Why It Suits Disney and Fox To Strike A Deal – Audience Analysis for the Hollywood sale of the Century

There has been no shortage of bombshells dropped in Hollywood recently, but last week’s news that Disney had held acquisition talks with 21st Century Fox was a particularly loud one. Although the potential deal has currently not moved beyond these preliminary talks, that they have even taken place once again demonstrates Disney indefatigable ambitions to increase their domination of the cinema industry and beyond. It also perhaps revealed where the Murdoch-owned Fox Corporation sees itself in the present media landscape.

The talks are reported to have concerned Disney acquiring all of 21st Century Fox’s film properties and distribution network as well as the FX cable channel, Nat Geo, and Rupert Murdoch’s 39% stake in Sky. From Disney’s point of view, the potential acquisition would add to their already considerable scale and would add further diversity in content. The latter is something Disney will be seeking increasingly as they prepare to enter into direct competition with streaming giants Netflix and Amazon in 2019 when they launch their own digital platform.

X-Men: Homecoming

Disney bringing Marvel Studios into their fold has been one of the greatest success stories in recent Hollywood history. The films of the Marvel Cinematic Universe have gone on to dominate the box office the world over under Disney’s ownership, but the purchase of the comic book powerhouse did come with one major caveat: the film rights to several key Marvel properties had already been sold to other studios.

One of the most notable of these was the X-Men franchise, which was acquired by Fox in 1993. The mutant-based film series has been a key proponent in establishing the current golden age of superhero movies and they have remained frustratingly out of reach in the building of the Marvel Universe – even to the extent where Marvel Studios are not permitted to refer to characters as “mutants” in their own films.

The idea of the X-Men entering into the Marvel Cinematic Universe officially is tantalising to one of the biggest fanbases in modern cinema and presents a clear overlap of awareness across all demographics in this audience as we can see below:

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While awareness in the two franchises is virtually mirrored across the demographics, one particular area of interest for Disney will be the increased awareness of the X-Men brand compared to Marvel in the Asia Pacific region.

This increased awareness in the region directly translates into box office numbers in the key market of China where the previous two X-Men films have outperformed Marvel Studios’ products Captain America: The Winter Soldier and Doctor Strange in their respective years of release. While the inverse is true at the US box office, where the X-Men franchise box office returns are considerably more modest than Marvel’s own films, harnessing the stronger awareness in the X-Men franchise in Asia provides Disney with an excellent opportunity to further strengthen the Marvel brand in one of the fastest growing film markets in the world.

The Fox & The Newshound

With the potential acquisition offering ample opportunities to Disney to strengthen and grow their brand and services, perhaps the more interesting story is why Rupert Murdoch is willing to sell a considerable chunk of his media empire. And the focus there should be on not what is leaving the corporation, but on what is staying.

It has been made clear in the reports that Murdoch would retain his news and sports networks, most significantly Fox News. At the risk of repeating ourselves ad infinitum, we have been stating that politics and real world events have been putting a serious attention share drain on entertainment’s for over a year now.

Last year, we put forward the proposition that audiences were beginning to see politics as a new form of entertainment - and an extremely potent one as well. As of July 2017, it seems that trend has continued as Fox News retained the highest ratings for US cable channels for the 13 months straight

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And it is a news cycle which has shown no signs of slowing in 2017 as we again noted in July this year when James Comey’s Senate testimony outperformed both hit cable TV shows and the NFL in the ratings. Could it be that Murdoch is now seeing Fox News as a more fiscally prudent investment compared to the production of original content?

In terms of direct competition with Disney at the US box office, Fox was dwarfed by Disney in 2016 with a 12.9% market share compared to Disney’s 26.3%. So the “if you can’t beat them, join them” strategy could be the thinking behind the potential sale. Also, the mounting arms race of original content production with the streaming giants, such as Netflix's $6bil investment in content production for 2017 alone, is becoming increasingly risky and nearly prohibitively expensive.

It is a race that Disney is on the verge of entering and need as much scale and diversity of content as possible to ensure success. Likewise, it could be a smart move for Fox to hand over the risk and vast investment of original content, leaving them to concentrate on their lead in the market of the most self-perpetuating and sustaining form of modern entertainment: the news.

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David Murphy

David Murphy

EntSight Researcher