LOS ANGELES - Strictly in terms of dollars and cents, the deal announced yesterday for the Walt Disney Co. to buy Fox Family Worldwide for about $3.2 billion is not in a league with a transaction like that of AOL-Time Warner or even Viacom-CBS.
But it is, nevertheless, a noteworthy moment in the relentless push toward media consolidation, with important programming implications for television networks like Disney-owned ABC, and an even larger cultural significance in terms of who will become the principal teller of children's stories worldwide. This is as much about access to our children's imaginations and fantasy lives as it is about corporate synergy, economies of scale and the price of Disney stock on Wall Street.
With yesterday's purchase of the Fox Family Channel, Fox Kids International Channels and the Saban Library, which includes all the Mighty Morphin Power Rangers programs, Disney not only gobbled up one of its most serious competitors in cable programming but established an absolute hammerlock on what Disney chairman Michael Eisner described as the company's "core values - Disney brand kids and family entertainment."
"With our branded broadcast blocks around the world and our 14 Disney cable channels around the world, we have about 600 million kids a month watching these assets. Now, if you add in the Fox channels, you can see why this is such a tremendous opportunity for us," Eisner said at a news conference here yesterday announcing the deal, in which Disney also assumed $2.3 billion in debt.
The Fox Kids International Channels that Disney acquired yesterday are seen in 35 million cable homes in 50 countries in Europe and Latin America. They are basic cable channels, which means any home with cable receives them, whereas Disney's international channels are all premium, which means the subscriber pays extra. Being on basic cable guarantees that Disney will grow worldwide as cable grows.
Eisner and other top Disney executives, like president Robert Iger, pre-empted ABC's promotion of its fall lineup on the Summer Press Tour yesterday to announce the deal. ABC executives in the audience nodded in agreement when Eisner, their boss, explained the pre-emption by saying, "Obviously, we're enthusiastic about the new ABC shows, but this is an acquisition that has strategic importance beyond ABC's [fall] schedule."
Indeed it does. In terms of network television, the acquisition addresses one of the fundamental concerns voiced over and over by executives at all the networks on this press tour: How to find a new business model that will allow them to keep making high-priced, quality dramas like NBC's ER or ABC's NYPD Blue while still meeting stockholder demands for higher and higher margins of profitability.
The key piece of the deal here is the Fox Family Channel, which currently reaches about 81 million cable and satellite homes in the United States. As soon as the deal is approved, it will be renamed ABC Family and will become a primary outlet for second showings not just of ABC dramas and sitcoms but also ABC News programs.
Beyond the obvious family-based brand identity, the channel will give Disney "another screen," in the language of Iger, on which to show ABC programs a second time, thus getting more bang for the production buck. The network now does this with its drama Once and Again, which airs once on ABC and then later in the week on the Lifetime cable channel. But whereas Disney owns only 50 percent of Lifetime, it will have total control of how ABC Family will be programmed.
"This acquisition gives us several venues to distribute that [network] content, which means that we can still make expensive Hollywood film entertainment content, which is getting more and more difficult to make economically when you have only one source of distribution," Eisner said.
"In that regard, I think this deal is the beginning of a new trend in the American broadcast and cable environment," he added.
It is going to be fascinating to watch Disney program this channel. Iger suggested that Disney might use it to air a second showing each night of ABC World News Tonight and Nightline, thus amortizing news costs, too.
How would affiliates, such as WMAR in Baltimore, feel about viewers watching Peter Jennings or Ted Koppel on a cable channel rather than with them? It doesn't matter, because during the last round of affiliate negotiations, Disney won the right to rerun network programming on channels other than their affiliates, according to Iger.
It is also going to be interesting to see what Disney does with Pat Robertson's 700 Club. The religious broadcaster founded the Family Channel, and when he sold it to Fox, part of the deal was that Fox had to continue to carry his show.