Disney buys Fox Family for $3 billion
By Gary Gentile
Associated Press
LOS ANGELES — Despite a $5.3 billion deal that adds new cable channels and more than 100 million new viewers to the Disney empire, chief executive Michael Eisner says his company's focus remains on content, not distribution.
"Although our strategy has some similarity to some of our competitors, we are content obsessive," Eisner said yesterday at a press conference announcing that The Walt Disney Co. would acquire Fox Family Worldwide Inc. for $3 billion in cash and the assumption of $2.3 billion in debt.
The deal adds the Fox Family Channel cable network to Disney's portfolio, which already includes ESPN, the Disney Channel and stakes in A&E and Lifetime. Fox Family, which Disney plans to rename ABC Family, reaches about 81 million cable subscribers in the United States.
The deal expands Disney's programming reach worldwide with a 76 percent ownership in Fox Kids Europe, a children's programming channel that reaches 24 million homes, and a 10-million subscriber channel in Latin America called Fox Kids.
Disney said it will use ABC Family to rebroadcast programs first aired on its ABC Television Network. For instance, ABC's "World News Tonight" and the late-night program "Nightline" may have a second airing the same day on ABC Family.
A group of sitcoms that formed a Friday night block called "TGIF" will also likely find a new home on ABC Family, officials said. The channel will also air sports programs from ESPN and original shows.
So while the deal looks like it's about giving Disney more distribution channels, it's really about making it economically feasible to continue producing content.
"This acquisition, giving us several venues to distribute that content, means we can still make expensive Hollywood filmed entertainment, which is getting more and more difficult to make economically when you only have one source of distribution," Eisner said. "So this is kind of a safety net. All the other reasons are strategic, all the other reasons are real. But if you believe in content, as we do, this is a solidifying moment for us."
Disney has been criticized by Wall Street analysts and its stock has been punished in comparison with other media giants in large part because the company has not bought cable or Internet companies that would give it control of the so-called pipelines into more homes.
The need to have direct access to homes was made clear last year when Time Warner Cable temporarily yanked ABC from 3.5 million homes in major cities such as New York, Los Angeles and Houston in a dispute with Disney over contract terms.
That experience might have been on Disney President Robert Iger's mind Monday during the announcement of the Fox Family deal.
"Access is incredibly critical and with this comes unbelievable access for this company," Iger said.
Analysts praised the deal despite concern that Disney overpaid for a cable channel with poor ratings.
"They paid a premium, but if they are able to achieve $50 million in cost savings and double their ratings in two years, the market is going to reward that very well," said Jeffrey Logsdon, an analyst at Gerard Klauer Mattison.
A twist in the deal is that ABC Family will continue to show the 700 Club and other shows made by Pat Robertson's Christian Broadcasting Network, which originally started the channel.
"The obligation that was made to Pat Robertson and his organization passes on to us as the new owners of the service," Iger said yesterday.
Disney has come under fire from religious groups for its policy of extending health benefits to same-sex couples, annual gay and lesbian events at its theme parks and the content of movies made by its Miramax subsidiary. Robertson is known for espousing conservative Christian principles.
Eisner said he spoke to Robertson on Sunday and that the televangelist supports the transaction.
"He believes that Disney and what we stand for is not inconsistent with what he stands for," Eisner said. "Pat Robertson has never been in that group that has criticized us for our policies. He is not that far to the right."
Robertson did not return calls seeking comment.
