Walt Disney (NYSE:DIS) has built its recent success on the back of the intellectual property (IP) it owns. Since the company spent $7.4 billion buying Pixar, and $4 billion each for Marvel and LucasFilm, it has had unparalleled success at the box office. Disney has been able to take the guesswork out of making hit movies.
Disney has shown that content -- at least the right content -- can drive an entire business. It has also shown that in the right hands, good IP can be even more effective, and that's why it makes sense that it would want to buy 21st Century Fox's (NASDAQ:FOXA) (NASDAQ:FOX) film and television studios.
What is Disney's content strategy?
Disney owns franchises and more importantly it owns enduring ones. The public has yet to tire of the company's superhero movies, and while degrees of success can vary, the same can be said of its animated fare. That means each year the company's film division starts with a slate that looks like this.
- 3 Marvel movies
- 2 Pixar films
- 1 Disney animated project
- 1 Disney live-action film based on a classic animated project
- 1 Star Wars movie
On top of those movies, the company also has the ability to exploit its IP in other forms. That includes everything from its ABC broadcast network, to cable shows, theme park attractions, merchandising, and its soon-to-end deal with Netflix.
What would Disney get from Fox?
Disney reportedly has been in talks to buy Fox's film and television production divisions, as well as its FX, FXX, and National Geographic cable channels, according to CNBC. Fox would not be selling its broadcast, news, or sports properties nor would it be giving up any of its local television stations.
On the film side, Disney would get the rights back to Marvel's X-Men universe of characters. That would allow it to integrate those characters back into its universe of Avengers films (it would reportedly not return theme park rights to Disney, as those are held by Comcast for the X-Men). The X-Men rights also include Deadpool, which had a very-successful first film, and Fantastic Four, which flopped in Fox's most recent attempt to reboot the series.
In addition, and perhaps it's the crown jewel of what Fox owns in film, Disney would reportedly obtain James Cameron's upcoming four planned Avatar sequels. That's an especially nice asset for the company to own because Disney already licenses theme park rights for its Avatar-themed Pandora -- The World of Avatar land at Animal Kingdom.
Fox also owns less robust, but still valuable franchises including Alien, Home Alone, Die Hard, Planet of the Apes, Predator, and Independence Day. Not every one of those properties is a guaranteed hit as a reboot, but certainly Disney could revive or successfully continue at least some of them.
On the television side, Fox also has a wealth of exploitable content. It's hard to see what Disney might do with Family Guy or even 24, but long-running shows or brands that can be rebooted or turned into movies would be strong assets for Disney.
It's about movies and streaming
Disney has already said it plans to launch a streaming service that would compete with Netflix. Owning more premiere film properties would give it more must-see content for that service. That may not all happen immediately as some Fox franchises have existing licensing deals, but eventually Disney could bring it all home. The company could also use new IP to create original programming for its service and have access to more archival programming that would be a draw as well.
This is by no means a done deal. The two companies have talked, according to CNBC, but are not talking actively now. This deal does make sense because Fox executives believe they can't reach the critical mass of IP needed to compete with Disney, Netflix, and others.
Disney already has the critical mass, but if it can get even more high-quality IP, it has shown it knows what to do with it. This deal would make the company's film and TV slates stronger, bolster its streaming service, and even give it more characters, shows, and attractions for its theme parks.