content from FX and the Fox TV studio.

Iger also suggested that Disney could offer a mega-bundle with an array of live and on-demand content from all of its properties. “We believe it is possible that the consumer may want to be choosy,” he said. “Some may want all of it, by the way, and we will certainly make that available.”

Disney has no intention of abandoning the traditional TV business model, but as it develops new streaming video services built around the Disney and ESPN brands, the company will be “in a position to flip a switch and go direct-to-consumer” should traditional models fall apart, Iger said.

Reaction from analysts has been mixed. Pivotal Research group’s Brian Wieser says Disney’s direct-to-consumer content distribution acquisitions potentially help establish a “portfolio of approaches” and that Disney taking control of Hulu would be a “significant benefit.”

BTIG’s Richard Greenfield said the deal “could curtail the future of the vMVPD business model” because Disney could restrict its programming and channels to other streaming services, such as Sling TV.

Whatever the result, Disney is poised to reshape the streaming video marketplace. As more ad spending moves to OTT and online video platforms, Disney is banking on its premium TV and film content to lure subscribers as well as advertisers.

Insiders say the deal may not close until 2019 because Disney has to secure approvals from both domestic and foreign regulators.