21st Century Fox, Disney in talks to merge

The two rivals are discussing, but would not include some Fox properties, including Fox News and Chicago’s WFLD-TV

Itchy and Scratchy joining forces with Mickey Mouse? It could happen.

As first reported by CNBC Monday, 21st Century Fox is considering selling part of their assets to the Walt Disney Company.

The proposed deal would not include Fox Broadcasting, Fox O&Os, Fox Sports, or Fox News and sister Fox Business, according to the report. In Chicago, Fox owns WFLD-TV and CW affiliate WPWR; Disney parent ABC owns WLS-TV and WMVP-AM, branded as ESPN 1000. ESPN is also owned by Disney. The FCC is expected to revise the ownership rules soon, which could make owning an ABC and Fox station in the same market possible.

But 21st Century Fox would sell everything else – including its iconic film and television studio and a library featuring more than 100,000 hours of content, ranging from Dobie Gillis to M*A*S*H.  Programming 21st Century Fox owns include humongous cash cow The Simpsons and the X-Men theatrical franchise. Other current programming on the air (besides Simpsons) include Family Guy, The Orville, Empire, This Is Us, and The Gifted, which is a co-production with Disney-owned Marvel. Also on the block is Fox’s cable networks including FX, FXX, and National Geographic (FS1, FS2, BTN, and Fox’s regional sports networks would not be part of this transaction as any deal with ESPN would raise anti-competitive issues.)

Historically, Disney hasn’t had much of a TV presence until 1985, when Touchstone Television (now ABC Studios) was formed. TV shows currently produced by Disney include Grey’s Anatomy, black-ish, Marvel’s Agents of S.H.I.E.L.D., and Scandal. In addition to ABC and ESPN, Disney owns Freeform, Disney Channel, and Disney XD, among others.

For syndication, the deal would include Twentieth Television, which could be dissolved into Disney-ABC Domestic Television Distribution. Current product distributed by Twentieth include Page Six TV, Top 30, and Divorce Court; Disney-ABC has Live With Kelly and Ryan, Who Wants To Be A Millionaire, Right This Minute, and Pickler and Ben in limited-distribution.

And yes, this would unite Marvel’s X-Men and Fantastic Four into the Marvel Cinematic Universe as Fox holds the film and TV rights to those properties.

The moves come as Disney is preparing to launch its own streaming service in 2019 to compete with Netflix, and the company is looking to bulk up on product.

Of course, nothing is finalized yet – neither side has talked to each other recently. But the rumors comes in a back drop as two big media mergers are on the horizon: AT&T-Time Warner, and Sinclair-Tribune. 21st Century Fox reportedly tried to buy Tribune Media in a joint bid with a financial firm to keep the company out of the hands of Sinclair but failed; recently Fox had discussed a deal with Ion Media regarding possible affiliation in some Sinclair markets.

The million dollar question is this: what would Fox do without a vertical integration partner? It would put the network – and its owned stations without one and could put them in a distinct disadvantage as opposed to other networks and studios. Fox has struggled in prime-time ratings in recent years, with American Idol heading to all places, ABC. Also, Fox Broadcasting has been overshadowed by its news counterpart for the last few years, creating a huge identity problem – when you think of Fox, you think of news slanted toward the GOP, not Homer Simpson or Lucious Lyon.

So, why is 21st Century Fox putting much of itself up on the block? Many media companies cite competition from Facebook, Apple, Google, Amazon, and Netflix as the tech companies are increasing their content output and operate freely without regulation. Traditional media companies don’t have the economies of scale their tech counterparts have and this is one of the reasons why we’re seeing so many proposed mergers (Sinclair-Tribune, CBS-Entercom, etc.)

Another reason why chairman Rupert Murdoch may be willing to sell? His proposed takeover of a majority stake of broadcaster Sky in the United Kingdom is running into trouble with Ofcom, Britain’s broadcast regulator.