Disney Bought a Company in Debts for $66 Billion – Here’s Why
Fox Network and Disney are the undisputed champions of television entertainment but, despite having empires worth billions of dollars, the future of their companies is in jeopardy due to the increasing popularity of online entertainment services like Netflix.
Now, Disney has come up with a strategy to become the next big online entertainment provider while maintaining its standard in the world of television and cinema.
Disney Acquires Majority of Fox Network
Walt Disney Co. just announced on Thursday that it had bought several assets from 21st Century Fox Inc., including over a dozen television networks, several international distributers and 20th Century Fox film studio for $66 billion – the biggest acquisition Disney has ever made. But what most people are wondering is why Disney is buying more television networks when the future of entertainment is online.
Streaming services like Amazon and Netflix have gotten ahead of the curve, leaving cable operators worried about the future of television. Despite the decreasing popularity of television business, Disney still makes more than $20 billion every year in revenue whereas Fox makes several times more. With its newly broadened portfolio of versatile television networks, Disney is planning to use a diversification strategy to make the best of, both, online and cable entertainment.
Too Small to Survive?
Rupert Murdoch, the media mogul and CEO of News Corp who founded Fox network, spent the past 60 years of his life acquiring television networks to grow his extensive media empire and no one thought he would sell two-thirds of his most profitable assets to Disney so easily– so when the news broke, people wanted to know the motive behind this move.
Despite being one of the richest and most successful businessmen on the planet, Murdoch had made some bad investment decisions back in the day during the internet boom when News Corp acquired Myspace for $580 million. A few years later, as Facebook gained popularity, Myspace was doomed and Murdoch lost all of his money. Today, the media mogul fears that history might repeat itself with his media empire.
Disney Hoping to Become a Monopoly in the Show Business
Disney CEO, Bob Iger, says that the deal is a win-win for both him and Murdoch. Fox Entertainment Group has been able to sell off its assets at a great price whereas Disney Inc. has acquired new film, television series and sports network (ESPN) to add to its vast entertainment library. With great channels like National Geographic, Disney aims to gain an international foothold in Europe and Asia.
Furthermore, it wants to pursue the same strategy as Amazon and Netflix by giving its viewers entertainment on demand through the Disney app. It’s hard to tell if Disney will be able to succeed at managing such a large empire and if it’s new strategy to take over online entertainment will work.
Smaller media companies like Lions Gate Entertainment and AMC Networks are feeling the pressure as Disney gets closer to becoming an entertainment monopoly and are searching for deals to grow their own media assets in order to survive.
The Future of 21st Century Fox and Netflix
After selling off most of the assets, Murdoch is left with only a handful of television channels including Fox News – but the future looks uncertain for Fox News as well as the channel has been afflicted with harassment scandals that have resulted in large payouts for the victims. Disney has also cut down its budget for films after the acquisition and is planning to release only 10 films per year, mainly by Marvel and Pixar.
Wary of the incoming competition, Netflix has accelerated its efforts of creating its first ever studio in order to decrease its dependency on other networks for series. The streaming company had formerly relied on Fox and Disney as its biggest suppliers but Disney has now announced that it’ll be making films and series for its own streaming service and may not give Netflix the permission to use to them on its app.
Is Disney on its way to become a monopoly in the show business?
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