disney and 21st century fox merger case study

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The disney-fox deal: why it’s about going directly to the consumer, july 10, 2018 • 26 min listen.

Last month, the U.S. Justice Department gave its blessing to Disney’s acquisition of 21st Century Fox -- a deal that paves the way for the creation of a mega-behemoth entertainment company.

Wharton's Herbert Hovenkamp and Hemant Bhargava of UC-Davis discuss the strategy behind the Disney-Fox deal.

The Simpsons may be headed to Disneyland. Last month, the U.S. Justice Department gave its blessing — some said fairly quickly — to Disney’s acquisition of 21st Century Fox in a deal valued at $71.3 billion. The approval paves the way for the creation of a mega-behemoth entertainment company, combining many top-flight content brands and two of the world’s largest movie studios whose films all together commanded half of all box office receipts year-to-date, according to Box Office Mojo.

“It was an extremely quick decision, particularly when you look at the market share numbers of these firms, at least in some markets, which puts them pretty close to the line,” said Herbert Hovenkamp, a Wharton legal studies and business ethics professor with a joint appointment at the Penn Law School, on the Knowledge at Wharton show on SiriusXM channel 111 . “It’s the kind of merger that you would think the government would actually take its time evaluating.”

Antitrust authorities took about half a year to clear the deal, after requiring that Disney divest Fox’s 22 regional sports networks. The transaction is a horizontal merger that combines two competitors in the same market. Meanwhile, the DOJ took two years to evaluate AT&T’s acquisition of Time Warner — a vertical merger. Vertical mergers historically have been more likely to gain approval because they involve players in different parts of the supply chain. But authorities greenlit the Disney-Fox deal and rebuffed AT&T. (The phone company took the government to court and won .)

According to Hovenkamp, there’s a growing feeling on the part of some merger scholars that deal guidelines have become “a little bit too lenient” based on some retrospective studies that have looked at approved mergers in the past that had come too close to the line of being anti-competitive. “Those studies have determined that a fairly high percentage of those mergers have resulted in higher prices.” While one explanation for higher prices could be an improvement in product quality, he noted, nonetheless there is some agreement that standards have gotten a bit looser.

The New York Times editorial board said the swift approval of Disney-Fox was “ stunning ” when similar deals usually take twice the time to scrutinize. The paper noted that the DOJ also only required one condition for approval — the sale of the regional sports networks — even though Disney-Fox accounts for half of national box office revenue this year and about a third of all scripted, as opposed to reality, TV shows. The Writers Guild of America West opined that “the antitrust concerns raised by this deal are obvious and significant.” Disney and Fox are part of an “oligopolistic” industry, it said, and this deal “will make matters even worse.”

“It was an extremely quick decision, particularly when you look at the market share numbers of these firms, at least in some markets, which puts them pretty close to the line.” –Herbert Hovenkamp

Disney-Fox would own Walt Disney Studios (Marvel, Lucasfilm, Pixar); Disney theme parks and hotels; ABC TV stations; A&E networks; Disney Channels; ESPN, Disney products and stores, music and publishing; Twentieth Century Fox studio; Fox’s TV production (“The Simpsons,” “Modern Family,” “This is Us”); cable networks FX, FXX, FXM and National Geographic channels; Star India; more than 350 international channels; 39.1% of pay TV provider Sky; controlling ownership of Hulu; and other assets. Their movie slate would include Avatar , new and earlier Star Wars films and unites Fox’s Marvel films — X-Men , Fantastic Four and Deadpool — with Disney’s Marvel properties. (Fox is spinning off its broadcasting and cable networks and the bulk of its sports channels.)

Disney-Fox have set a date of July 27 for shareholders to vote on the transaction. But it’s not a done deal. Comcast is also interested in the Fox assets, and could still grab the company from Disney by raising its rival bid of $65 billion. Comcast’s involvement had forced Disney to up its latest offer from $52.4 billion. But Disney has the advantage of already having the DOJ’s approval on the deal, experts say. There is no guarantee Comcast will get approval as well, given that the government tried to block the AT&T-Time Warner merger.

Disney’s Direct-to-consumer Plan

Hemant Bhargava, chair in technology management at the University of California, Davis, agreed that the Disney-Fox merger approval was “extremely quick.” But he said it could be because antitrust authorities see the boundaries of the market changing. Traditional media firms like Disney and Fox see viewers cutting the cord and moving to online offerings. “And so, even though they may both have 27% of the market collectively, perhaps the DOJ recognizes that there are new players who are beginning to become more powerful,” he noted.

There’s a host of new online video subscription services available, with the largest being Amazon Prime Video, Google’s YouTube and Netflix. Apple is planning to join the ranks as well. So it’s no surprise that traditional media is consolidating to better compete. “Certainly, Netflix will have a bigger competitor in Disney-Fox,” Bhargava said. Disney has said it plans to expand the offerings of Hulu, a Netflix rival, since it will have a controlling interest in the online video platform after acquiring Fox. (Hulu’s other owners are Comcast’s NBCUniversal and AT&T’s Time Warner.)

Indeed, Disney’s main reason for buying Fox is to have additional branded content for online, direct-to-consumer content services. “This acquisition reflects a changing media landscape increasingly defined by transformative technology and evolving consumer expectations,” said Disney CEO Bob Iger during a conference call with analysts to discuss the acquisition. “It will allow us to greatly accelerate our direct-to-consumer strategy. … We believe creating a direct-to-consumer relationship is vital to the future of our media businesses, and it’s our highest priority.”

Disney has just launched ESPN+, a new $4.99 a month streaming service, and plans to offer another next year that will house Disney, Pixar, Star Wars and Marvel movies plus exclusive films and TV shows. As part of this development, Disney has said it plans to stop licensing Disney movies to Netflix starting in 2019. “We believe that in order to be in the [online subscription video] business for the long run … we ultimately need to take back control of our content,” Iger said . Netflix grew by licensing older content from companies like Disney. But now Netflix has gotten so big that it is challenging the big media companies themselves.

“[Even] though they may both have 27% of the market collectively, perhaps the DOJ recognizes that there are new players who are beginning to become more powerful.” –Hemant Bhargava

Iger said the plan was for EPSN+ and the upcoming Disney online service to cost “substantially below” the fee for Netflix. ESPN+ is an add-on subscription that will not fully replicate the ESPN cable channel content while the new Disney service would have “much less” volume of content than Netflix, he noted. As for Hulu, Iger said he plans to make it the home of programming geared for adult viewers from TV and cable networks. It will also house movies that are not part of the Disney subscription service. For now, he said, Disney will offer these three content portals as standalone services instead of a bundle so viewers can pick and choose.

“One of the big, big advantages of this merger” is that it strengthens Disney’s online streaming services, Bhargava said. “The primary synergy is going to be that they become a bigger content player in this industry and they can sign up subscribers and get this recurring revenue.” Traditional media companies’ revenue sources — licensing, affiliate fees from cable, satellite and telecom TV companies and ratings-based ad revenue — are in jeopardy as viewers continue to cut the cord or watch content online. By launching online video services that charge monthly, Disney-Fox can get this “predictable” revenue regularly, he added.

Bhargava believes Disney has three paths it can take: offer a streaming service but still distribute content through cable, satellite and telecom TV providers; become another Netflix and just do streaming where viewers can only get their bundled content exclusively through Disney-Fox; or focus on becoming a larger content company and license their shows and movies. “I think what they would do right away is to offer their own streaming service and then still be available elsewhere,” he said. “What Disney would be looking forward to is that they become the primary content place or the supplier for” millions of viewers.

Too Many Subscriptions?

But Hovenkamp said one thing that horizontal and vertical media mergers have in common is the risk of “excessive siloing.” “One of the things people fear about excessive concentration in this market is that too many of these companies are going to try to bottle up their own content … and they’re going to be reluctant to share that content with others,” he said. “What that means for consumers is that if you want a big range of content, you may have to subscribe to more than one service.” For example, CBS All Access exclusively has “The Good Fight,” a spinoff of the popular legal drama “The Good Wife,” as well as “Star Trek Discovery,” which is the next saga of the science fiction series.

If consumers have to subscribe to multiple services just to get all the content they want, eventually they’re going to push back against escalating media bills. “We usually think of antitrust as a consumer welfare principle,” Hovenkamp said. “We look at the interest of consumers first, and that interest is not merely in low prices, it’s also in quality and variety. And [consumers] have come to expect a big variety.” On the flip side, with so much competition in online video services, companies tend to keep some content exclusively to get people to sign up, Bhargava said.

When considering antitrust, “[we] look at the interest of consumers first, and that interest is not merely in low prices, it’s also in quality and variety. And [consumers] have come to expect a big variety.” –Herbert Hovenkamp

Disney’s Iger said the company is already developing movies and TV series for its online video streaming services. “I’ve talked about a Star Wars series, Marvel series,” he told analysts. “We’re creating a series based on the Monsters Inc. characters, for instance. There’s a High School Musical series.” Iger said Disney will have to invest in these new ventures while “weaning ourselves off the Netflix deal” since it will forgo licensing revenue by ending the two companies’ agreement. “It’s going to take a reset of sorts.”

As for Disney-Fox’s impact on movie theaters, “I think Disney already extracts higher percentage fees when a movie is seen inside a cinema house than from all the other studios,” Bhargava said. “Disney and Fox will have a hugely bigger stick with which to play that fight … Together, they will be even more powerful.” According to The Wall Street Journal , Disney not only had strict requirements for cinemas if they wanted to show Star Wars: The Last Jedi but took 65% of the ticket revenue , “a new high for a Hollywood studio.” If a movie theater violated the terms, Disney would hike that commission to 70%, the paper said.

Bhargava said it might even be conceivable that Disney-Fox could eventually run their own movie theaters. Recently, Netflix reportedly considered buying Landmark Theaters, according to The Los Angeles Times . “I think there are current regulations against that, but that would be another area to watch,” he said. The Supreme Court ruling in the U.S. v. Paramount Pictures case in 1948 put legal roadblocks around studios owning theaters as they would control both the content creation and distribution process.

Another area Disney-Fox could dive into would be gaming, Bhargava said. “Look at other areas of content consumption where Disney could increase its power and ability to fight against Netflix and other firms,” he said. “We talked about movies, TV shows, but gaming is a huge area of content consumption. And Disney could strike deals there.” Comcast could do the same as it competes with a combined AT&T-Time Warner, Bhargava added. “Go after things that involve interactive gaming or other areas where people’s eyeballs are shifting towards.”

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The Walt Disney Company: The 21st Century Fox Acquisition and Digital Distribution

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David J. Collis

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• The Walt Disney Company: The 21st Century Fox Acquisition and Digital Distribution  By: David J. Collis

Disney’s Acquisition of 21st Century Fox Will Bring an Unprecedented Collection of Content and Talent to Consumers Around the World

At 12:02 a.m. Eastern Time tomorrow, March 20, 2019, The Walt Disney Company’s acquisition of 21st Century Fox will become effective. With 21st Century Fox’s iconic collection of businesses and franchises, Disney will be able to provide more appealing high-quality content and entertainment options to meet growing consumer demand; increase its international footprint; and expand its direct-to-consumer offerings, which include ESPN+ for sports fans, the highly-anticipated Disney+ streaming video-on-demand service launching in late 2019; and Disney and 21st Century Fox’s combined ownership stake in Hulu.

“This is an extraordinary and historic moment for us—one that will create significant long-term value for our company and our shareholders,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “Combining Disney’s and 21st Century Fox’s wealth of creative content and proven talent creates the preeminent global entertainment company, well positioned to lead in an incredibly dynamic and transformative era.”

The acquisition includes 21st Century Fox’s renowned film production businesses, including Twentieth Century Fox, Fox Searchlight Pictures, Fox 2000 Pictures, Fox Family and Fox Animation; Fox’s television creative units, Twentieth Century Fox Television, FX Productions and Fox21; FX Networks; National Geographic Partners; Fox Networks Group International; Star India; and Fox’s interests in Hulu, Tata Sky and Endemol Shine Group. Disney and 21st Century Fox entered into a consent decree with the U.S. Department of Justice last year under which Disney will divest 21st Century Fox’s Regional Sports Networks.

Earlier today, 21st Century Fox completed the spin-off of a portfolio of 21st Century Fox’s news, sports and broadcast businesses, including the FOX News Channel, FOX Business Network, FOX Broadcasting Company, FOX Sports, FOX Television Stations Group, and sports cable networks FS1, FS2, Fox Deportes and Big Ten Network, and certain other assets and liabilities, into Fox Corporation.

Click  here  to read a press release detailing Disney’s acquisition of 21st Century Fox.

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The Walt Disney Company: The 21st Century Fox Acquisition and Digital Distribution – Case Solution

This case study discusses the actions of Walt Disney Company to acquire 21st Century Fox and in launching three streaming channels in competition with Netflix. It seeks to answer the questions on why Disney chose to acquire Fox and what it resulted in.

​David J. Collis Harvard Business School ( 719-445 ) January 2019. (Revised October 2019.)

Case questions answered:

• The analysis should focus on the following issues: Strategic assessment of Walt Disney Company and its situation as of today Strategic assessment of the entertainment industry Disney’s history and evolution over the last years Disney – the recent strategic decision of purchasing FOX’s assets, the rationale and the expectations, Assessment of competitors Outcomes and/or expected outcomes
• On top of that, you are expected to pose some specific questions on the case and further develop your research based on that.

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The Walt Disney Company: The 21st Century Fox Acquisition and Digital Distribution Case Answers

The entertainment industry.

History . Throughout the 20th century, the movie industry became one of the cheapest and most accessible ways to entertain, and the 2000s brought technological advancement and radical changes. Computers, already being used to create effects and animations in the previous decades, over time replaced traditional hand-drawn animation as the method of development for animated feature films. Several film genres began to rise in popularity, including fantasy and superhero films, a trend that continued well into the 2010s.

The movie industry as a whole grew significantly (see Exhibit 1), with box office sales of US$23.1 billion in 2005, US$31.6 billion in 2010, and US$38.7 billion in 2018, a slight decline from the historical record of 2018, with the US representing more than 24% of the worldwide box office of 2019. [1] [2]

Exhibit 1 . Box Office revenue in US$ billions

Despite growing figures and record profits, traditional movies are being challenged by a potential substitute industry. Since the first decade of the 21st century, the steady growth of the internet has influenced the supply of entertainment. In fact, during this period, a new concept of media service started to appear as categorized by the US Federal Communication Commission: over-the-top (OTT) services.

OTT is a streaming media service that provides movies and TV series content via the Internet, with most of them being subscription-based platforms. Those services can be divided into two groups, according to USFCC: multichannel video programming distributors (such as Roku) and online video-on-demand distributors (such as Netflix and Apple TV). [3]

For the sake of simplicity, this research will not analyze the industry based on this categorization. Indeed, it will focus on players that produce their own content (SVOD) rather than broadcasting channels.

OTT revenues and users represent the growing demand for new ways to entertain. The evolution of these figures is shown in Exhibits 2 and 3. Worldwide, OTT services grossed US$6 billion in 2010, an estimated US$85 billion in 2019 with 1.1 billion subscribers, and a steady growth that is expected to reach US$159 billion and 1.3 billion subscribers by 2024.

The VOD segment grossed US$48 billion in revenues in 2019 and is forecast to reach US$87 billion by 2025, with 627 million subscribers in 2019 and an estimated 950 million by 2025. [4] [5]

The stable demand for online entertainment is also testified by piracy. Worldwide, it has been estimated that illegal online access to movies costs this sector a loss of US$37 billion. In 2022, it is expected to increase by 72% and reach a total market loss of US$51 billion. [6]

Given the attractive figures, giants such as Fox, Amazon, Apple, and WarnerMedia have decided to position themselves in the sector, creating synergies with their already established businesses. At the same time, Bob Iger, Disney’s President since 2000 and CEO since 2005, was tasked with figuring out a way to do the same.

In this case, the first part is an introduction to The Walt Disney Company. It is followed by descriptions of the leading competitors and an analysis of The Walt Disney Company’s strategic moves.

The Walt Disney Company

History . The Walt Disney Studios, formerly the Disney Brothers Cartoon Studio in 1923, was founded in 1926 by Walt Disney and his brother, Roy. The siblings performed parallel tasks: Walt was the creator, and Roy was the manager. Alice’s Wonderland was imagined by Walt Disney and triggered the success of his company. [7]

Walt Disney was a very resourceful man. After a tough start, he created a new character, Mickey Mouse, who has been the mascot of the company since 1928. He succeeded in making cartoons accessible by serving a niche. The company managed to impose itself through merchandising – they put the image of Mickey Mouse on pencil tablets, books, and newspaper comic strips.

The brand Disney became famous not only in the United States but also worldwide by creating clubs and the Mickey Mouse Magazine. Nevertheless, the success of Disney lay in its technological innovations, which led to the Oscar Academy, creating a category for cartoons.

The changes accompanied the success of the studio. Disney created the storyboard, the multiplane camera, the first sound cartoon (Steamboat Willie, which is still used as the opening scene in every Disney movie), then the first colored full-length cartoon with Snow White and the Seven Dwarfs in 1937, and the first stereo cartoon, Fantasia in 1940. The same year, to sustain the growth of Walt Disney Company, the company issued its first stock. [8]

Walt Disney embodied the myth of the self-made American man, from humble beginnings to founding a flagship company, enabled by his stubbornness, ambition, and pioneering spirit. His innovative ideas did not stop here, creating the world’s first theme park – Disneyland, in 1955 in California, and later expanded to Florida (1971) and Tokyo (1983).

Even after his death in 1966, he has continued to influence the culture of his company and its development. However, the value of the company was put into question due to lackluster innovations, as its conservatism impeded change within a more capitalistic structure with new customs.

The 80s were a difficult period for Disney due to the decreasing audience and the fierce competition with Spielberg and Lucas’s movies. The company decided to launch The Disney Channel in 1983, allowing it to address a new market segment. Three years later, Walt Disney Studio’s name changed to The Walt Disney Company. The first Disney Store opened a year later, a further step in diversification. The success continued with animated films in movie theatres, television, and VCRs. [7]

Since the 90s, Disney has followed a strategy of acquisition – it first acquired the American entertainment company Miramax in 1993. The company diversified its business with the Disney Stores, the acquisition of the California Angels baseball team, and Capital Cities/ABC in 1996.

In 2005, Bob Iger became CEO and built a strategy on three fundamental pillars: “generating the best creative content possible, fostering innovation and utilizing the latest technology, and expanding into new markets around the world.” [9]

To reach this goal, he decided to acquire – among other minor acquisitions: Pixar Animation Studios in 2006, Marvel Entertainment in 2009, Lucasfilm in 2012, Bamtech in 2017, and 21st Century Fox in 2019.  [7]

Today . Recent years have been…

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Case 21 Walt Disney, 21st Century Fox, and the Challenge of New Media *

On July 19th, 2018, Comcast Inc. withdrew from the battle to acquire Rupert Murdoch's 21st Century Fox, leaving the field clear for the Walt Disney Company. Disney's initial bid of $54 bn. (plus the assumption of Fox's debt of $14 bn.) had been accepted by 21st Century Fox on December 14, 2017. However, a higher bid from Comcast had thrown the deal into doubt and was only resolved when Disney raised its bid to $71 bn., making the deal worth $85 bn.

For Disney's CEO, Bob Iger, the acquisition would reinforce Disney's position as America's leading entertainment provider. For 87‐year‐old Rupert Murdoch—Fox's controlling shareholder—it signaled his intention to dissolve the multimedia empire that had been his life's work. For both companies, it was an acknowledgement of the technological changes that were sweeping the media sector, in particular, the potential for video streaming to undermine existing channels for distributing video entertainment: these included cinemas, broadcast TV, cable TV, satellite TV, and DVDs. These changes had been highlighted by the rise of Netflix and the entry of technology giants such as Amazon, Alphabet, Apple, Facebook, and Microsoft into the market for video‐based entertainment.

A major motivation for the deal—according to Disney's CEO, Bob Iger—was to bolster Disney's efforts to adapt to these changes occurring in video entertainment. During 2018–19, Disney intended to rapidly ...

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5 Takeaways from the Disney-Fox Merger

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• What is it? This is a huge merger involving two brands that you know and love. The Walt Disney Co. is acquiring most of the assets of 21st Century Fox for $52.4 billion in stock , or $66.1 billion after the assumption of debt , creating a content behemoth that will have the power to reshape the sports and entertainment landscapes. Their combined heft will give them even more leverage over cable companies and internet service providers, while strengthening their online video streaming services, according to experts at Wharton and elsewhere.
• What will Disney get? If the deal passes antitrust muster (if it stands the test of Federal Trade Commission antitrust laws that prohibit corporate mergers if they give one company too much power in the market, which means consumers wouldn’t benefit from actions like competitive pricing ), Disney will get Fox’s film and TV studios, Star India and a 39% stake in European pay TV giant Sky, 22 regional sports networks, as well as entertainment properties including “The Simpsons” and  Avatar , cable networks FX and National Geographic and a controlling stake in online video service Hulu. Fox is retaining its national sports channel, its broadcast and news operations , local TV stations and the Big Ten sports network. While the merger would help Disney grow its annual revenues from its current $55.1 billion to $74.1 billion, Fox would downsize correspondingly from $29 billion to $10 billion, according to a  Wall Street Journal report. Herbert Hovencamp, a Penn Law professor who is also a Wharton professor of legal studies and business ethics , says the merger “will produce a much more powerful Disney, able to compete better with streaming services like Netflix and Amazon.” However, Hovencamp, who is an antitrust law scholar, expects the merger to attract “close review” from regulators, especially with the combination of ESPN and several Fox sports networks.
• What does this mean for the industry and for Fox? A more powerful Disney with the Fox assets could trigger other such deals, according to Wharton professor of operations, information and decisions Jehoshua Eliashberg. “It is likely to lead to more mergers and acquisitions and fewer, but more powerful, competing conglomerates.” Hovencamp says that Netflix as the market leader in its space could find itself as a merger target. As for 21st Century Fox: “Fox either had to get a lot bigger in entertainment and in streaming or get out,” said University of Michigan professor Erik Gordon during a visit to the Knowledge@Wharton show  on Wharton Business Radio on SiriusXM channel 111 . “Being in the middle is exactly where you don’t want to be.”
• What about Disney’s video streaming strategy ? As Netflix, Google, Facebook and Amazon strengthen their muscles in entertainment, Disney will be able to compete against them better with the Fox assets in its fold, notably with a bigger voice in Hulu. Its larger content repertoire would give Disney a more robust online video service. Disney also recently announced new online streaming services as well as “ESPN Plus,” a streaming service slated for spring 2018, and a Disney-branded service in the latter half of 2019.
• Where does Mickey play into all of this? The power that Disney would get with the Fox assets also goes beyond making money from content, says Hemant Bhargava, chair in technology management at the University of California at Davis. “Disney’s business model … is about getting people to recognize [its brand ] and then selling them toys, clothing, [tickets to] theme parks,” he notes. “As long as Disney is able to capture consumers through streaming but not necessarily make a lot of money, that’s okay because they can then monetize those consumers and the brand in other ways.” In other words — see you at Disney World.

Related Links

• Merger Press Release
• WSJ: Disney Agrees to Buy Key Parts of 21st Century Fox
• K@W: Can Disney’s Bid for Fox Overcome Antitrust Concerns?
• K@W: What Will Really Happen If the FCC Abandons Net Neutrality?
• Federal Trade Commission Guide to Antitrust Laws

Conversation Starters

What prompted the Disney-Fox merger? Give at least three reasons why the merger might make sense for both companies.

What does it mean that the deal must pass “antitrust muster?”

Net neutrality also factors into the Disney-Fox merger. While it is not addressed in this summary, it is addressed in the longer K@W article about the merger cited in Related Links. What is net neutrality and how does it influence this deal?

16 comments on “ 5 Takeaways from the Disney-Fox Merger ”

1. The merger was prompted because the 2 companies realized that they would get more “leverage” by joining as one. Also, Disney would get almost 25 billion dollars in profit a year. The merger could also lead to other deals that could benefit the company. 2. The deal passing “antitrust muster” means that the government has to approve of the merger for it to be legitimate. 3. Net neutrality is the rule saying that everyone on the internet gets treated equally. For example, rich people and poor people pay the same price for Netflix. It influences this deal by controlling the future online services for Disney and Fox by making prices same for everyone.

What prompted the Disney- Fox merger was that their combined heft would give them both more leverage over cable companies and internet service providers. While doing that it also strengthens their online video streaming services.

The antitrust muster is if the deal passes the test of Federal Trade Commission antitrust laws, Disney will get all it’s assets said to be given.

Net Neutrality is the principle that Internet service providers should enable access to all content and applications regardless of the source without favoring or blocking particular products or websites. In regard to this deal, this principle controls their future online services by making prices the same for everyone.

1. The Disney-Fox merger was prompted by both companies wanting more leverage over other cable and internet-service providers. The merger will also strengthen their online video streaming services. 2. The Federal Trade Commission will look into whether this merger will give this company too much power or influence on the market, and if it does, it will not let the deal happen. 3. Net neutrality is the principle that Internet service providers must treat all data on the Internet the same. The impact of net neutrality on this deal is uncertain, as some in the FCC want to end net neutrality so we do not know how net neutrality can influence the deal for sure.

What prompted the Disney-Fox merger was that will give them more authority in over cable companies, strengthen their online services, and create a new sports picture on T.V When the deal must pass through “antitrust muster” it must go through government regulations to make sure that this deal will not create a monopoly over the markets. Net neutrality is where the government no longer have control on how much internet companies charge for internet and their services. This affects the deal because they will be able to charge however much they want because they are in the internet industry.

What prompted the Disney-Fox merger? Give at least three reasons why the merger might make sense for both companies. What prompted the Disney-Fox merger was that they would get more power as one, the companies will get a lot more profit, and the merger will also strengthen streaming services online.

What does it mean that the deal must pass “antitrust muster?” The deal must pass “antitrust muster” means that the Federal Trade Commission will look into the merger and make sure they don’t gain too much power or else the merger will be stopped.

Net neutrality also factors into the Disney-Fox merger. While it is not addressed in this summary, it is addressed in the longer K@W article about the merger cited in Related Links. What is net neutrality and how does it influence this deal? Net neutrality is the principle that internet service providers must treat all data on the internet the same. The influence from net neutrality is that they can charge users whatever they choose because they are in the internet business.

1. I think what prompted the Disney-Fox merger is that streaming has become a highly profitable market, and both companies will be able to make money from it by combining their resources. Disneys three reasons to merge would be: 1. more TV networks to aquire, 2. more film content 3. Hulu. Foxes three reasons to merge would be: 1. a powerful partner 2. a way to compete with streaming services 3. a lot of financial assets.

2. The deal passing the “antitrust matter” means it must be approved by the government. This is to prevent one company from having too much power and control over a market. It also makes sure that things like competitive pricing can benefit customers.

3. Net neutrality is the principle that Internet service providers should enable access to all content and applications regardless of the source. It influences this deal because an important aspect of this deal is to compete in the streaming market. Since net neutrality has been repealed, these companies can charge however much they want.

1. The merger was facilitated by both companies wanting more leverage over other cable and internet-service providers. The merger will also strengthen their online video streaming services. 2. The deal must pass “antitrust muster”. This means that the Federal Trade Commission (FTC) will look into the merger and ensure that they don’t gain too much power or else the merger will be stopped. 3. Net neutrality is the principle that Internet service providers should enable access to all content and applications regardless of the source, and without favoring or blocking particular products or websites.

What prompted the Disney-Fox merger? Give at least three reasons why the merger might make sense for both companies. 1)The Disney-Fox merger will give Disney more authority in other cable companies, strengthen their online services, and create a new sports picture on T.V

What does it mean that the deal must pass “antitrust muster?” 2) The deal must pass antitrust muster, means that the FTC “Federal Trade Commission” will look into the merger and authorize it so they don’t gain too much power over the market, or else the merger will be canceled . Net neutrality also factors into the Disney-Fox merger. While it is not addressed in this summary, it is addressed in the longer K@W article about the merger cited in Related Links. What is net neutrality and how does it influence this deal? 3) Net neutrality is the principle that Internet service providers must treat all data on the Internet the same. The impact of net neutrality on this case is uncertain, as some people in the FCC want to end net neutrality so we don’t know how net neutrality would affect this deal.

1. The merger might make sense in both companies because it will alter the sports and entertainment landscapes. It will give them more leverage over cable companies and internet service providers. It will also strengthen theri online video streaming services. 2. The deal passing the “antitrust matter” means it must be authorized by the government The deal has to go through a test of Federal Trade Commission. This prevents one company from having to much power and monopolizing the market. Also it makes sure that competitive pricing benefit the customers. 3. Net Neutrality is the principle that Internet service providers should enable access to all content and applications regardless of the source without favoring or blocking particular products or websites. The influence from net neutrality is that Disney-Fox can charge users anting they choose because they are in the internet field of business.

The Disney-Fox merger was prompted by the fact that their combined heft will give them even more leverage over cable companies and internet service providers. It will also strengthen their online video streaming services. Disney will get a lot out of the merger. Such as, Fox’s film and TV studios, Star India, Avatar, Hulu, and much more. Fox studios had to make this deal. It was their only choice to stay as an entertainment studio. If not it would downsize from $29 billion to $10 billion. How could a big company like Fox be forced out of entertainment? The deal must not be making Disney or Fox too powerful. Otherwise, it would be illegal. The law states “if it stands the test of Federal Trade Commission antitrust laws that prohibit corporate mergers if they give one company too much power in the market.” Net neutrality is the principle that Internet service providers should enable access to all content and applications regardless of the source, and without favoring or blocking particular products or websites. It influences this deal positively. The Internet service providers cannot withhold their service due to their beliefs about the merger. Therefore, it is not a problem for Disney-Fox.

1) The Disney-Fox merger was prompted by the power that Disney would have and the assets that it would control and on Fox’s part the amount of money that was offered is almost irrecusable. The merger makes sense for both companies because Disney is thinking about joining the upcoming streaming market and Disney now controlling Hulu is an easier way to join the competition, Fox will still maintain some of its assets but most is owned by Disney, which facilitates an easier market exit. Another reason as to why this deal makes sense is that Disney is trying to get all of Marvel’s rights, and what is left is in control of Fox and Sony, so they now only have Sony to worry about, as well as getting the right to “A New Hope” the only Star Wars movie that Disney did not have the right to.

2) The meaning of “antitrust muster” is that the purchase of Fox by Disney does not mean that Disney will have the majority of market power because that is against the law.

3) Net neutrality is the principle that Internet service providers should enable access to all content and applications regardless of the source, and without favoring or blocking particular products or websites. This influences the deal because as Disney is trying to start their streaming network and net neutrality can make the streaming network have better or worse results because it influences the ability of all service providers to grant access to all content without favoring or blocking any source, therefore not giving an edge to Disney or any competition in the streaming market.

Disney and Fox merged in order to gain leverage over other competing companies which helps Disney increase revenue. The merge also helps strengthen their online video streaming services against competitors like Netflix and Amazon. Disney will also be given more brand exposure and as a result they will become better suited to selling their products to customers

The deal must pass “antitrust muster”, meaning it must pass the Federal Trade Commission’s antitrust laws where one company holds too much power over the other and it reduces the amount of competition between other companies. As a result, consumers won’t be able to have multiple options where the different companies battle it out with lower pricing and more benefits to make it more appealing to consumers, and instead having only the option of one large company.

Net neutrality is something that allows broadband providers to treat internet traffic differently to maintain and protect their network. It tries to protect the needs of internet service providers to manage their networks but also limiting their power.This might affect the merge as net neutrality as online video streaming services won’t be able to effectively reach customers of the internet service providers, and they will have to pay extra fees to.

1. What prompted the Disney-Fox merger? Give at least three reasons why the merger might make sense for both companies. The Disney-Fox merger could make sense for both companies because they will be more powerful together, improve streaming online services, and companies will make more profit. 2. What does it mean that the deal must pass “antitrust muster?” The deal must pass “antitrust muster” means when one company is too powerful over the other company and helps the competition between others. 3. Net neutrality also factors into the Disney-Fox merger. While it is not addressed in this summary, it is addressed in the longer K@W article about the merger cited in Related Links. What is net neutrality and how does it influence this deal? Net neutrality is allowing everyone to use the internet and there are no favorites or interference between any networks which helps internet traffic. This helps because all internet service providers will not be affected by others and all are the same with no extra fees or something.

What prompted the Disney-Fox merger? The Disney-Fox merger will give more authority in other cable companies making them powerful in the industry. Which then would strengthen their online services competitors Netflix & Amazon. Fox can then dedicate more time to recreate a new sports landscape for the media.

What does it mean that the deal must pass “antitrust muster?” Means that Disney-Fox merger can not be so powerful to not allow consumers to not have options between competitor pricing.

What is net neutrality and how does it influence this deal? Net neutrality is the concept that Internet service providers should allow entry to all content and applications in any case of the source, and without preference or blocking specific products or websites.

What prompted the Disney-Fox merger was the idea that they would earn more from coming together, than being apart and against each other. It also would benefit Disney in the way of gaining more profits and benefits Fox in the way that there may be more deals on the table that may benefit them and Disney. This deal, however, must pass through the antitrust muster meaning that one company cannot have too much power over the other. With net neutrality giving people equal rates on certain websites, it will influence them by saying that anyone can use the services provided if eligible.

1. What prompted Disney, and Fox to merge was the added benefits they’d receive from this. They’d gain an overall advantage’s in aspects such as the sports, and entertainment landscape; As well as the cable, and internet services. Merging would give Disney numerous assets such as, not limited too, Sports channels, ownership to the Simpsons, and Avatar.

2. For it to be passed the government would have to approve of it. If a company receives to much power it’ll most likely be declined

3. Net neutrality (is the principle that governments should mandate Internet service providers to treat all data on the Internet the same) prevents internet services such as fox and Disney from price fixing however they want. If net neutrality where to be repeal, this would allow them to block any outside sources they don’t find appropriate, an examples of this would be preventing their users from seeing ads from apposing competitors.

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Justice Dept. Approves Disney’s Purchase of Fox Assets

By Edmund Lee and Cecilia Kang

• June 27, 2018

The Department of Justice approved the Walt Disney Company’s $71 billion bid for the entertainment assets of 21st Century Fox on Wednesday, potentially complicating Comcast’s desire to make a rival offer for Rupert Murdoch’s entertainment empire.

The government’s approval was filed in federal court on the condition that Disney, which already owns ESPN, divest all of Fox’s 22 regional sports networks, which include valuable channels like the Yankees’ YES network.

“Today’s settlement will ensure that sports programming competition is preserved in the local markets where Disney and Fox compete for cable and satellite distribution,” Makan Delrahim, the head the Justice Department’s antitrust division, said in a statement.

In December, Disney and Fox agreed to an all-stock deal worth $52.4 billion . Then, two weeks ago, Comcast made an offer for the Fox assets that was worth about $65 billion. That prompted Disney to come back with its richer offer, a mix of cash and stock, which Fox promptly accepted .

The green light from the Justice Department makes it more difficult for Comcast to mount a competitive counteroffer. The cable giant, which also owns NBCUniversal, will have to raise even more cash, adding to its debt, and convince Fox’s board that it, too, would gain government approval. Comcast, which already controls nine regional sports networks, has signaled that it would also be willing to sell Fox’s regional sports networks.

Fox has not yet set a date for its shareholders to vote on the Disney deal.

Fox’s Prized Assets

At stake are cable channels including FX and National Geographic, the “Avatar” and “X-Men” film franchises, and a pair of international television networks: the European pay-TV operator Sky and Star India. Those two networks, which are growing businesses with an emphasis on streaming services, are key attractions for both Disney and Comcast. In addition, the winner gets control of the streaming service Hulu, which has more than 20 million customers.

Gobbling up Fox would significantly increase Disney’s already formidable box office business. In 2017, the two controlled a combined 35 percent of the box office in North America. This year, they control 50 percent. Three of Hollywood’s most successful film studios are owned by Disney: Marvel Entertainment, Pixar and Lucasfilm.

Not included in the sale are Fox News, the Fox broadcasting stations and the FS1 sports network.

The regional sports networks are one of Fox’s most valuable businesses and are expected to generate more than $2 billion in profit this year. Adding those channels to Disney’s portfolio could be seen as stifling competition since Disney also controls ESPN, the dominant cable sports channel in the United States. The sports networks could also be problematic for Comcast because of the regional networks it already owns.

A Quick Go-Ahead

The Justice Department approved the Disney deal just six months after the merger was announced. Transactions of this size typically take a year or longer. The relatively quick process contrasts markedly with AT&T’s $85.4 billion purchase of Time Warner, which took almost two years to close . The Justice Department had sued to block that deal but lost the case this month after it failed to convince a federal judge that combining the companies would lead to higher cable bills.

As a candidate, Donald J. Trump, who had frequently blasted CNN, a Time Warner property, as “fake news,” vowed to stop the AT&T-Time Warner merger if elected to the White House.

“We will not approve in my administration because it’s too much concentration of power in the hands of too few,” he said at the time.

He exhibited more rosy feelings for the deal between Disney and Fox. “I know that the president spoke with Rupert Murdoch earlier today, congratulated him on the deal,” the White House press secretary, Sarah Huckabee Sanders, said in December .

Disney said in a statement on Wednesday it was “pleased that the D.O.J. concluded that, with the exception of the proposed acquisition of the Fox Sports Regional Networks, the transaction will not harm competition.” The company added that it saw the deal as an “exciting opportunity that will enable us to create even more compelling consumer experiences.”

Disney in Pole Position

The approval bolsters Disney’s bid, which is about $6 billion more than Comcast’s current offer for Fox. Disney’s chief executive, Robert A. Iger, is counting on the merger to cement his legacy . He had flirted with a presidential run in 2020 but decided to continue leading the company after efforts to plan his succession resulted in the departures of two senior executives.

Comcast’s chief executive, Brian L. Roberts, also wants to reach an agreement for Fox’s business, but the cable giant has remained quiet since Disney made its latest offer. Comcast declined to comment on Wednesday.

“If you’re on the Fox board, and you have a strong view that Comcast will come back with a higher offer, you probably have an obligation to wait and see the structure and the price of that,” said John Janedis, a media analyst with Jefferies in New York.

He added that even if Mr. Murdoch and the Fox board determined that Comcast could eventually get the government’s blessing, it would take at least six months or longer, which means any counteroffer would have to compensate shareholders for that additional time.

“There’s an art and a science to that,” Mr. Janedis said. “You’re competing against Disney, but in some ways you’re competing against time.”

Comcast has been talking to private equity investors and other media companies about teaming up on a renewed offer for the Fox assets, The Wall Street Journal reported Wednesday.

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The Walt Disney Company: The 21st Century Fox Acquisition and Digital Distribution

By: David J. Collis

This case describes the acquisition of 21st Century Fox by the Walt Disney Company and the subsequent launch by Disney of three streaming channels to compete with Netflix.

• Length: 4 page(s)
• Publication Date: Jan 15, 2019
• Discipline: Strategy
• Product #: 719445-PDF-ENG

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Allows for discussion of Disney's vertical integration into distribution with the launch of three streaming services to compete with Netflix.

Jan 15, 2019 (Revised: Oct 15, 2019)

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Harvard Business School

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U.S. v. The Walt Disney Company and Twenty-First Century Fox, Inc.

Final Judgment (September 23, 2019)

Plaintiff United States’ Motion and Memorandum in Support of Lifting the Stay and Entering the Final Judgment (September 4, 2019)

• Proposed Final Judgment (September 4, 2019)
• Certificate of Compliance with Provisions of the Antitrust Procedures and Penalties Act (September 4, 2019)

Response of Plaintiff United States To Public Comment On The Proposed Final Judgment (April 5, 2019)

Competitive Impact Statement (August 7, 2018)

United States' Explanation of Consent Decree Procedures  (June 27, 2018)

• Proposed Final Judgment (June 27, 2018)
• Hold Separate Stipulation And Order   (June 27, 2018)

Complaint  (June 27, 2018)

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