CNBC, citing sources familiar with the matter, said on Monday that Rupert Murdoch’s company is in talks to sell most of its film and television assets to Disney. If the deal goes ahead and overcomes regulatory hurdles, Disney, which only recently unveiled plans to launch its own standalone streaming service, will suddenly find itself with a big enough portfolio of media and entertainment assets to shake up the entire market and gain a timely advantage in Hollywood’s content wars. (See also: Fox Held Talks to Sell Most of Company to Disney -CNBC.)
Fox’s entertainment catalogue includes "The Simpsons," the TV and film rights to Marvel’s "X-Men" characters and, for now, the physical distribution of the first six "Star Wars" films, one of Disney’s biggest movie assets, according to Fortune. Adding those offerings to Disney’s existing stockpile of original programming, which includes Marvel, Lucasfilm, Pixar, Disney Animation and ABC, should give the entertainment powerhouse a great platform to attract customers when its streaming service goes live in 2019. (See also: Disney's Netflix Competitor Could Be Worth $25B: Morgan Stanley.)
For Netflix, a potential tie-up between Twenty-First Century Fox and Disney would mark the unwelcome arrival of yet another major rival in what is becoming an increasingly competitive market. Not too long ago, the Scotts Valley, California-based company’s dominance of the streaming industry went fairly undisputed. Now Amazon.com Inc. (AMZN) is producing original content, Apple Inc. (AAPL) and Facebook Inc. (FB) are entering the space, and HBO, AMC Entertainment Holdings Inc. (AMC) and Hulu, co-owned by Fox, Disney, Comcast Corp. (CMCSA) and Time Warner Inc. (TWX), are gathering momentum. (See also: Hulu Upstages Netflix, Amazon at Emmys.)
Against this competitive backdrop, Netflix faces more pressure than ever to convince its 109.3 million global subscribers not to jump ship to a rival service. Greg Portell, a partner at management consulting firm A.T. Kearney, told CNBC that the current trend of giant media companies merging their portfolios is making it increasingly harder for Netflix to compete. He cited Disney and Comcast, which bought Dreamworks last year, as key examples.
"If Disney or Comcast or anyone else comes up with something with a similar subscriber profile it will make it that much harder," Portell said.
To make matters worse, Jim Nail, an analyst at Forrester, warned that rising competition is likely to spark more bidding wars for content, making the cost of securing the best TV shows and movies much more expensive. "The days of cheap archived content are over," Nail said, according to CNBC. Companies are "going to ask Netflix for a whole lot of money."