3 Reasons Why Disney Will Be An Unstoppable Reserve Ball – The Fool Motley

To date, you have probably heard the news: Walt Disney (NYSE: DIS) acquires assets from 21st Century Fox (NASDAQ: FOX)(NASDAQ: FOXA) for $ 71 billion. The agreement has been approved by US shareholders and regulators, and the last major hurdle is a review by the European Commission which is expected to be completed by November 6. If everything went as planned, Disney's formidable empire could become a real center of destruction. in the entertainment industry.

Box office prowess

On its own, Disney has a lot of power as a movie studio. The company has acquired Marvel and Lucasfilm over the past decade and now with the addition of Fox titles as AvatarDisney will own the rights to 12 of the world's 20 most profitable films in the world. If they had been combined in 2017, Disney and Fox would have reported 35% of the $ 11.1 billion in domestic ticket sales.

Map Data: Mojo Box Office.

Disney movies could continue to occupy the top spots for a while. The film studio has three potential record breakers in production that are expected to come out in the next few years. In 2019, the last tranche of The Avengers and the conclusion of the original Star wars The scenario began more than 40 years ago. Both films were presented – the first in May and the second in December. In 2020, the next chapter of the current world record holder of ticket tickets Avatar go out during the holidays.

Add to that dozens of other titles and characters already present in Fox, and Disney seems to be the studio to beat in the movie theaters for a long time.

Streaming TV is on notice

Netflix is in the driver's seat in the streaming TV industry. The first player had just exceeded 130 million paying subscribers worldwide, including 57 million in the United States, which allowed the company to achieve a turnover of over $ 15 billion in 2018. However , Disney could quickly reduce this gap.

First of all, there is Hulu, whose two-thirds will be owned by Disney after they get one-third of Fox's cake. -All Fox's R-rated and mature content will remain in place. Hulu said it has exceeded 20 million users in the United States earlier in 2018.

Then, ESPN +, the new Disney sports streaming service launched in the spring of 2018 at $ 5 a month. This service has just exceeded one million subscribers, one of the fastest streaming offers to reach this brand.

Things may well accelerate, however, when Disney launches its flagship streaming service with the same name as the second half of 2019. Disney is known for its family-friendly content, including Star wars, the Marvel Universe and Pixar movies, all of which will be available exclusively on the new service – as well as on brands such as Fox's National Geographic. CEO Bob Iger said it represented about 500 films and more than 7,000 episodes of television shows.

In addition, Iger says that one should expect about four to five television series and three to four films to be launched exclusively on Disney's streaming platform. One of these is a live episode of 10 episodes Star wars show. Whether you're looking for the fantasy sci-fi brand or not, it's easy to get excited about this as an investor, considering his clientele. Solo: A story of Star Wars has recently left the cinemas as the worst performing film of the franchise, with a national turnover of $ 214 million. Let's use it as a benchmark to measure interest in Disney's upcoming Internet offering.

According to Mojo Box Office, the average price of a theater ticket was $ 9.14 in 2018. SoloRevenue from the average ticket price means that 23.4 million tickets were sold in the United States. Even if a few million of them are the ones who will see the film several times, the public remains respectable with about 20 million, more or less a few million.

If only a fraction of that number ends up subscribing to Disney's service just to see the new live-action Star wars show before the release of Episode IX in December, this could be a great start for a Disney brand service. By adding domestic subscribers to Hulu and ESPN +, Disney could quickly switch to the second largest Internet TV provider, just behind Netflix, by the end of next year.

The power of synergy

One of the complaints against Disney engulfing Fox is the possibility of layoffs. Disney said that synergy and cost savings would save at least $ 2 billion in expenses by 2021 – a significant figure considering Disney and Fox's combined operating expenses. Raising $ 15 billion over the last year. Disney says the bulk of this reduction in spending will come from "cost savings" (read: layoffs). However, it is possible that Disney will end up creating other jobs as a result of the merger. Someone will have to create these exclusive movies and TV shows for the new streaming service.

To add weight to this, Disney has just accepted a $ 15-billion bonus from its acquisition. Before Disney unchained Comcast in its bid for Fox, it fought alone against a British cable operator Sky. Fox lost and the company agreed to sell its minority stake in Sky to Comcast.

Disney says it will use the $ 15 billion to pay off its debt, which will give it more flexibility to spend money on new content. Combined with $ 2 billion in synergies, Disney will generate a lot more money, in addition to the money to expand content creation and marketing to expand its streaming portfolio and catch up with Netflix. So, perhaps, new jobs are coming.

Anyway, the Disney and Fox association looks like an unstoppable force in the entertainment world. Of course, much remains to be done in the first place, including the final approval by all government regulators of the transaction, as well as the implementation of the integration process by Disney. Nevertheless, if everything goes as planned, by 2021, the already huge Disney empire will have been much bigger – and more profitable.