The Disney and Fox Merger
On December 14th, 2017 it was announced that the Walt Disney Company had purchased 21st Century Fox for $52.4 billion. Under this acquisition Disney will acquire all of the film and television properties that Fox owns, their various cable channels, stakes in Hulu, National Geographic, and other subsidiaries. Due to the massive nature of this merger it will not be finalized until summer 2019. That being said there are still major marketing implications that will be made by this deal. An increase in marketing channels and segmentation will make Disney a powerhouse within the industry.
This deal will have a major effect on the marketing environment. The big effect it will have and one that many people have criticized and that is that Disney will effectively be eliminating a lot of it’s competition in the marketing environment. With Fox effectively out of the picture that leaves very few entertainment businesses that will be able to compete with Disney. Some have even speculated that this could lead to a monopoly. Disney, a company that already has $55.1 Billion in revenues, will see a $19 Billion increase in revenue from this deal. Instead of upping their prices on productions like Disney has, other competitors like Universal, Warner Brothers, and Sony might look into actually making smaller priced productions so as to make a bigger profit in return relative to the cost. Movies like “Get Out” made $255 million on a $4.5 million dollar budget, so with successes like this it is highly possible that other companies will follow this model. On the flip side of that this could lead to an increase in prices due to the lack of competition. One of the reasons that Disney CEO Bob Iger gave for this acquisition is that because Disney plans to start it’s own streaming service ala Netflix in 2019, having all those Fox Properties will help them start off on a good foot. But if Disney’s streaming service is really as massive as they say this will lead to other competitors such as Amazon and Netflix increasing their prices. In fact Netflix just recently increased their prices in order to better compete in the streaming market, and if Netflix is already doing that, what’s to stop other services like Amazon, Hulu, and of course Disney to skyrocket their products. So even though this merger will allow Disney to better expand its library of products, it will also minimize the jobs that Fox as its own company would have provided, thus possibly creating a monopoly, but will also lead to an increase in prices due to the very limited market and competition and Disney will want to assert its dominance in the field. On the positive side however this could lead to inspiring other companies to be more creative with its pricing strategy and will lead to more diverse content in the market.
How it works
This deal will also lead to an increase in marketing channels and segmentation opportunities for Disney. When Disney first acquired Marvel back in 2009 one of the main reasons that was given was that Disney wanted to appeal to the boys demographic, something they hadn’t been reaching with their content at the time. This deal provides a very similar scenario. By acquiring Fox, Disney will be able to segment all it’s various properties. They will be able to target all kinds of demographics. Traditional Disney for girls, Marvel/Star Wars for boys, and edgier content that Fox can provide. Also because of this segmentation new Marketing channels will also be provided. So as to maintain a brand identity Disney will put out it’s content through various channels. They can distribute their more kid friendly products through their Disney branded streaming service, while they can put their more adult content through channels such as National Geographic, Hulu, and FX. This will cause Disney to have a far reach in attracting consumers. Another big factor of this deal is that while Fox sold a majority of their assets, they actually decided to keep their News and Sports outlets. They will prioritize their efforts in to making these the best they can be under a New Fox label. As Fox had been struggling in the movie industry and wasn’t seeing a very big return in their investments it makes sense for them to prioritize to what they’ve always excelled at. Fox is a major player in the news and sports broadcasting industry so them selling off their other assets and making those the best they can be while Disney expands it’s ever growing media empire makes sense for both sides as I believe that in the long run these strategies of marketing to their consumers will bring big financial gain to both sides and they will continue to be very successful for years to come.
So overall this deal will have a big effect on the entertainment industry. While it will have positive effects like expanded consumer reach and potential profits increase. It will also hold negative effects such as lower competition, higher prices, and a possible monopoly. But whatever happens, positive or negative, it can’t be denied that is one of the biggest deals in marketing history.