Disney’s $52B Fox purchase gives consolidated pay TV business its scaled-up match

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The Walt Disney Company’s $52.4 billion proposed purchase of 21st Century Fox will create a massive media company with almost unimaginable global scale, dominating global box offices, as well as broadcast, cable and satellite television, both domestically and internationally, all the while creating a most formidable over-the-top opponent for Netflix and Amazon. 

Of course, the consolidated pay TV business will have its hands full, too.

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Responding to the same forces of skyrocketing sports program licensing costs, cord cutting and OTT competition, the U.S. pay-TV business consolidated from its top 10 companies down to a top six over the last several years. 

Now, faced with declining distribution fortune for its most profitable asset, ESPN, Disney has responded in kind, turning the formidable Fox empire to that thing media and telecom companies covet most right now: scale!

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Sports viewers, who had made inroads in getting around ESPN in recent years, will have no other choice but to go through Disney to get to their favorite teams. Leagues like NFL and NBA, which had saddled Disney’s ESPN with prohibitively expensive licensing deals, will have no other choice to reach their target markets. 

The deal combines the forces of the Fox Sports Net regional sports channels, as well as the Fox Sports 1 and Fox Sports 2 national networks, with the assets of ESPN. This is not to mention the NFL and Major League Baseball contracts held by FOX Broadcasting. 

“Big picture, the new company’s exposure to cable networks would increase to around 40% vs. the current 32%,” wrote MoffettNathanson analyst Michael Nathanson. “However, the assets would be much more internationally diverse and would be even an even bigger behemoth in U.S. sports with ESPN, regional sports networks and stakes in three leading college conference channels (i.e. Big Ten, SEC and ACC).”

Of course, no one says it’ll be easy. Disney has to figure out how to reconcile a programming slate that includes ABC’s “Modern Family” and Fox News, a match-up that wouldn’t appear to generate a lot of synergy right off the bat. 

There will be major regulatory hurdles in regard to Disney controlling two of the Big Four broadcast channels. And as far as the FCC and Justice Department go, that just might be for starters amid a regulatory climate that, as AT&T just found out, isn’t as laissez-faire certain as it might appear.

And certainly, FCC clerks should prepare themselves from an ex parte avalanche from pay TV and their associated lobbying groups. 

But if and when the Disney-Fox deal does consummate, the combined company will be peddling a bundle to behold beyond sports channels, combining such must-haves as Disney Channel and ABC with FOX, FX, Fox News and National Geographic, just for starters. 

Whichever operator chooses to black out that bundle probably chooses to exit the multichannel business. 

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