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

[Rodan75]

I’m surprised there’s crickets from them on the theatrical market share front.

I have to imagine even the government views that as cyclical. There is no guarantee that what Disney is doing successfully today in theaters will be successful in 2 years, let alone 5. And realistically there is plenty of healthy competition on that front, including from Amazon and Netflix competing with theatres as well as TV distribution.

 

[MisterPenguin]

I’m surprised there’s crickets from them on the theatrical market share front.

DOJ didn't buy Comcast's breathless take on Disney hording the Box Office take. It's not about how much the movies make, but how many you produce. Disney, with all its subsidiaries barely puts out 10 movies a year. It has a huge take because they're very good/popular movies. As far as movies produced, Disney plus Fox still has a minority of the production of the several hundred movies produced per year. If other movie studios made better and more popular movies, the Box Office take wouldn't be so skewed toward Disney.

 

[the.dreamfinder]

DOJ didn't buy Comcast's breathless take on Disney hording the Box Office take. It's not about how much the movies make, but how many you produce. Disney, with all its subsidiaries barely puts out 10 movies a year. It has a huge take because they're very good/popular movies. As far as movies produced, Disney plus Fox still has a minority of the production of the several hundred movies produced per year. If other movie studios made better and more popular movies, the Box Office take wouldn't be so skewed toward Disney.

Yeah, that’s BS. It is about how much the movies make because with that comes leverage. Leverage they have used keep large auditoriums playing SW and Marvel films longer than the market may demand and increase their share of the take. With a cradle to grave slate, they can use their leverage to block out offerings from other studios from tentpoles to specialty films.

Need we revisit the Paramount decision and block booking?

 

[happycamperuni]

DOJ didn't buy Comcast's breathless take on Disney hording the Box Office take. It's not about how much the movies make, but how many you produce. Disney, with all its subsidiaries barely puts out 10 movies a year. It has a huge take because they're very good/popular movies. As far as movies produced, Disney plus Fox still has a minority of the production of the several hundred movies produced per year. If other movie studios made better and more popular movies, the Box Office take wouldn't be so skewed toward Disney.

All of that is true technically, but Disney has been able to skew theatrical terms in a way that other studios can't (i.e. extended exclusivity windows for specific films, higher splits than 50%, etc.).

Disney has and exerts real market power in the theatrical release market. That's pretty much undeniable. Just look at the terms that they dictate on the Star Wars films to US exhibitors: 65% of the film's box office and if the film wasn't in the largest auditorium for at least 4 weeks, they'd increase that to 70%.

DoJ may have thought that even though Disney is getting an additional movie studio, there might not be as much of an increase in box office share if Fox's Marvel movies are basically cut.

I'm somewhat sympathetic to that argument. In that case, Disney isn't really going to be extending its box office take that much since Fox's Marvel movies are their main blockbusters.

 

[pdude81]

Perhaps it's too cynical but I blame Roseanne for them not getting the whole enchilada.

 

[Rodan75]

The DOJ is going to approve the Disney Fox merger today. What does that mean?

First Comcast will have to offer a substantial premium over the Disney offer and second the breakup fee would also have to be higher.

Do what we will Comcast have to bid? Well the prior breakup fee was 2.5 billion. Then there is the 1.5 billion that has to be paid to Disney. Now there is no longer a risk of Disney backing out of a great deal for Fox shareholders and if Comcast is blocked by the feds there may be no deal. Therefore Comcast would have to offer a breakup fee of 5 billion plus the 1.5 billion up front to pay Disney. Then the offer would likely have to be 90 billion plus assuming the 14 billion in debt. That would total 105.5 billion plus at least 23 billion debt for Sky. Forget it! It's over and Comcast should move on to buy Sony/Columbia pictures.

Once DoJ approves, won't the pressure be back on to schedule the Shareholder vote? One of the articles today said that Comcast was in no hurry to create a new offer because Fox hadn't scheduled the vote yet, but that seems disingenuous. BUT, I also didn't see any guidelines in the information posted yesterday that would indicate a hard timeline for the Shareholder vote.

 

[MisterPenguin]

Yeah, that’s BS. It is about how much the movies make because with that comes leverage. Leverage they have used keep large auditoriums playing SW and Marvel films longer than the market may demand and increase their share of the take. With a cradle to grave slate, they can use their leverage to block out offerings from other studios from tentpoles to specialty films.

Need we revisit the Paramount decision and block booking?

You're welcome to, and enjoy the reading.

But Disney can have a year of Solos and all of a sudden it's market share drops to less than 10% of Box Office. Where's the leverage there?

Or... If Box Office take is so dangerous, why isn't DOJ breaking up Disney right now and telling them their 10 movies a year is too dominating?

Looking at BO alone is the real BS here.

 

[Rodan75]

All of that is true technically, but Disney has been able to skew theatrical terms in a way that other studios can't (i.e. extended exclusivity windows for specific films, higher splits than 50%, etc.).

Disney has and exerts real market power in the theatrical release market. That's pretty much undeniable. Just look at the terms that they dictate on the Star Wars films to US exhibitors: 65% of the film's box office and if the film wasn't in the largest auditorium for at least 4 weeks, they'd increase that to 70%.

DoJ may have thought that even though Disney is getting an additional movie studio, there might not be as much of an increase in box office share if Fox's Marvel movies are basically cut.

I'm somewhat sympathetic to that argument. In that case, Disney isn't really going to be extending its box office take that much since Fox's Marvel movies are their main blockbusters.

But look at it from the other perspective, Theatres are fighting all of the other studios from killing the Theatrical Window protections completely. If Comcast won Fox, then the Theatres would have no window protections.

The % of take from the film's box office topic is complicated, because for many years, Disney got a smaller cut of their film's profits, because it wasn't considered a 'Major', only in recent years have they renegotiated those terms, but they did so aggressively.

 

[AnotherDayAnotherDollar]

Divestment of RSNs is kind of a big deal. I'm sure the only reason Disney is not fighting it is because of the pressure from Comcast.

It would make fun for them to buy FloSports to make up the loss of the RSNs and complement ESPN+. It would be a lot smaller, but a lot cheaper with tons of niche content.

 

[Rodan75]

Divestment of RSNs is kind of a big deal. I'm sure the only reason Disney is not fighting it is because of the pressure from Comcast.

It would make fun for them to buy FloSports to make up the loss of the RSNs and complement ESPN+. It would be a lot smaller, but a lot cheaper with tons of niche content.

Maybe they just picked them up in the original agreement so they could offload them,something to sacrifice. From what it sounds like, they've always been willing to give them up. And this way they aren't being pressured to give up something like the combined Hulu stake.

I always assumed they would have to give up some of them, not all of them as a unit. And I'm a little surprised that New Fox didn't keep them to augment FS1 and FS2.

 

[Indy_UK]

So is this revelation now likely to slow things down?

 

[happycamperuni]

So is this revelation now likely to slow things down?

It sounds like the Murdochs hold all of the cards right now. They get to decide whether to speed up the process (by rescheduling the shareholder vote), or hold out for a bidding war in hopes of higher offers from Comcast and Disney.

I'd imagine though that they will want to see Comcast actually progressing towards an offer if they're going to keep the bidding window open, otherwise they'll schedule the shareholder vote again.

 

[Rodan75]

It sounds like the Murdochs hold all of the cards right now. They get to decide whether to speed up the process (by rescheduling the shareholder vote), or hold out for a bidding war in hopes of higher offers from Comcast and Disney.

I'd imagine though that they will want to see Comcast actually progressing towards an offer if they're going to keep the bidding window open, otherwise they'll schedule the shareholder vote again.

We are likely getting to the Bird in the Hand scenario. Disney has the approval and based on the SEC filing yesterday, the Fox board doesn't think Comcast can get the approval on the existing RemainCo assets. So any new offer from Comcast and a potential partner will have to be different RemainCo configurations. That pushes this deal back another 6mos to a year. Any partner would have to re-start due diligence or risk their own shareholder revolt.

 

[AnotherDayAnotherDollar]

I watched a ton of online interviews with Igor and it comes across that they do really want SKY. If Comcast gets SKY then I hope Disney swaps the 39% in exchange for the remaining 30% of Hulu and maybe Some Marvel rights

How much money Disney would get for the 39% of Sky is also a valid question. At 31B (which will probably go up if Fox closes at 71B), the 39% is worth 12B. Let's go with that number.

An April analysis says Hulu is worth 8.7B, which is up from its 5.8B 2016 valuation when Time Warner bought a 10% stake in the company.

https://www.bloomberg.com/news/artic...fed-by-netflix

https://variety.com/2016/digital/new...nt-1201829514/

Let's be conservative in our analysis:
Assets that would be owned by Disney that Comcast wants:

Sky 39% = 12B
Fox's Dreamwork Animation VOD distribution rights = 0

Assets that would are owned by Comcast that Disney wants:

30% of Hulu = 30% of 9B = 3.3B
Marvel Orlando theme park rights, Spider-man Japan theme park rights and outstanding Hulk and Namor movie rights = 1B

Even in this unrealistic scenario, Comcast would still have to pay Disney ~7.7B to get the rest of Sky.

 

[AnotherDayAnotherDollar]

Maybe they just picked them up in the original agreement so they could offload them,something to sacrifice. From what it sounds like, they've always been willing to give them up. And this way they aren't being pressured to give up something like the combined Hulu stake.

I always assumed they would have to give up some of them, not all of them as a unit. And I'm a little surprised that New Fox didn't keep them to augment FS1 and FS2.

Fair enough. ESPN+ needs more content though. FloSports is something they should definitely look at once this acquisition closes and they start divesting the RSNs.

 

[Indy_UK]

I can't figure out if Disney are wanting to get into the TV distribution Game with SKY or just do online streaming with a lot lower overheads.

Why say you want to buy a TV company like SKY when they are constantly saying that streaming is disrupting the market and on demand with ESPN+ Disney streaming and Hulu is the way to go?

If they are really not fussed about SKY then sell the 39% to Comcast in exchange for Hulu and other bits.

 

[seascape]

How much money Disney would get for the 39% of Sky is also a valid question. At 31B (which will probably go up if Fox closes at 71B), the 39% is worth 12B. Let's go with that number.

An April analysis says Hulu is worth 8.7B, which is up from its 5.8B 2016 valuation when Time Warner bought a 10% stake in the company.

https://www.bloomberg.com/news/artic...fed-by-netflix

https://variety.com/2016/digital/new...nt-1201829514/

Let's be conservative in our analysis:
Assets that would be owned by Disney that Comcast wants:

Sky 39% = 12B
Fox's Dreamwork Animation VOD distribution rights = 0

Assets that would are owned by Comcast that Disney wants:

30% of Hulu = 30% of 9B = 3.3B
Marvel Orlando theme park rights, Spider-man Japan theme park rights and outstanding Hulk and Namor movie rights = 1B

Even in this unrealistic scenario, Comcast would still have to pay Disney ~7.7B to get the rest of Sky.

I think your numbers are fair but the Japanese rights end in about 10 years so they are not worth that much.

 

[Disney Analyst]

I was seeing on Twitter that the DOJ approved the merger except the sports side of things? Is that what you guys are talking about regarding this lawsuit?

 

[seascape]

I was seeing on Twitter that the DOJ approved the merger except the sports side of things? Is that what you guys are talking about regarding this lawsuit?

The anti trust case against the Disney Fox merger was settled with Disney agreeing to sell the RSNs. As a result the case is over and the Government agreed to the merger.

 

[AnotherDayAnotherDollar]

I think your numbers are fair but the Japanese rights end in about 10 years so they are not worth that much.

I don't think they are worth that much either (even if the Japan rights never expired). I am being conservative with the numbers. In reality it would require Comcast to fork out more money + those assets to get the remainder of Sky.