Disney needs time to integrate Fox assets like Star India: Harold Vogel

 

Vogel speaks to Vanita Kohli-Khandekar about the Disney-Fox merger and its implications for Star India.

Harold Vogel, CEO of New York-based Vogel Capital Management and author of Entertainment Industry Economics: A Guide for Financial Analysts, among the world’s leading entertainment industry analysts, speaks to Vanita Kohli-Khandekar about the Disney-Fox merger and its implications for Star India. Edited excerpts:

What are the big assets that the Fox deal brought for Disney? Will it add value or do you see Disney writing down some of the assets?

Fox added significant assets to Disney that included real estate, The Simpsons, cable networks including FX and National Geographic as well as a substantial film library of TV and film classics. Also included was part of Hulu and Sky and the Indian cable network. Murdoch was brilliant as he realised he couldn’t compete on capital required in the new streaming world and the rising costs of major film production. The problem was because Comcast came in late and bid for the same assets, the ultimate price ($71.3 billion) paid by Disney was especially high (about $20 billion over the initial offer).

Then came the costs of merging the two companies, right-sizing the management staffs, and the virus, of course. Merging two companies of this type and size was difficult because of different management cultures and strategies. But there was great enthusiasm about the future of Star. Comcast eventually won Sky, a dubious proposition because the price was also very high, but Disney got full control of Hulu, which was good. The latest Fox films, however, were mostly duds, so there was a need for writedowns of the latest projects. This was not good. In all, Disney will likely retain these assets and eventually get them running smoothly. But that awaits relief from the virus.

So far, the value contribution has been nil because of the virus and partly because the price paid was too high. Otherwise Disney’s record of acquisitions has been excellent on the large ones including Pixar, Lucasfilm, Marvel and streaming tech. The record on smaller acquisitions, primarily in game software, has been poor, with many writedowns over 20 years. But note that all of these were under $1 billion, so no big harm.