Disney-Fox Aftermath: A Roaring Mouse Could Force Rivals to Get Bigger

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It’s not a small world, after all.

The Walt Disney Company, stocked to the gills with ESPN, the ABC television network, the Pixar studio, and the Marvel superhero franchise, was already a giant. Now it has turned into a behemoth — and rivals across a number of spaces could feel new pressure to compete.

When Disney snatched up a good portion of 21st Century Fox Thursday for a sum said to be valued at $52.4 billion in stock, it was only the latest in the media sector to bulk up in order to gain scale. The deal means Disney gains cable networks that specialize in things more worldly than “The Lion Guard” or “Doc McStuffins,” two popular offerings from its Disney Junior pre-school cable outlet. Disney also gains a greater share in the Hulu streaming video hub and a passel of regional sports networks that will help buoy ESPN. And it means that other companies seeking to have a toehold in the world of content must suddenly contend with another titan stalking the land.

“The new combined entity will have the global pieces and important intellectual property to compete more aggressively in the face of disruption and with the changing media and entertainment industry, where consumers are more and more empowered with choice of how and when they consume content,” said Neil Begley, an analyst at Moody’s.

Others may now feel they need similar bulk to take on the challenges of the era.  Disney’s maneuver follows a veritable parade of tie-ups in the past months aimed at gaining more reach among consumers and more leverage with distributors of content. Staying small — or even medium-sized — is simply no longer seen as a viable option for many in the sector. Smaller players are increasingly at a disadvantage in an industry where telecommunications providers and cable distributors are snapping up content houses in an effort to gain more sway over consumer choice. Comcast’s $13 billion purchase in 2009 of a controlling stake in NBCUniversal has set in motion a shift in terrain.

Recent deals speak to the new pressure. AT&T, which already purchased satellite distributor DirecTV in 2015 in a deal valued at approximately $48.5 billion, continues to work to close an $85.4 billion pact to snap up Time Warner, the owner of HBO, CNN, Warner Bros., and DC Comics. Charter Communications broadened its national footprint by acquiring Time Warner Cable in May, 2016, for approximately $65 billion. Lionsgate acquired Starz earlier this year in a deal valued at around $4.4 billion — a combination seen as a way for media magnate John Malone, who had stakes in both companies, to create a new media competitor.  In late July, Discovery Communications unveiled a deal to pick up Scripps Networks for $14.6 billion, a move that joins the owner of the Food Network and HGTV with the controller of Discovery Channel and TLC.

And digital-media outlets, once seen as enjoying unchecked growth while their linear-media counterparts grappled with new limits foisted upon them by streaming video and migrating audiences, are now also running into challenges. BuzzFeed and Vice Media are expected to miss their 2017 revenue targets. Mashable, the online site known for its devotion to technology and popular culture, agreed earlier this year to sell itself to trade publisher Ziff Davis for a significantly smaller portion of the valuation it received when it held its most recent investment round in 2016. Indeed, whether it’s Snap, Vice, BuzzFeed, or Vox, many of these companies count the old-school media among their most significant investors.

Viacom and AMC Networks could both use new scale in a difficult era. Viacom, home to mainstay cable networks like MTV and Nickelodeon, has suffered audience declines thanks to new video-consumption technology. Indeed, the core audience for its networks — younger people — is the very one adapting the quickest to new methodologies. Viacom has been trying to lend momentum to some of its core networks, while bolstering new business around them, like live events built around Comedy Central. AMC Networks’ flagship network, AMC, is home to fan-favorites like “The Walking Dead” and “Better Call Saul,” and it has some other assets like BBC America. But each time one of the aforementioned deals takes place, the fate of these companies is more difficult to sketch.

CBS Corp. has seemed to revel in its smaller size. A giant in name, CBS’ history is intertwined with the nation it serves. CBS controls the rights to TV classics like “I Love Lucy” and “Star Trek,” and its shows continue to attract some of the biggest linear audiences possible. But even those are smaller than they once were. In response, rather than merging with Viacom — both are controlled by the Redstone family through its National Amusements movie-exhibition company — CBS has opted to create new businesses of its own. CBS in recent years has launched a streaming-news video hub, CBSN, and a subscription video-on-demand service, CBS All Access. It has plans for a streaming sports outlet. To grow these days, a media company has to merge or expand. Whether the CBS businesses lend their parent company more ballast is something all eyes are likely to be upon next year.