Ultimately, it was the Mouse that roared — and the Fox that beat a retreat from the global stage.
The Walt Disney Co. has struck a deal valued at $52.4 billion to acquire much of the Hollywood holdings of 21st Century Fox, the global television and entertainment conglomerate controlled by Rupert Murdoch and his family. The deal occurs against a backdrop of swift changes to the industry's finances and uncertainty about succession plans at both companies.
The sale represents a stunning turn of events for Murdoch, a reversal of decades of alternately calculated and impulsive expansion of a sprawling media empire that started with a single afternoon paper in a forgotten city on the southern coast of his native Australia.
The most profitable and controversial part of the Fox empire — Fox News —would not be part of the deal. Yet the family is selling off other defining properties, including the movie studio 20th Century Fox. The deal is expected to face regulatory scrutiny, as it would greatly concentrate similar holdings in Disney.
The following story is based on interviews with outside industry analysts and current and former executives for the Murdochs and for Disney.
From Disney's standpoint, the acquisition offers a chance to consolidate holdings, bringing together talented leaders in television and movie production, major cable properties and a vast network of local sports cable channels to fold into Disney's ESPN programming. Disney has also long wanted greater international distribution channels, such as those afforded by Fox's properties and relationships abroad.
And it would give Disney a controlling stake in Hulu, the entertainment streaming service set up by the conventional networks to compete with Netflix and Amazon. In August, Disney announced plans to withdraw its content from Netflix and set up its own two on-demand streaming services. One centers on sports and ESPN; the other is likely to leverage entertainment programs. The Fox stable, including The Simpsons and the X-Men movie franchise, for example, could be folded into the mix.
On Fox's part, the Disney deal appears driven by fear, opportunity and pragmatism: fear of the seemingly bottomless wallets of Netflix, Amazon and possibly Apple to spend on new shows; opportunity to cash out assets at a possible peak; and pragmatism in finally resolving the professional fates of Murdoch's sons, Lachlan and James, as well the fortunes of four other Murdoch children who do not play a role in the company.
Lachlan Murdoch is 21st Century Fox's co-chairman, and his younger brother, James Murdoch, is its CEO. Both have spoken over the course of this past year of the need for what they call "scale" in the entertainment industry: the size needed to keep flourishing. Both asserted that Fox had it.
But, much like Jeff Bewkes at Time Warner, who is seeking regulatory approval to sell off his entire company to AT&T, the Murdochs reached the remarkable conclusion that a publicly traded company with a market capitalization of roughly $60 billion just wasn't big enough.
Earlier this month, at a conference for investment analysts staged by UBS, James Murdoch declined to address intensifying questions about the Disney-Fox deal taking shape. Yet he spoke of the desire to create maximum value for shareholders, notably sidestepping the idea that Fox had sufficient heft to fend off adversaries.
As one sign of the Murdochs' ongoing ambitions, 21st Century Fox is now arguing before British regulators on behalf of its $15 billion bid to take full control of Sky, a major European satellite company based in the U.K. Rupert Murdoch founded Sky's predecessor company a generation ago, and Fox already owns about 39 percent of Sky.
The Murdochs have not concealed their desire to bring the European broadcaster back into the fold and have sought to do so for more than seven years — a process that was interrupted by a phone hacking and corruption scandal at Murdoch's British newspapers. The scandal led the Murdochs to split their empire into two halves. News Corp. is the newspaper and publishing wing.
The latest effort to acquire full control of Sky has similarly been delayed by a series of controversies and scandals. They include Murdoch's sympathy for the Brexit movement and open support for the Trump presidency; the ongoing sexual harassment and governance scandals at Fox News; and public outrage over that network's coverage of the death of Seth Rich that gave broader circulation to conspiracy theories. The British government has repeatedly ordered more reviews.
Disney would take over 21st Century Fox's stake in Sky — and its full ownership if British regulators were to allow the takeover to go through with a different parent company. Yet Rich Greenfield, a leading media analyst for BTIG Research who is bullish on Netflix and other upstarts in TV, argues that the Fox deal shows Disney once more making a major play in platforms likely to be in decline. Streaming ultimately will threaten satellite television in Europe as much as it does the cable business in the U.S., he tells NPR.
Rupert Murdoch has personally led Fox News since the ouster of its founding chairman, Roger Ailes, over sexual harassment allegations in July 2016. The perch has given Murdoch constant access to President Trump, an Oval Office rapport that the media magnate has long sought.
Fox News is the greatest single economic engine within 21st Century Fox. Yet its brand would be too toxic for many other major American corporations that could afford to buy it, according to a former longtime Murdoch executive, who spoke on the condition of anonymity.
However, Claire Enders, a pre-eminent media industry analyst based in London, argues in an interview with NPR that the presence of Fox News complicates everything Murdoch does in the U.K. — even though Sky dropped Fox News earlier this year from its offerings in hopes of removing that sticking point.
Disney and Fox have overlapping properties that could stir antitrust regulators, so there is no intent to sell the Fox broadcast network, or Fox's 28 local stations, to Disney, which owns ABC and eight local stations of its own. Yet, as planned, the acquisition would include Fox's other networks, such as cable channel FX and the National Geographic television and media holdings, as well as Sky in Europe, and Star in India and in China. Disney would undoubtedly have to shed some assets in order to smooth the path for the deal.
Disney would be consolidating properties in television and movie production houses. ABC has struggled to mint hits; Fox studios created top shows for ABC and NBC — Modern Family and This is Us, respectively — and it has won critical and popular acclaim for programs on FX. Some of Fox's superhero figures might be integrated into Disney theme parks — though it's hard to imagine characters from Alien or Predator joining Mickey Mouse and Frozen's Elsa at Disneyland.
Given the Justice Department's legal challenge to the purchase of Time Warner by AT&T, which would bring together far fewer currently competing entities, it is hard to imagine federal antitrust officials would give the Disney-Fox transaction an easy pass. But Time Warner includes CNN, long a Trump rhetorical target, while Murdoch is a trusted adviser to the president on media issues.
The question of succession looms over both companies. At Disney, it is a simpler matter of corporate transition. CEO Robert Iger has already extended his term past its expected date and has weighed entering politics in California or on a national level. If the Fox deal goes through, Iger will stay on through 2021.
Rupert Murdoch has also urged Iger to take on James Murdoch as a senior deputy to oversee the former Fox properties. Should Iger further delay his departure, it could give James Murdoch time to prove himself inside Disney and set him up as a possible candidate for the top job there.
It is a position that has eluded James Murdoch at the family shop. Though 21st Century Fox is a publicly traded company, it is operated as a privately held business. The older son, Lachlan, had been groomed to succeed his father, but he returned to Australia after some of his father's top executives engaged in corporate politics against him. James took Lachlan's place, evolving into a more polished figure, ultimately giving a more progressive sheen to the company with his advocacy of environmental causes and technological innovation.
James Murdoch received strong marks for steady leadership of Sky. He never particularly took to the newspapers that made up the core of his father's company for decades and remain at the heart of Rupert Murdoch's identity.
Yet the younger Murdoch oversaw the British papers when the tabloid crisis broke into the open. And he was widely condemned for approving secret payoffs to victims of cellphone hacking. His critics said it was hush money to hide a scandal. He said he relied on top executives and didn't remember the episode.
James' star dimmed, and Lachlan returned, first among equals among the younger Murdochs. Investors soured on both: Most non-Murdoch shareholders voted against both sons' reappointment to the corporate board for several years after the scandal. (Of the other four children, there are two adults; Prudence never sought a role within the company, and Elisabeth sold her production company to her father. Rupert's two daughters by his third wife, Wendi Deng, are still minors.)
James has quietly rebuilt his reputation while Lachlan has indulged his father's eagerness to run Fox News. (Neither is playing as active a role at News Corp., which is separately traded.) The past 18 months have brought a series of negative headlines. Parent company 21st Century Fox, its insurers and its disgraced former star, Bill O'Reilly, have reached agreements to pay more than $200 million to settle sexual harassment claims and to oust some of those accused. O'Reilly and Ailes, then the Fox News chairman, were paid eight-figure sums to leave the company after multiple allegations of sexual harassment surfaced against each. The network remains the subject of a federal criminal investigation.
Were James Murdoch to take a job within Disney, he could escape his father's shadow and the taint of the Fox News and tabloid scandals while setting himself up to contend for the top job there. And Lachlan could plan for a day when he oversees the family empire on his own. In the meantime, he would aid his 86-year-old father in running a diminished media empire built around Fox News, the Fox network, the local television stations and the Fox Sports 1 network, as well as newspapers in the U.S., the U.K. and Australia.
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