Disney-Fox Deal Is the Rotten Cherry On Top of a Miserable 2017 For Everyone But Theater Owners and the X-Men

Courtesy of… Disney

Just when you thought 2017 couldn’t get any worse, along comes Disney’s super-deal to acquire 20th Century Fox (as well as the TV studio, FX, National Geographic and a bunch of other Murdoch-owned properties including Fox’s 30 percent stake in Hulu) and spoil Hollywood’s holiday cheer as fear spreads throughout the Pico lot. The truth is that it could be two years before this mega-merger is approved by the DOJ, so while it may not be business as usual at Fox, any disruption should be minimal.

Of course, given the overlap in Fox and Disney’s marketing, distribution and production departments, there are bound to be layoffs, which is sad all around. I know, because I’ve been there, with Variety back in 2009. It may be early for people to start preparing their resumes, but honestly, this kind of thing could happen to any studio these days as the industry contracts. It’s probably worse for the town (one less buyer, gulp!) than the consumer, which right now, seems more focused on the tantalizing possibility of the X-Men and the Fantastic Four (two worn-out franchises that could, admittedly, be rejuvenated by this merger) joining the Avengers, but it’s likely to be bad for both.

The other problem the Disney-Fox deal could lead to is a chain reaction of mega-mergers if other conglomerates start to feel small compared to a newfound behemoth like Disney. How will Comcast react? Does it stand pat with Universal, which besides Disney, feels like the steadiest of the other studios, or does it go on a shopping spree after flirting with acquiring 20th Century Fox itself? Could Viacom decide to sell Paramount? Would Sony sell off its movie studio? Will giant companies acquire independent studios like Lionsgate (a strong fit for CBS), MGM and A24? I suppose it all depends on whether AT&T will be allowed to acquire Warner Bros. for a cool $85 billion despite the Justice Department’s lawsuit to block the “vertical” deal.

Speaking of which, as noted above, the “horizontal” Disney-Fox deal is expected to take 12 to 18 months to close according to Disney CFO Christine McCarthy. Each studio’s board of directors has approved the transaction, but it’s still subject to shareholder (stocks have risen) and DOJ approval. Of course, Rupert Murdoch is said to be friendly with Donald Trump, and White House spokeswoman Sarah Huckabee Sanders confirmed that the President congratulated Murdoch, adding that it “could be a great thing for jobs.”

That remains to be seen, though it’s entirely possible that Murdoch could decide to beef up his remaining assets such as the Fox Broadcasting network and stations and the Fox News Channel, which will be spun off into a separate company immediately prior to the Disney acquisition. After all, Fox will still have to compete with rising media companies like Netflix, Amazon and Hulu, which Disney may decide to expand beyond the U.S. and into international markets. Now that it is no longer tied to 20th TV, Murdoch expects the Fox network to be popular among sellers, as studios like Warner Bros. TV and Sony Pictures TV “will be looking to us to buy programs.”

Hulu, for its part, will likely complement the SVOD service that Disney plans to introduce in 2019, which will include first-run movies once its Netflix deal expires. But as Variety notes, the question remains whether majority owner Disney will try to buy the remaining 40 percent stake in the company from Comcast/NBCUniversal and Time Warner, and whether those companies are even willing to sell. Hulu’s 16 millions SVOD subscribers ain’t nothing, and the company took years to build that audience. Hulu may not be Netflix, now or ever, but it has elbowed a place for itself at the streaming table.

And here’s the other elephant in the room: Is Disney even done buying right now? After all, the company isn’t just battling current threats like Netflix and Amazon, but future ones like Apple, which is just starting to produce its own content and will likely take a few years to find its footing.

Getty Images

20th Century Fox leadership has scheduled four Town Hall-style meetings — three today and one Friday — to address the deal and what it means for the studio’s employees. Fox’s chairman/CEO Stacey Snider reportedly canceled her trip to Washington DC for The Post premiere so she could personally meet with staffers, who will either be absorbed by Disney or bought out in the long run.

As for the 53 acres of ground beneath their feet, Disney has inked a deal to lease the Fox lot in Century City for seven years, according to Variety. That’s valuable real estate (approximately $425 million) that Murdoch wasn’t so eager to part with, but you can’t just immediately displace the thousands of people who work there.

So what else does it mean to go from a six-major to a five-major town for the first time in more than 50 years? It means that fewer studios movies will hit theaters, which is bad for creatives in this town, but may not necessarily be so bad for business, since right now, movies cannibalize each other at the box office. You have one weekend to do big business before another comic book movie arrives to rain on your parade. With release calendars as crowded as ever, more space between larger titles could be a good thing, as it gives small films a chance to breathe and find their audience.

As for 20th Century Fox, speculation has Disney treating the studio like an adult-oriented label run by Stacey Snider. Think Die Hard, Predator, Alien, Kingsman and prestige dramas like Steven Spielberg’s The Post. Stuff that’s a little too edgy for the family-friendly Disney brand, but isn’t quite Miramax-Level of risqué. Fox Searchlight is also expected to continue operating as a specialty label focusing on arthouse fare. If there’s any division that could find itself in jeopardy its Fox 2000, but that’s pure speculation on my part. They make fine films, I just don’t know why Disney would need so many labels, that’s all. It’s also worth questioning the fate of Blue Sky Studios, since Disney already has its own animation studio in addition to a little company called Pixar. It’s unclear whether that label will remain intact, or whether its animators will be absorbed inside either Disney Animation or Pixar.

As far as exhibition is concerned, the Disney-Fox deal is a mixed blessing. Between Star Wars and the Marvel movies, Disney is the studio most eager to protect the 90-day window between a film’s theatrical release and its home entertainment release, so on that front, theater chains should be happy. However, smaller, independent theaters may find it difficult to push back on Disney’s terms now that it will enjoy 40 percent market share, with Fox films possibly calling for the same cushy deal that Disney movies currently receive. It’s not quite a monopoly, but it’s pretty close. Just look at the month of December for the next several years. It’s going to be tough for studios to compete with Disney’s Star Wars and Fox’s Avatar franchises, which are expected to dominate the field. And let’s not forget potential Pixar movies around Thanksgiving. This year, Coco topped the box office for several weeks before it being (inevitably) dethroned by its corporate sibling The Last Jedi.

Meanwhile, last spring I had the chance to ask Kevin Feige a few questions prior to a screening of Guardians of the Galaxy Vol. 2, so I asked him if Marvel planned to make any R-rated movies, and he said something to the effect of, “not at this time.” It’ll be interesting to see if Feige changes his tune following Thursday’s announcement from Disney chairman/CEO Bob Iger that “there might be an opportunity for a Marvel-R brand for something like Deadpool,” which Disney now owns. Crazy, right? As long as we let the audience know what’s coming, we think we can manage that fine,” said Iger, who also extended his contract through 2021. So much for that presidential run in 2020!

Deadpool star Ryan Reynolds seemed pleased with his character’s new corporate overlords on Twitter, but the Writers Guild of America West weren’t as happy, releasing the following statement:

“In the relentless drive to eliminate competition, big business has an insatiable appetite for consolidation. Disney and Fox have spent decades profiting from the oligopolistic control that the six major media conglomerates have exercised over the entertainment industry, often at the expense of the creators who power their television and film operations. Now, this proposed merger of direct competitors will make matters even worse by substantially increasing the market power of a combined Disney-Fox corporation. The antitrust concerns raised by this deal are obvious and significant. The Writers Guild of America West strongly opposes this merger and will work to ensure our nation’s antitrust laws are enforced.”

Time will tell how successful the guild is, but I’m betting there won’t be much anyone can do to disrupt this merger. Sometimes in life, and especially in Hollywood, you just have to surrender. Studios should get their white flags ready, because there will be few places left to hide on the release calendar.

 Jeff Sneider | Editor in Chief