Disney Closes $71.3 Billion Deal for 21st Century Fox Assets

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Walt Disney Co. DIS +0.19% closed its $71.3 billion acquisition of the major entertainment assets of 21st Century Fox , FOXA -2.45% the companies said, combining some of Hollywood’s best-known studios, characters and franchises as media companies look to get bigger to better compete in a world where shows and movies are increasingly streamed. Disney will now control Fox’s movie and television production studios, as well as its FX cable network, Fox Searchlight label and National Geographic properties.

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The deal, which stemmed from talks about 18 months ago at a Los Angeles winery owned by Fox Chairman Rupert Murdoch, closed following approval in several foreign markets. After quickly getting approved by the U.S. Justice Department last year, the deal was slowed by the partial government shutdown earlier this year. The combined Disney-Fox entity is part of a race for scale in Hollywood, where having a hit movie or TV show is no longer enough. Studios today need a deep stable of characters and franchises to sell streaming subscriptions, movie tickets, toys and theme-park admissions.

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Disney is positioning its bet on Fox—by far the biggest acquisition in the company’s history—as a central element of its long-term strategy. The rise of Netflix has forced traditional studios to look for ways to create direct business relationships with consumers, skipping the multiplex and going directly into the home. Disney has launched one streaming service, tied to its ESPN programming, and is planning a family-oriented one for later this year. To prepare for that launch, it already has started removing its movies and television shows from Netflix’s library. Disney has a considerable advantage in its streaming ventures, given the popularity of its well-known characters and movies. But launching a streaming service requires an extensive catalog of programming to convince consumers to pay a monthly fee, and Fox programming such as National Geographic documentaries is expected to launch on the Disney service alongside Disney shows like “High School Musical.”

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In a sign of the awkwardness of the Disney-Fox mashup, edgier Fox fare—such as FX shows like “American Horror Story” or “Pose” and movies like “Deadpool”—will appear on streaming service Hulu, over which Disney will assume majority control now that the deal has closed. However, many FX shows are on Netflix and will remain there for some time. Acquiring Fox’s 20th Century Fox Television Studio gives Disney one of the industry’s most prolific producers of content and a large library that includes such hits as “The Simpsons,” “The X-Files” and “Modern Family.” Disney has put Fox’s television team in charge of its TV operations, including the ABC network, its cable networks and ABC Studios. Peter Rice, who headed Fox’s Network Group, has been named chairman of Walt Disney Television, while former Fox TV Group Chairman Dana Walden has been named chairman of Disney Television Studios and ABC Entertainment. ESPN will continue to be overseen separately by President James Pitaro, who reports directly to Mr. Iger.

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It remains to be seen what will ultimately happen to Fox’s movie studios. Its Fox Searchlight label has had considerable success at the Oscars, releasing best-picture winner “The Shape of Water” in 2017 and nominee “The Favourite” last year, and as a result of the acquisition is expected to focus primarily on movies for the streaming services. The larger Fox studio will likely see its output diminish.

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The merger is expected to result in thousands of layoffs across Fox, but it will also bring several high-ranking Fox executives into the Disney fold at a time when succession at the world’s largest entertainment company remains a looming question. Mr. Iger has postponed his own retirement five times, most recently so that he could see through the Fox deal and the launch of Disney’s streaming services.

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