Why Did the Walt Disney Company Buy Fox for $52 Billion?

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Summary: The Walt Disney Company is buying 21st Century Fox’s entertainment assets.

On Thursday, the Walt Disney Company announced that it was buying 21st Century Fox’s entertainment assets for $52.4 billion. Fox owner Rupert Murdoch and his family will retain Fox News, but they have agreed to sell a stake in the broadcaster Sky, 20th Century Fox film studio, and other television and film assets.

  

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In fifty years, Rupert Murdoch, 86, built Fox into the media empire it is today. Rumors of Disney’s acquisition of Fox have been circulating recently, but the acquisition was still surprising to insiders because Fox appeared to be doing well financially.

Murdoch explained to the BBC that the move was in response to the media industry changing. Viewers now want to stream entertainment into their homes from the internet, and television views are fractured because of so many choices.

“With today’s announcement, we launch the next great leg of our journey,” Rupert Murdoch said. “We are paving the way for the new Fox and a transformed Disney to chart a course across a broad frontier of opportunity.”

Disney chief executive Bob Iger said that Disney was “excited” about acquiring Fox’s assets, which include the movie and television studios, regional sports networks, and the company’s TV networks such as National Geographic, Fox, and FX. Disney owns highly profitable franchises such as Star Wars, Toy Story, and the Marvel superhero movies, and with their purchase of Fox, they can add hits such as Modern Family, X-Men and The Simpsons to their catalog.

“The acquisition of this stellar collection of businesses from 21st Century Fox reflects the increasing consumer demand for a rich diversity of entertainment experiences that are more compelling, accessible and convenient than ever before,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “We’re honored and grateful that Rupert Murdoch has entrusted us with the future of businesses he spent a lifetime building, and we’re excited about this extraordinary opportunity to significantly increase our portfolio of well-loved franchises and branded content to greatly enhance our growing direct-to-consumer offerings. The deal will also substantially expand our international reach, allowing us to offer world-class storytelling and innovative distribution platforms to more consumers in key markets around the world.”

Disney is preparing to launch its own streaming service with sports and entertainment and acquiring Fox diversifies its offerings. Additionally, Disney plans to add Fox-themed attractions to its popular theme parks.

“Increasingly Disney has been taking back control in the U.S. and looking forward to launching their own platform,” Guy Bisson, research director at Ampere Analysis, told Variety. “In a way, they have the potential to launch a supercharged Netflix-type platform that can go global very quickly, and they have full control from content to distribution to the end viewer.”

Entertainment insiders note that this is a good move for Disney and Fox, but the colossal company they will form will be hard to beat.

“This is really bad news for every other studio,” an anonymous executive told Variety. “Competing against Disney is already tough enough. But Disney plus Fox is going to be really tough.”

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