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Disney Purchase of Fox Brings New Era  12/15 06:19

   NEW YORK (AP) -- After years of tremors, the earthquake that had long been 
predicted finally shook Hollywood.

   Disney's deal to purchase most of 21st Century Fox ends the era of the "Big 
Six" major movie studios, toppling one of the industry's most famed studios and 
dramatically redrawing the Hollywood map.

   Disney's move --- to pay $52.4 billion in stock for Fox assets --- has 
countless reverberations. But by effectively absorbing Fox's film studio, 20th 
Century Fox, Disney has rapidly accelerated the industry contraction that many 
considered inevitable in an era of flat-lining ticket sales and new streaming 
competitors like Netflix, Amazon and Apple.

   The Big Six are now the Big Five --- and the mightiest of them all has just 
been supersized.

   The Disney deal hasn't just made 20th Century Fox's 3,200 employees anxious 
about their future within Disney. It's sent shockwaves through an industry that 
has until now bent under the pressures of the new digital landscape, but not 
broken. Now, Hollywood as an industry is quite literally shrinking.

   "The strongest will get stronger and the weaker will fall off or merge with 
other entities," said Exhibitor Relations analyst Jeff Bock. "The future is 
right now and it's pretty obvious what's going on."

   Many analysts consider further consolidation simply a matter of time. Before 
Rupert Murdoch earlier this fall began shopping Fox, most expected the first 
studio to fall would be either Viacom's Paramount Pictures (5 percent of the 
market) or Sony Pictures (8.8 percent), both of which have struggled in recent 
years and replaced their chief executives. Lionsgate and CBS are also frequent 
sources of speculation.

   Fox is bigger, though. Founded in 1935 by the merger of Twentieth Century 
Pictures and Fox Films, 20th Century Fox is the home of "The Sound of Music," 
the original "Star Wars" and the highest grossing film of all-time, "Avatar." 
The studio has generally ranked either third or fourth in market share. This 
year, it's fourth with 12.3 percent, following the market-leader Disney, Warner 
Bros. and Universal.

   Fox isn't necessarily disappearing. Disney will lease its fabled Los Angeles 
lot for the next seven years. But 20th Century Fox will be folded into Walt 
Disney Studios. Its movie-making operations will be reduced and likely 

   As a studio, Disney is already based on several distinct silos of brands: 
Disney, Marvel, Pixar and Lucasfilm. Its strength in intellectual properties 
--- especially "Star Wars" and its library of animation classics --- has made 
the studio dominant. In a conference call with investors Thursday, Disney chief 
executive Robert Iger suggested Fox may function similarly as a label within 

   "We have not only respected the culture of those organizations but respected 
and appreciated the talent that came with those acquisitions," Iger said.

   Before it sold a ticket for "Star Wars: The Last Jedi," Disney already has 
three of the top six movies of the year: "Beauty and the Beast," ''Guardians of 
the Galaxy, Vol. 2" and "Thor: Ragnarok." It has used its might to enforce more 
onerous terms with theaters on films like "The Last Jedi." Disney is requiring 
many theater operators to share a higher percentage --- 65 percent --- of 
ticket sales. The film is expected to come close to grossing $500 million 
worldwide this weekend.

   The combination of sensibilities between Disney and Fox, has intrigued 
others. Though it's easy to see the planned quartet of "Avatar" movies under a 
Disney banner ("Avatar" already has a place in Disney theme parks), many of 
Fox's franchises, including "X-Men" and "The Kingsman," are well off-brand for 
the family-friendly Disney. It hasn't released an R-rated movie in four years.

   "Time to uncork that explosive sexual tension between Deadpool and Mickey 
Mouse," Ryan Reynolds tweeted after earlier reports of the Disney-Fox deal.

   Disney, which sold Miramax Pictures in 2005, has lacked other kinds of 
films, too. Fox's specialty label, Fox Searchlight, is among the industry's 
art-house leaders. Two Searchlight films --- "The Shape of Water" and "Three 
Billboards Outside Ebbing, Missouri" --- along with Fox's "The Post" have made 
the studio the leading company of this year's awards season, at least with the 
Golden Globes and Screen Actors Guild Awards.

   Iger voiced his support for maintaining those businesses. "We like being in 
the business of making quality movies," said Iger. "We fully intend to stay in 
those businesses."

   The deal also, perhaps crucially, gives Disney the extensive Fox library for 
Disney's planned streaming service, set to debut in 2019. Disney is now better 
armed to compete against deep-pocketed digital competitors. Netflix has said it 
will spend up to $8 billion on original content next year.

   "It's really a battle about the future of streaming," said Peter Labuza, a 
film historian and researcher at the University of Southern California. "Disney 
needs all this material outside of its own brand which now is its own Disney 
product, Lucasfilm, Pixar. But this can fill in a lot of the space in a 
streaming site that can compete with, essentially, Netflix."

   That's a component of the deal that will strike fear in the hearts of 
exhibitors. Disney has pursued an almost completely event-movie strategy (it's 
releasing only eight movies this year), and it's expected to cut back Fox's 
theatrical slate. That's reason for concern for already struggling theater 
owners. Box office revenues were up just 1 percent last year, and are expected 
to slide this year.

   "They can't be pleased," said Bock of exhibitors. "Less product just means 
less revenue in their minds."

   But Disney has also, up until now, been a staunch defender of the 
traditional theatrical window. For that reason, as well as its reputation for 
quality, the world's largest theater chain, AMC, hasn't sounded any alarms over 
the purchase. Last week on CNBC, Adam Aron, AMC chief executive, applauded 
Disney's track record. "AMC has made a lot of money partnering with Disney 
studios," he said.

   Whichever direction Disney chooses to go, it will have the sway --- with 
approximately 40 percent market share --- to set the course for the entire 

   Hollywood may have shrunk into not the Big Five, but the Big One.


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