Now that the megadeal is done and the smoke has cleared, there’s a price tag that can be put on each asset moving from Fox to Disney. Analyst estimates vary; the numbers below are derived from RBC Capital Markets.
Disney is getting two groups of channels from Fox: FX Networks and National Geographic Channels. FX is the home of critically acclaimed, edgy series from “American Horror Story” to “Fargo”–exactly the kind of content Disney lacks. Nat Geo has just begun to broach that business with scripted fare like “Genius,” but it’s a classic brand that fits perfectly with Disney’s portfolio, and one that is already translating nicely to digital platforms like Snapchat.
That they may represent the priciest assets in the whole deal is less a reflection of their future worth and more a testament to how valuable linear channels have been over the past decade, given the billions of dollars in advertising and affiliate fees they’ve brought to Fox. But Murdoch’s willingness to give them up is proof positive that the pay-TV business is in a state of secular decline, one that will provide plenty of short-term value but limited in the long term. Digital channels like FXX and NatGeo Wild are probably going to be retired eventually.
With ho-hum franchises like “Kingsmen” and “X-Men,” Fox certainly can’t hold a candle to what Disney has accomplished as a movie studio, though there’s still value to be mined with the upcoming “Avatar” sequels and the expected commingling of their assorted superhero characters. The valuation here is probably more based on the greater successes Fox has enjoyed in TV from animation (“The Simpsons”) to comedy (“Modern Family”), where syndication has proved a veritable goldmine. TV production capabilities will be absolutely key to powering Disney’s intent to go head to head with Netflix in the streaming game come 2019.
At first blush, it might seem counterintuitive for Disney to pay so much for what is essentially a satellite-based operation, a business with dim future prospects. But there is so much more to Star than that: It not only provides more international exposure for Disney in a business where it’s under-represented, but India may be the biggest growth market on the globe. Best of all, Star has an OTT platform, HotStar, that already has over 50 million subscribers and rights to must-have sports content in the region like cricket. As Disney mounts a global OTT effort, this could become a very valuable piece of the puzzle.
With ESPN becoming something of an albatross around Disney’s neck these days, doubling down on sports might seem a strange move. But having 22 RSNs across the country that boast deals with some of the greatest franchises — like the home run-happy New York Yankees with Aaron Judge and Giancarlo Stanton — could help shore up the faltering economics underpinning ESPN. Incredible affiliate fees will be a great buffer for Disney in the short term while it mounts a risky multi-year effort around OTT that may not provide desired returns for quite some time.
The value here is mostly tied up in Sky, where Fox had been engaged in a torturous, possibly doomed effort to snap up the 61% portion of the satcaster it doesn’t own. Handing that over to Disney could help ease the regulatory path to getting a deal done; the combination of Sky and STAR will give Disney an incredible international footprint across two continents.
The rest of these investments are tied up in Endemol, a production hub that could also help TV production efforts, and Hulu, where Disney will take a controlling interest. Hulu could become a valuable contributor to Disney’s overall OTT efforts given the head start the joint venture has in this space.
Total Enterprise Value of What Disney Is Buying From Fox: $66.1 billion
Fox Debt Disney Will Assume: $13.7 billion
Sale Price $52.4 Billion