News Disney and Fox come to terms -- announcement soon; huge IP acquisition

[Slpy3270]

AT&T's Hulu stake comes with no board members or ownership say, so the ratio of control would remain 2:1 in Disney's favor even though I guess Disney would take 70% of the losses (or profits eventually) while Comcast takes 30% of the losses (or profits eventually).

With the potential lawsuits over royalty fraud coming, I don't think it will ever turn a profit now.

 

[Darkprime]

Comcast not giving up its 30% is real petty. Especially after Disney agreed to give up its percentage of Sky.

 

[AnotherDayAnotherDollar]

Comcast not giving up its 30% is real petty. Especially after Disney agreed to give up its percentage of Sky.

Keep in mind that upon further look Variety - and thus seekingalpha - is just using a month old quote from Steve Burke where he says he doesn't think anything will happen in the near term but that Comcast probably won't still be in the JV in "50 years" or whatever number he used.

 

[Kingtut]

With the potential lawsuits over royalty fraud coming, I don't think it will ever turn a profit now.

What I think may be a bigger issue is the selling streaming rights to basically ourselves as Fox seems to have done. Future contracts may require a shows streaming rights to be offered to all interested parties and have the offers available for the "creative folks" to review. Which means that a Disney/Fox show could end up on Netflix or Amazon if they outbid Disney Streaming for the rights. If Disney ( or any other studio) wants an exclusive on streaming they may be forced to pay up front.

Also, that says nothing about every other successful money losing Fox show's creators speed dialing their lawyers today

 

[happycamperuni]

I'd imagine that Rupert and his sons are much happier about getting out of the assets after hearing this news.


But this does bring some concern to the overall price that Disney is paying for these assets. The sports assets in the US, Mexico, and Brazil are probably worth around $30-35 billion out of that $71 billion price that Disney is paying for the overall assets. The concern there is that it's highly unlikely that Disney will be able to offload those assets for anywhere near $30-35 billion. At most, those assets seem likely to sell or be offloaded for $20 billion or so.

If there's also issues with the TV assets and Hulu in terms of these payment agreements that Fox had for its shows, that's another negative aspect if it results in substantial payouts to talent/producers/etc.


Regardless, we already knew that Disney+/ESPN+/Hulu are the future of Disney, but they need those bets to go really big now to justify paying what could end up being $40 billion (with $14 billion in additional assumed debt) for 30% of Hulu, Star India, the TV/Movie studio, some international channels, and National Geographic/FX. The price paid just looks very expensive if all the sports assets are removed at a discounted value.

 

[seascape]

AT&T's Hulu stake comes with no board members or ownership say, so the ratio of control would remain 2:1 in Disney's favor even though I guess Disney would take 70% of the losses (or profits eventually) while Comcast takes 30% of the losses (or profits eventually).

Hulu will be profitable in about 1 to 2 years. As for Comcasts 30%, Comcast is planning on having their own streaming service and that the shows currently on Hulu are the ones they want on their new service. Disney does not plan on cutting off the number of shows they are currently giving Hulu but in fact are adding even more shows. I expect that Disney will buy out the 30% and give Comcast a nice profit on their investment. I would also not be surprised if the buy out resolves the Marvel movie rights that Universal currently has but nothing with the themepark rights. Rather than worrying about the themepark contract with Universal, Disney should work on consolidating the combined Disney Fox and then try to buy the last missing piece of Marvel from Sony.

On the themepark rights, let Comcast keep them and collect their payment. There are more t th an enough Mavel Characters that Disney can use at WDW and they all can be used at all the other Disney Parks around the world. Besides Comcast has bigger issues to worry about, 5G. 5G will hurt cable companies but time because competition in high speed internet with streaming and cell service will be cheaper than a triple play package and cell phone from a cable provider. In my case the savings will be substantial because of owning multiple homes and having multiple triple play packages. Streaming is the future as is wireless internet.

 

[bartholomr4]

With the potential lawsuits over royalty fraud coming, I don't think it will ever turn a profit now.

I believe the "New Fox" will have to pay the $128. I am pretty sure Disney is protected from existing law suits. Disney may eventually write the check, but I believe Fox will have already places these funds aside pending the arbitration outcome as this sum of money would be deemed substantial under GAAP accounting rules. One could argue then this won't follow onto Disney+

Also if Disney acquires the 10% of Hulu from AT&T, it will be getting really close to having the power to force Comcast to sell. I believe with 80% of the vote, it can force a liquidation vote, and force minority owners to sell at the current market price.

 

[seascape]

I'd imagine that Rupert and his sons are much happier about getting out of the assets after hearing this news.


But this does bring some concern to the overall price that Disney is paying for these assets. The sports assets in the US, Mexico, and Brazil are probably worth around $30-35 billion out of that $71 billion price that Disney is paying for the overall assets. The concern there is that it's highly unlikely that Disney will be able to offload those assets for anywhere near $30-35 billion. At most, those assets seem likely to sell or be offloaded for $20 billion or so.

If there's also issues with the TV assets and Hulu in terms of these payment agreements that Fox had for its shows, that's another negative aspect if it results in substantial payouts to talent/producers/etc.


Regardless, we already knew that Disney+/ESPN+/Hulu are the future of Disney, but they need those bets to go really big now to justify paying what could end up being $40 billion (with $14 billion in additional assumed debt) for 30% of Hulu, Star India, the TV/Movie studio, some international channels, and National Geographic/FX. The price paid just looks very expensive if all the sports assets are removed at a discounted value.

You are correct, selling the Fox Sports assets at a discounted value is a hit on the stockholders. That is why I want Disney to spinoff these companies rather than sell them. I do not believe Disney can be doing what is their fiduciary responsibility if they sell these assets at a major loss.

 

[mikejs78]

I'm not saying this will kill merger. What I'm saying is that this puts Disney in massive legal red tape that could destroy their streaming ambitions and put them in hot water among creatives in Hollywood.

That he casted the executives in a positive light in the face of potential criminal activity is seriously going to make Hollywood creatives hesistate to work for Disney, especially if they bring the two in as planned whilst more potential lawsuits start to affect their new TV studio's profits.

A bit awkward to be discussing that now when the service is about to be the center of massive accounting fraud lawsuits.

You're really blowing this way out of proportion. It may change future contracts and the way streaming revenues are divided, but no way this kills Disney's streaming ambitions.

 

[Darkprime]

You are correct, selling the Fox Sports assets at a discounted value is a hit on the stockholders. That is why I want Disney to spinoff these companies rather than sell them. I do not believe Disney can be doing what is their fiduciary responsibility if they sell these assets at a major loss.

They will probably end up spinning them off locally in the U.S but I dont think they can do so in Latin America e.g Brazil and Mexico and what not. Those approvals were very specific they had to sell them. Probably at a loss just to get it sold in time.

 

[AnotherDayAnotherDollar]

I believe the "New Fox" will have to pay the $128. I am pretty sure Disney is protected from existing law suits. Disney may eventually write the check, but I believe Fox will have already places these funds aside pending the arbitration outcome as this sum of money would be deemed substantial under GAAP accounting rules. One could argue then this won't follow onto Disney+

Also if Disney acquires the 10% of Hulu from AT&T, it will be getting really close to having the power to force Comcast to sell. I believe with 80% of the vote, it can force a liquidation vote, and force minority owners to sell at the current market price.

That could be a thing if Comcast owned 20% and say Sony owned 10%. However with Comcast owning 30% then Disney can never get to 80% unless it buys Comcast's whole equity.

Also, where did you hear this 80% forced to sell thing?

You are correct, selling the Fox Sports assets at a discounted value is a hit on the stockholders. That is why I want Disney to spinoff these companies rather than sell them. I do not believe Disney can be doing what is their fiduciary responsibility if they sell these assets at a major loss.

Christine McCarthy mentioned these reports are incorrect. I want this thing to finish up so we can see how the divestment is going to look. Hearst wants to buy the A&E Euro equity and that might involve some of their ESPN equity, which Disney will undoubtedly want.

 

[Quinnmac000]

Hulu will be profitable in about 1 to 2 years. As for Comcasts 30%, Comcast is planning on having their own streaming service and that the shows currently on Hulu are the ones they want on their new service. Disney does not plan on cutting off the number of shows they are currently giving Hulu but in fact are adding even more shows. I expect that Disney will buy out the 30% and give Comcast a nice profit on their investment. I would also not be surprised if the buy out resolves the Marvel movie rights that Universal currently has but nothing with the themepark rights. Rather than worrying about the themepark contract with Universal, Disney should work on consolidating the combined Disney Fox and then try to buy the last missing piece of Marvel from Sony.

On the themepark rights, let Comcast keep them and collect their payment. There are more t th an enough Mavel Characters that Disney can use at WDW and they all can be used at all the other Disney Parks around the world. Besides Comcast has bigger issues to worry about, 5G. 5G will hurt cable companies but time because competition in high speed internet with streaming and cell service will be cheaper than a triple play package and cell phone from a cable provider. In my case the savings will be substantial because of owning multiple homes and having multiple triple play packages. Streaming is the future as is wireless internet.

As of yesterday, per Comcast CEO Brian Roberts himself that is false. Almost all NBCUniversal properties will be on multiple platforms as the purpose of the streaming service is not to be a Hulu/Netflix rival but allow consumers to have access to their properties easier to retain interest as well as monetize with AVOD and SVOD their properties which they currently haven't to increase value for shareholders.

 

[Darkprime]

So In a few years once Disney recovers financially from buying Fox do you think they'll look at buying someone else? Maybe Sony? If someone else doesn't? By then Amazon, Netflix and Apple should be able to compensate for all the media consolidation.

 

[bartholomr4]

That could be a thing if Comcast owned 20% and say Sony owned 10%. However with Comcast owning 30% then Disney can never get to 80% unless it buys Comcast's whole equity.

Also, where did you hear this 80% forced to sell thing?

Google “Force-Buyout” and “Buy-Sell” agreements.

Also, with 7 of 10 board seats, if Disney wants to force Comcast out, it can just issue more stock and add capital to Hulu itself without letting Comcast participate and take a greater equity postition, and “water down” the Comcast equity position. Because Hulu is loosing money, and Comcast is wildly in debt, I am betting Disney‘s investments in expansion will result in a greater equity position, as % of ownership.

 

[Quinnmac000]

So In a few years once Disney recovers financially from buying Fox do you think they'll look at buying someone else? Maybe Sony? If someone else doesn't? By then Amazon, Netflix and Apple should be able to compensate for all the media consolidation.

Sony Pictures Entertainment is not an asset Disney will utilize properly and is over redundant to the point it only adds content but lacks anything else making the cost to obtain overpriced. Disney lacks proper Japanese distribution nor do they produce anime so the Sony Music Entertainment portion is completely useless (they also can't put any on Hulu in Japan as they licensed the name to another company), as well as Sony Television not adding anything to what Disney will have with the combined assets from Fox.

There is a better likelihood Disney will try to obtain smaller level studios such as Univision, ITV, and RTL which will provide something that can actively participate in.

 

[seascape]

So In a few years once Disney recovers financially from buying Fox do you think they'll look at buying someone else? Maybe Sony? If someone else doesn't? By then Amazon, Netflix and Apple should be able to compensate for all the media consolidation.

Disney should not be allowed to buy another studio. I do make an exception on buying part of Sony. I believe the justice department would allow them to buy the movie rights for Spiderman and family back from Sony. Disney/Fox will end this year with over 40% of the Noth American movie box office and could actually hit 50% if all their movies hit.

 

[Darkprime]

Disney should not be allowed to buy another studio. I do make an exception on buying part of Sony. I believe the justice department would allow them to buy the movie rights for Spiderman and family back from Sony. Disney/Fox will end this year with over 40% of the Noth American movie box office and could actually hit 50% if all their movies hit.

well yea buying individual movie rights is different to a studio. And the DOJ wouldn't even be involved in that situation. But I mean everybody keeps bringing up the 40% box office but thats a hypothetical. Iger has already said they actually plan to have Fox make less movies, downsizing to just 4 releases a year under Fox. The DOJ had no issue with Disney buying Fox outside the Fox Sports and ESPN merging. Probably because they can see the rise in streaming studios like Netflix, Amazon and Apple to compensate for all the media consolidation.

 

[AnotherDayAnotherDollar]

.

I see. But there's no guarantee that is the case with Hulu. If 80% is all it took I think Disney would have forced Hearst to sell their 20% equity of ESPN a long time ago.

 

[mab7689]

So are we now assuming that the IFT in Mexico have given the approval privately and the ten day final review period has begun?

 

[Darkprime]

So are we now assuming that the IFT in Mexico have given the approval privately and the ten day final review period has begun?

Pretty much. All the trades seem to be implying March 8th is closing day.