Disney’s interest in 21st Century Fox’s film and TV assets is all about building up its direct-to-consumer streaming capabilities.
Disney chairman-CEO Bob Iger was blunt in laying out the rationale for the $52.4 billion deal with investors on Thursday. Disney needs to enhance its ability to reach consumers directly with programming and channels to guard against further declines in the current pay TV eco-system.
Building up direct-to-consumer offerings “is vital to the future our of media business and its our highest priority,” Iger told investors during a conference call held an hour after Disney and Fox unveiled the acquisition pact.
During a later call with reporters, Iger emphasized the importance of adding Fox’s production capabilities as it ramps up content production for its OTT offerings. Disney earlier this year announced plans for a standalone sports streaming service to launch in 2018 and an entertainment-focused option in 2019.
“We’ll be able to expand our franchise-creation capabilities…in addition to gaining access to more high-quality content,” he said.
With consumers flocking to on-demand and streaming options, Disney needs to make sure it has the pipelines in place to prepare for the future. Disney intends to keep its channels distributed in the MVPD arena. But if the marketplace shifts, “we’d be well-positioned to in effect flip a switch and distribute programs and channels direct-to-consumer through the platforms we’ve created,” he said.
Iger was pressed by analysts about management plans for the enlarged Disney film and TV operation but he avoided any specifics. Iger pointed to Disney’s track record of trying to maintain the culture and leadership of companies that it has acquired, notably Pixar, Marvel and LucasFilm.
“We have not only respected the culture of those organizations but respected and appreciated the talent that came with those acquisitions,” Iger said.
Disney has said it expects to realize $2 billion in cost savings within two years of the deal’s closing. Iger would not talk specifics of Disney’s vision for integrating the 20th Century Fox studio operation with Disney’s existing film and TV divisions. The lack of details so far on the long-term plans is creating much anxiety on the Fox lot.
“We’re just going to embark on our integration plans (after which there will be) clarity on what the organization will look like,” Iger said. “We’re going to take some time and look at it carefully.”
Iger did express his support for continuing to produce the prestige, adult-oriented movies that have been a much bigger part of the mix at 20th Century Fox and Fox Searchlight than at Disney’s studio in recent years. He said he’s been impressed with the output of Fox Searchlight and Fox 21 in recent years. But he would not commit to whether those brands would continue to function as distinct labels under the Disney umbrella.
“We love the movie business. It’s been incredibly profitable for us,” Iger said during the call with reporters. “We like being in the business of making quality movies. We fully intend to stay in those businesses.”
Iger was also questioned about how Fox’s edgier film and TV productions would fit with Disney’s family-friendly brand image. Iger pointed to Hulu as a prime outlet for Fox fare that would not be a fit with the Disney-branded service coming in 2019.
Moreover, Disney already has track record of “managing brands in a compartmentalized way,” hIger said. “We’re in the business of managing brands that are very different in nature. Marvel is certainly far afield from Disney.” Iger pointed to FX in particular as “a strong consumer brand. We fully intend to enhance that.”
Earlier, in an interview with ABC’s “Good Morning America,” Iger was asked specifically about the future of 21st Century Fox CEO James Murdoch, who is rumored to be seeking a high-level role at Disney.
“James and I will be talking over the next number of months,” Iger said. “We’ll be discussing whether there’s a role for him at this company.”
As part of the Fox transaction, Iger extended his contract as chairman-CEO for another two years, in order to be the steady hand on the tiller as the Fox assets are integrated into Disney, assuming the deal passes muster with federal regulators.
Iger had previously said that he was committed to stepping down at the end of his most recent extension, through mid-2019. But spearheading the biggest acquisition in Disney’s nearly 100-year history required him to stick around. It came at the request of the Disney board as well as that of 21st Century Fox.
“I’ve got one of the great jobs in the world,” Iger told “GMA.” “This combination makes it more exciting.”