The Mouse and the Fox get married. How will the Disney-Fox acquisition play out?

The Mouse and the Fox get married. How will the Disney-Fox acquisition play out?

Just a week before Christmas, news broke that Disney would be buying most of 21st Century Fox. The industry is abuzz with the consolidation of these two giants; the $66bn deal is reverberating around Hollywood. As we move into 2018, would this power merger actually play out to be a blessing?

Much of the media is touting how the integration of these two houses brings together huge franchises, “Avatar” and “The X-Men” will join Disney’s formidable library of Marvel titles, Pixar Animation hits and “Star Wars” films.

But this perspective misses the point. There are relatively few economies of scale to be had by consolidating catalogues of content.

Indeed, the economist point out (I believe presciently) “Rupert Murdoch has shocked his industry by ceding ground. The family is not in retreat, he said as the deal was announced;

“We are pivoting at a pivotal moment.” His timing, exiting a lucrative business on the precipice of decline, looks shrewd.

Combining two business (both large, incumbents of the “old school”) does not make an organisation fitter to deal with the disruption they face. Indeed, the distraction caused by the issues of integration may well prove to be damaging to their ability to execute on the real task at hand.

The Mouse and the Fox get married. How will the Disney-Fox acquisition play out?
Is power combined = disruption?

1) Both Disney and Fox are apex players of “the old school”.

The “old school” is a landscape where the key corporate skill sets are around Content Origination, and Negotiating and Signing Carriage Rights with Broadcasters & CableTV operators around world. They have become skilled in the art of strong-arming broadcasters to take bundled deals and negotiating placements in CableTV bundles.

Both are B2B businesses (whilst they manage consumer brands, they do business almost entirely with broadcasters — think P&G or Unilever with their portfolio of consumer brands but whose business is primarily delivered through Grocery retailers)

However, the landscape in which they excelled is rapidly changing, and new platform players are emerging as the dominant force. Netflix — Amazon and 1000s of smaller, niche, local OTTs. Just as Spotify has become dominants as a platform play in the music industry rendering the record labels irrelevant, and Google & Facebook is doing to many sections of the content industry.

Both Disney’s and Fox’s traditional businesses partners (Broadcasters) are struggling with this new world order. For Disney & Fox, working with the newly crowned king-pins (Netflix and Amazon) is dancing with the devil.

2) Both are resorting to the same strategy to go direct to consumer.

A pivot from being a B2B business of making content and selling it to broadcasters, to being a B2C business.

The logic is seductive, disintermediate and go direct to the consumer.

However, this is not in the DNA of either business. Both, having been apex players are “over confident” about the power of their brand and their product. And more importantly, are unskilled in the cut throat, “move fast and break things”, innovate or die world of building an online business.

Whilst the technology to build an OTT can be bought & indeed the teams can be built/acquired. What remains missing is the corporate culture and willingness to abandon previous cash cows for the sake of their future business. The very same issues (their ownership of BMG) that meant that having owned the portable music market with the WalkMan and DiscMan, Sony ceded that sector of the business to Apple who had nothing to lose. The story was also played out by the music industry where record labels overestimated the power of their brand and product in the face of technology, to internet-driven distribution and ruthless, nothing-to-lose platform players.

This battle will be fun to watch unfold, the result will demonstrate which is true;

Content is King or the Customer?

> Source: Disney is buying most of 21st Century Fox for $52.4 billion

Ian McKee is the Chief Executive Officer of Vuulr. Connect with Ian on his Linkedin at https://www.linkedin.com/in/iandmckee/

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