Walt Disney (NYSE:DIS)
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6 Months : From Nov 2018 to May 2019
By Erich Schwartzel
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 8, 2018).
LOS ANGELES -- The sale of major assets of 21st Century Fox Inc. will create two juggernauts of programming, Walt Disney Co. and Comcast Corp., that will tower over a rapidly consolidating media and entertainment landscape, according to a report by Ampere Analysis.
Disney's $71 billion deal to acquire Fox's film and television divisions and Comcast's agreement to buy the pay-TV operator Sky PLC will create companies that together control nearly 40% of all programming spending in the U.S., the analysis found. Globally, the two will account for 20% of such spending.
"That would be the most concentration we've seen," said Daniel Gadher, an analyst at the London-based media analysis firm.
The findings underscore how traditional Hollywood studios are responding to the threat posed by Netflix Inc., which has pledged to spend $8 billion on programming and helped drive Disney to buy Fox in the first place. As theatrical attendance stagnates and cord-cutting consumers cancel cable subscriptions, studios have been rushing to find ways to pipe their movies and television shows directly into the home and establish their own commercial relationships with their customers.
"Netflix was on course to catch -- and overtake -- the top Hollywood studios by content spend," the report stated. "However, in light of the two new combined entities, Netflix would now need to triple spend to achieve this feat."
Now traditional Hollywood is attempting to turn the tables by siphoning business from Netflix. Ampere projects Disney and Comcast, through its NBCUniversal and Sky divisions, will spend a combined $43 billion on programming by the end of 2018 -- $22 billion of it coming from Disney-Fox and the other $21 billion from NBCUniversal-Sky.
The Disney-Fox share of domestic programming spending will be 23% after the merger, the analysis found.
21st Century Fox and Wall Street Journal -parent News Corp share common ownership.
The Ampere report, which examined company filings and executive statements, measured spending on original and licensed programming produced for viewing in the home, whether through traditional cable packages or streaming services. Spending on theatrical movie releases wasn't included.
Disney is planning to start its own direct-to-consumer service in late 2019, using Fox programming to build out its library. The service will include movies from Disney mainstays such as Pixar Animation and Marvel Studios alongside Fox's National Geographic.
In just over a year, Disney has reoriented itself in an effort to catch the streaming wave. A separate sports service, ESPN Plus, started in April, and the Fox deal will also give the company majority control of the Hulu streaming service when it closes early next year.
Comcast itself attempted to acquire the Fox film and TV assets last year, driving up Disney's bid and ultimately walking away with control of Sky for $38.8 billion. That gives the cable operator a strong foothold in Europe, where Sky sells phone, TV and internet services to 23 million customers.
Netflix isn't the only competition they face. AT&T Inc., which purchased Time Warner Inc. this year, is planning a streaming service that will bundle programming from HBO and other properties. It is also set to launch late next year.
Write to Erich Schwartzel at firstname.lastname@example.org
(END) Dow Jones Newswires
December 08, 2018 02:47 ET (07:47 GMT)
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