How the $52B Fox deal will shape Disney’s streaming service strategy

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Disney is not currently anticipating a considerable value proposition from the RSNs for the ESPN direct-to-consumer product.

Disney is buying a big chunk of 21st Century Fox for $52.4 billion in stock, and a considerable strategic basis for the acquisition is the potential boost it will provide for Disney’s streaming video ambitions.

Disney intends to launch a direct-to-consumer ESPN streaming product (ESPN+) in 2018 and a Disney-branded streaming service in 2019. Disney CEO Bob Iger today during a press conference offered some details about how the Fox assets—including 22 regional sports networks along with Fox’s film and television businesses—will factor into that strategy.

Iger called the RSNs a “perfect complement” to ESPN’s current offering. He said ESPN is basically a national program service and that the RSNs are regional and local in nature. He compared ESPN’s and the RSNs’ upcoming relationship to a network and its affiliate stations.

But he said that Disney is not currently anticipating a considerable value proposition from the RSNs for the ESPN direct-to-consumer product since the RSNs will primarily continue to be distributed as they have been distributed by multichannel providers.

“If there’s an opportunity to bring their product more in the direct-to-consumer vein, we’ll take full advantage of that,” Iger said.

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In terms of Fox’s intellectual property (IP) and how it will fit into the upcoming Disney streaming product, Iger said that a lot of Fox’s IP—like the National Geographic cable channel and Fox’s Marvel properties including X-Men and Fantastic Four—will fit extremely well into the Disney-branded streaming service.

“[Fox] also makes a lot of product that we believe will be of great use, as it already is, to growing Hulu,” Iger said. He added that Disney considers Hulu—of which it will own 60% following the Fox deal—as more of an adult product that will benefit from programming like FX series.

Iger discussed some of the benefits Disney and Hulu will see once Disney has a controlling stake in the streaming service.

“Having control of [Hulu] will allow us to greatly accelerate it into [the streaming video] space and become an even more viable competitor,” Iger said, adding that Disney will do that by sending more content to Hulu and also by having the control and making managing Hulu “more clear, more efficient, more effective.”

Disney and Fox this morning announced their anticipated transaction. Disney will take ownership of film businesses including Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000, as well as television creative units Twentieth Century Fox Television, FX Productions and Fox21.

Disney will also acquire FX Networks, National Geographic Partners, Fox Sports Regional Networks, Fox Networks Group International, Star India and Fox’s interests in Hulu, Sky plc, Tata Sky and Endemol Shine Group, according to a news release.

This will give Disney access to properties including Avatar, X-Men, Fantastic Four and Deadpool, as well as The Americans, This Is Us, Modern Family and The Simpsons.