Walt Disney does deals like it does blockbuster movies—big scale. Take last December’s announcement that the brand is acquiring the film and television arms of 21st Century Fox: at US$52.4 billion, the deal is reported to be the second biggest merger ever, after AOL-Time Warner.
This move is expected to transform the global media landscape, making Disney far more than just an American giant but a citizen of the world—a world that you could say is fast shaping into a Walt Disney one.
Despite Fox and Disney being wholly different brands, there is significant potential for synergy between the two. Disney, of course, is the dominant force in movies with powerful franchises including Marvel, Pixar and Lucasfilm. The firm’s latest blockbuster, Black Panther, released under Marvel Studios, recently set a first-day advance ticket sales record.
Fox, meanwhile, is the key player in TV, with big-hitters like The Simpsons, Homeland, This Is Us and Modern Family set to add much to Disney’s offering. The latter’s significantly smaller TV factory, ABC Studios, recently lost its biggest hit maker last August when the super-producer of Grey’s Anatomy, Shonda Rhimes, decamped for Netflix.
As a combined entity with 21st Century Fox and Fox TV, Disney now boasts an unrivalled wealth of TV and movies to challenge Netflix, Apple, Amazon, Google and Facebook in the fast-growing realm of online video and it intends to launch two new streaming services in 2019.
In APAC, the new partnership will no doubt seek to exploit the two companies’ complementary strengths. Fox is already a dominant force in Asia. It has Star, India’s leading pay-TV player, and last year it launched its Fox+ streaming service in Hong Kong and Singapore. With its Star, Fox and National Geographic channels all doing well, Fox Networks boasts that its Asian profits are greater than the revenues of its nearest Western competitor.
This could help Disney immeasurably when it comes to launching its streaming services. The one area that remains a challenge for Fox—as it does for all Western media companies—is mainland China. Disney’s wider China strategy has proved effective, however, and Shanghai Disneyland welcomed over 11 million visitors in the first 12 months following its June 2016 opening. Last year, Disney also led the way among the major Hollywood studios in China with a combined US$735 million box office gross spread across seven film releases.
If Disney can merge brand equity with Fox successfully, then the future could look very mouse-shaped indeed. We asked two regional experts what they think of the deal and its outcomes for Disney.
LOCALISED CONTENT KEY TO WINNING
JACQUELINE ALEXIS THNG
Prophet brand consultancy
I thought it was a clever deal. Disney has been fast-expanding in the movie franchise arena, but has been less successful in TV, which is where Fox’s strengths lie. The brands’ combined repertoire of films and movies is unrivalled.
The upcoming online streaming services will be a big challenge, however. At Prophet, we helped develop the Fox+ brand and quickly found that launching streaming services in Asia is not straightforward. It’s easier for newcomers like Netflix and Google to produce original content, but for Disney and Fox—who are licensing a lot of old content and will need to get approvals throughout Asia—it’s complex.
Disney would also do well to remember that the diversity of the Asian markets in terms of language, culture and tastes means that localised content is key to winning. Asia is not one Asia. This lack of a localised strategy is the reason why Netflix, despite its huge success in the US, is not very successful in Asia. National Geographic could provide a good boost for Fox (and Disney) in China—I believe it has potential to grow stronger because the Chinese market loves anything that is historic and cultural.
Shanghai Disneyland has undoubtedly been healthy for the brand in China: Prophet’s brand relevance index, conducted in 2016 and 2017 in China, shows Disney brand strength has grown year on year. In the most recent survey, it emerged as one of the most recognised and relevant brands in China. I think that Hong Kong Disneyland will suffer a lot more from this new competition, however: a drastic revamp will be needed to really transform the Hong Kong Disneyland experience or it may die a slow death.
Going forward, I think the future will be very bright for Disney in Asia. They have a good collection of movies and TV; the only thing they may have to consider carefully is how they manage the entire
REFINING THE UNIQUE BRAND PROMISE
Business and brand strategist
Author of Asian Brand Strategy
Mergers and acquisitions are good for a lot of different reasons but integration is difficult.
With Disney and Fox there are a lot of synergy reasons why they would merge, including access to the catalogue and online capabilities.
I find these two brands to be very different, but there will be overlaps and there will be competition. I suspect they will want to coordinate production calendars, release calendars, access to cinemas and release dates, but a bit of cannibalisation and competition is healthy.
Disney will need to cross-fertilise all these capabilities, which is very complicated. You’ve also got two different cultures to integrate. Peter Drucker, the famous management professor, said: “Culture eats strategy for breakfast”. The strategy might be sound and healthy, but once two cultures meet they very often clash. Behind the scenes you will have a lot of things coming into play, including people fighting for consolidated positions. Culture is so often underestimated, but it’s a big issue.
On the TV front, Fox is leading in Asia, which is also probably why Disney will strive to get a foothold into online streaming. Disney does have to catch up in this sphere and they’ve got Fox at the forefront to learn from.
The brand is still in the early stages of its Asian potential. To stay healthy here, Disney needs to refine itself further and bring out its unique brand promise. Consumers need to know the essence of what Disney is all about, that it’s a legacy player, deeply rooted in family and respect for children. This must be combined with innovation and digital growth so that they don’t get too stale or old-fashioned.
Yes, we respect Disney for the big blockbusters, but they also have to be seen as a very modern and agile brand moving forward across the media side, parks and resorts, studio and consumer products in an Asian market that is very fickle and fast-moving.