Layoffs expected at 21st Century Fox’s Movie Studio in Southern California due to Disney Deal

Disney Deal
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Disney to Buy 21st Century Fox Century’s Movie and TV Studio

Walt Disney Co (NYSE:DIS) is buying most of 21st Century Fox Inc (NASDAQ:FOXB) in a $52.4-billion blockbuster deal. The deal combines two of the biggest entertainment/media companies in Hollywood and could help Disney fend off growing competition from digital rivals like Netflix, Inc. (NASDAQ:NFLX).

The acquisition will no doubt please investors, but the Disney-21st Century Fox deal is expected to lead to a large number of layoffs in Southern California. Employees at Disney and Fox and will undoubtedly face layoffs as both movie studios have departments that overlap.  What that will look like remains to be seen. Fox’s movie studio, which is based in Century City, employs around 3,200.

Disney is reshaping the entertainment industry. As part of the deal, Disney gets 21st Century Fox’s movie studio (20th Century Fox) and regional sports networks. Disney is also buying FX and National Geographic, along with Fox’s stake in Hulu and Sky, a European pay-TV provider.

Fox’s remaining assets are expected to be spun off into a new company.

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ESPN, which is one of Disney’s flagship brands, has suffered serious losses over the years as consumer viewing habits have changed. Thousands of ESPN subscribers have ditched their TVs for streaming services like Netflix.

The deal with 21st Century Fox allows Disney to expand its content, especially its streaming services (e.g. Hulu). Disney is looking to launch two of its own streaming services in the coming years: ESPN Plus in 2018 and Mouse House in 2019.

By pulling its content from Netflix, adding two new streaming services, and owning content from Fox’s television and movie studios, Disney will have a stable of exclusive content that its competitors will not.

With the acquisition, though, will come growing pains. Disney said the deal will result in at least $2.0 billion in cost savings related to “efficiencies” from the combined businesses. The savings, which will be realized by 2021, will come, in part, from layoffs.

Lachlan Murdoch, of 21st Century Fox, said, “Sometimes the right decisions are the hardest ones.”

Just how hard this decision will hit employees remains to be seen. Both companies have teams that look after film distribution, marketing, and business operations. Synergies would most likely result in a loss of jobs at Fox.

21st Century Fox Reported Decline in Profits Year-over-Year in TV & Film Studio

On November 8, 21st Century Fox announced its financial results for the first quarter of fiscal 2018 ended September 30, 2017. It was a mixed bag. First-quarter revenue was up eight percent year-over-year at $7.0 billion, with increases coming from all operating segments.

Operating profit was up four percent year-over-year, at $855.0 million, or $0.45 per share. The cable network division, which accounts for roughly 60% of total revenue, increased its operating income before depreciation and amortization (OIBDA) by nine percent, with operating profit up eight percent.

Television and film, though, reported year-over-year profit declines. Operating profits at the television segment fell by 36%. Film studio operating income tumbled almost 18%.

Commenting on the mixed results, Murdoch, said, “Our solid first quarter performance puts us on track to achieve our overall financial and operational objectives for this fiscal year.”

In November, looking ahead to the rest of 2018, both Lachlan Murdoch and CEO James Murdoch were non-committal on the rumored Disney proposal to acquire 21st Century Fox’s entertainment business. Investors only had to wait a month, though, to find out what they really thought.

Sources

Disney deal set to value Fox at more than $75 billion: source,” Reuters, December 14, 2017.

Disney’s deal to buy Fox studio could bring substantial layoffs, analysts say,” Los Angeles Times, December 14, 2017.

21st Century Fox to Spin off Businesses and Create New “Fox”; A Growth Company Centered on Live News and Sports Brands and the Iconic Fox Brand,” 21st Century Fox, December 14, 2017.

Earnings Release For The Quarter Ended September 30, 2017,” 21st Century Fox, Inc., November 8, 2017.

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