With Fox, Disney will have an even bigger footprint in Hollywood - Greif & Co
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cc Friday, March 8, 2019 latimes.com/news
With Fox, Disney will have an even
bigger footprint in Hollywood
By RYAN FAUGHNDER
TIMES STAFF WRITERs
Walt Disney Co.’s entertain-
ment kingdom is about to get a
whole lot bigger thanks to its
pending purchase of 21st Century
Fox assets, and the rest of Holly-
wood has only just begun to grap-
ple with the consequences of the
company’s increasing power.
The long-anticipated $71.3-
billion acquisition will put the X-
Men, Homer Simpson, the
Avengers, Buzz Lightyear, Kylo
Ren and the gang from “Avatar”
under the same roof, giving the Disney CEO Bob Iger surrounded by some of Disney's old and new properties.
(Robert Carter For The Times)
Burbank company an unprece-
dented share of film and television even greater clout from a stream- companies, talent agencies and pay
franchises. ing standpoint, and even greater -TV operators.
The deal, expected to close in clout from an exhibitor stand- “What you have here is the ma-
the coming days, would boost Dis- point." kings of a behemoth in every sense
ney’s share of the domestic box Disney’s ambitions have taken of that word,” said Tuna Amobi, a
office to at least 40% and rein- on a new urgency with the devel- media industry analyst with
force its stronghold in toys, theme opment of its upcoming streaming CFRA. “It's hard to think that this
parks and cruise lines. The Mouse service, Disney+, set to launch late deal gives them more leverage
House will have an unrivaled say this year, and its increased owner- than they already have, but it
over when and how movies are ship of Hulu, both of which will does.”
released. pose a challenge to Netflix. All Some industry insiders are just
"Basically, they become the these moves have wide-ranging now coming to terms with the like-
800-pound gorilla in the media implications for the various stake- ly fallout of the historic merger,
landscape,” said Lloyd Greif, holders in entertainment, including which reduces the number of ma-
chief executive of L.A. investment movie theaters, streaming video
bank Greif & Co. “It gives Disney
jor studios from six to five over- a time when attendance is under ticket sales for “Iron Man 3” dur-
night. long-term pressure from TV, ing a dispute over revenue splits.
“I don’t think the industry has streaming and video games. Ad- Anxiety has been tempered by
remotely digested what that’s go- missions rose 5% to 1.3 billion in the belief that Disney will avoid
ing to do to the pulse and culture the U.S. and Canada last year, but extracting terms so draconian that
of the industry,” said one producer, were still down slightly from 2016. they draw the notice of regulators.
who requested anonymity to allow However, to the surprise of some Some exhibitors argue that they
him to speak candidly without fear cinema operators, the U.S. Depart- will benefit from Disney having a
of reprisals. ment of Justice approved the mer- greater share of the box office, be-
Theater anxiety ger last year with no mention of cause the company has a strong
track record of producing popular
entertainment. Theaters should
make up ground lost on box office
by generating more revenue from
concessions.
"Obviously, it’s an industry-
changing event,” said Adam Aron,
CEO of AMC Entertainment. “But
we think it’s an event that will be
good for consumers, good for thea-
ters and good for movie makers."
Eric Wold, an entertainment
analyst with B. Riley FBR, said he
In 2013, AMC halted advance ticket sales for “Iron Man 3” during a dispute would be “surprised if they push
over revenue splits. (FREDERIC J. BROWN / AFP/Getty Images)
up rates across the board for every-
With a greater share of box of- how Disney’s clout could impact thing. If Disney’s going to put its
fice receipts, Disney could pres- exhibitors. marketing muscle and theme parks
sure theater owners to fork over a “This is unquestionably bad for behind new titles, maybe that’s
larger portion of the box office for the theater companies,” said Doug worth paying for. You’d rather pay
its films. Disney already receives Creutz, a media and entertainment 65% for a billion-dollar film than
more than 60% of box office re- industry analyst with Cowen & 50% for a $100-million film.”
ceipts for its biggest movies, in- Co. “Disney has been dominant, But privately, industry execu-
cluding the “Avengers” and “Star and they will dominate more tives caution against wishful think-
Wars” pictures. That’s higher than now.” ing. Some theaters worry that the
the typical 50% split for movies, Disney and the theaters have number of movies released theatri-
and having more franchises will come to blows before. With the cally will shrink dramatically once
improve Disney’s already formida- release of 2015’s “Avengers: Age the Fox deal closes. Disney focus-
ble negotiating position. of Ultron,” the company’s de- es almost exclusively on expensive
Cinema chains depend on mov- mands on exhibitors provoked a productions that draw huge global
ies like the upcoming “Star Wars,” rare response from the National audiences, and Fox’s more mid-
“Toy Story” and “Frozen” sequels Assn. of Theatre Owners, which level films may be scrapped.
to fill seats, and denying those represents the exhibition industry. Then there’s the looming spec-
movies screens is not an option at In 2013, AMC stopped advance ter of Disney+, which will feature
original Disney content that by-
passes theaters. The advent of Dis- pected to preview for investors at Analysts say Disney’s entry in-
ney’s streaming offering and the an April meeting. Disney hasn’t to the streaming wars could slow
continued rise of Netflix could ac- revealed its pricing plan, but has Netflix’s growth. Disney is also
celerate the push by studios to col- slowly unveiled details, saying it pulling its movies from Netflix, a
lapse the traditional 90-day gap will include a live-action series blow for the company that has
between a movie’s theatrical re- starring Diego Luna that will take benefited from being the streaming
lease and its availability for home place before the events of “Rogue home of films such as “Black Pan-
viewing. While theaters have long One: A Star Wars Story,” along ther.” A streaming service with
protested any changes to so-called with a Marvel show about Loki, Disney family content may be a no
windowing, fearing damage to the popular trickster god from -brainer investment for parents of
their business model, the prolifera- “Thor” played by Tom Hiddleston. kids who watch Disney and Pixar
tion of streaming services makes The service will include movies movies.
the decline of theatrical exclusivity and shows from five brands: Dis- Disney has also said it will
all but inevitable. ney, Pixar, Marvel, Star Wars and boost investment in programming
A blow for Netflix? Fox’s National Geographic. for Hulu, currently one of Netflix’s
biggest competitors. Disney will
own 60% of Hulu after it acquires
Fox’s 30% stake in the Santa Mon-
ica streamer as part of the deal.
Disney is expected to bolster Hulu
with edgier Fox programming
from channels such as FX Net-
works.
“The leg up Disney and 20th
Century Fox have over the newer
streamers is they have a historical
knowledge of the television busi-
ness, and they have been more
Diego Luna, with Felicity Jones, stars as Cassian Andor in "Rogue One: A open to being creative than ever
Star Wars Story." Luna will reprise the role for Disney+. (Lucasfilm Ltd.) before,” said Kevin Crotty, head of
Los Gatos, Calif.-based Netflix TV lit for talent agency ICM Part-
has used its debt-financed war “These guys are and have been ners.
chest to create a jaw-dropping an IP [intellectual property] jug- But Netflix executives insist
amount of film and TV content, gernaut,” said Ric Kay, head of they’re not worried. The company
tightening its grip on the viewing MUFG’s Media, Telecom & recently said it faces more screen-
public by amassing more than 140 Sports Finance practice. "Now time competition from online vid-
million global subscribers. It you’ve got greater capabilities, eo game “Fortnite” than other
flexed its power recently by raising greater breadth, wider talent pool streaming services.
prices by $1 to $2 a month. and even bigger libraries in Dis- “We compete so broadly with
But Disney is about to mount a ney’s hands. This will help feed all of these different providers that
serious challenge to Netflix’s their offerings and be attraction any one provider entering only
streaming dominance with the points for subscribers." makes a difference on the margin,”
launch of Disney+, which it is ex- said Netflix CEO Reed Hastings in
a recent video call with analysts.
Making agencies sweat ing on Disney and other traditional content-hungry tech giant or mo-
The consolidation of the studios players — such as AT&T-owned bile phone carrier.
will also have ramifications for WarnerMedia — to invest heavily Some distributors have already
talent agencies. Having five major in productions in order to fill their tried to downsize, or even rethink
film companies instead of six — own streaming services with new their strategies, to adapt to the rap-
and fewer theatrical films in the content. idly changing industry in which
industry — means Disney will be “I know there's been a lot of mid-budget comedies, adult dra-
able to extract better deal terms concern, with people saying we're mas and thrillers struggle to com-
from talent agencies trying to get losing a studio, and that's going to pete with franchise films released
their filmmaker and actor clients hurt our business,” said ICM’s by Disney. Lionsgate recently cut
jobs in its shows and movies, in- Crotty. “I don't look at it that way. jobs, while CBS Corp. is folding
dustry executives said. Unions There's going to be more distribu- its modest movies unit into its
such as the Writers Guild of Amer- tion platforms at the end of the larger entertainment business to
ica, which opposed the deal, could day. There are real deals for show- focus on making content for
also feel pressure. runners. There are many opportu- streaming.
Agencies are waiting to see nities to succeed and lots of money The group of companies that
how Disney’s purchase of Fox al- to be made.” stands to benefit most from Disney
ters its TV strategy. Famously ver- How will other studios and Fox’s marriage may be the top
tically integrated Disney has tradi- tier of the remaining major studios:
adapt?
tionally made shows that air most-
ly on networks it owns, including
ABC and Freeform. Fox has been
more open to producing shows for
other networks, creating competi-
tion that boosts revenues for agen-
cies. That’s less likely to happen
under Disney.
“When competition goes down,
you’ve got to think those fees are
going to change,” said one produc-
er who asked to remain anony-
mous to protect relationships.
But agencies are taking solace MGM Tower is seen on October 28, 2010 in Century City. (Kevork Djansezi-
in the fact that overall job opportu- an / Getty Images)
nities for talent are increasing be- The combination of Disney and
cause of growing players such as Comcast Corp.’s Universal Pic-
Fox will affect other studios on tures and WarnerMedia’s Warner
Netflix, Amazon and Apple look- multiple fronts.
ing to buy shows and movies for Bros.
Smaller studios like Lionsgate, Having fewer Fox movies in
their platforms. The battle for tal- Metro-Goldwyn-Mayer Studios,
ent has led to some blockbuster theaters could create some room
Sony Pictures and Paramount Pic- on the release calendar for studios
producer deals, including those for tures increasingly look like minor-
Shonda Rhimes and Ryan Murphy like Universal Pictures and Warner
league players, and many of those Bros. to distribute their own big
at Netflix. Agents also are count- companies may eventually sell to a films. Disney has said little about
its strategy for integrating Fox into Because of its clout, the compa- analysts say. The growth of Netflix
its film studio business, but Cowen ny has largely avoided the high- and the arrival of Disney+ and
& Co. analyst Creutz estimates the profile carriage disputes that have WarnerMedia’s streaming service
changes could mean five to seven embroiled other programmers try- will give consumers more ways to
fewer movies released in theaters ing to squeeze cable and satellite avoid traditional TV packages,
every year. Fox has typically re- firms for higher fees. In late De- which are already in decline. Cable
leased 12 to 17 movies a year, plus cember, Disney and Verizon en- and satellite giants are already try-
many more from its Fox Search- gaged in a brief spat over licensing ing to adapt with smaller “skinny
light specialty division. fees that would have blacked out bundles.” Comcast recently an-
If anything, Creutz says, there ABC, ESPN and other Disney- nounced it is working on an
are too many big movies released owned channels, but the two sides NBCUniversal streaming offering
every year competing for a more reached a deal before the deadline. free for its pay-TV subscribers, in
fickle moviegoing audience. Analysts don’t expect the Disney- a move to preserve subscriptions
That’s become a problem for studi- Fox merger to result in more and expand its digital business.
os that have to spend more on mar- blackouts. Yes, Disney’s Fox deal “This is all about people not
keting for their pictures to get at- will add valuable channels such as wanting to pay their cable bill, and
tention from global audiences. FX and FXX to its roster, giving it to get more content for less mon-
“It probably does open up a lit- an even better hand to play in ne- ey,” Creutz said. “How that plays
tle more room on the slate for the gotiations. But it’s evident to most out is the big unknown.”
other guys,” Creutz said. that Disney doesn’t need “Fargo”
Cord-cutters, rejoice and “American Horror Story” to
Carrie Coon in season 3 of FX's "Fargo." (Chris Large / FX)
Even before the Fox deal, Dis-
ney has enjoyed considerable pow- increase its leverage when it al-
er in negotiations with pay-TV dis- ready has the leading voice in live
tributors because of its ownership sports.
of ESPN, which is a must-have for The more likely long-term ef-
cable and satellite providers. fect will be a quickening of the
pace of cord cutting in the U.S.,You can also read
