1.0 Introduction
Before came the existence of 21st Century Fox, there was only Rupert Murdoch’s media empire, News Corporation. The announcement of NC splitting in two caused a massive uproar.
Originally, Fox Group was chosen as the company’s name but it was suggested by Murdoch that the golden heritage of retaining 20th Century Fox’s name to signify the firm’s advance into the future. Subsequently, 21st Century Fox is now managing media and entertainment whereas the spun off current News Corporation is managing as a publishing company.
This commentary will evaluate on how Murdoch’s 20CF being acquired by Disney should be beneficial to the company. There are three research objectives that will be the main focus of analysis which would be the following: does this acquisition contribute in 21CF’s strategy achievement, using MOST; how does the acquisition affect the company’s financial performance which will include the usage of the net profit margin and the current ratio; and what are advantages and disadvantages of Fox being acquired by Disney, analysed using SWOT.
Furthermore, this transaction has gotten the attention of many, especially movie viewers, who are now anticipating products from two of the largest movie production companies since there would be many chances and opportunities consequent from the combination of 21CF and Disney. This deal was speculated to be made, particularly, with intentions of taking on the two main competitors which are Amazon Prime and Netflix.
It was also mentioned that Murdoch had intentions of increasing the value of 21st Century Fox by the man himself. The process of the deal was described as stunning and swift by New York Times. 21CF shareholders and the DOJ (Department of Justice) has already given their approval.
Only secondary sources will be used such as articles from the internet or other media. All information would be extracted from official websites that are recently updated and will be referenced in the bibliography
2.0 Findings
2.1 Growth Strategy of 21st Century Fox
Currently, the company’s crucial brands which are FOX, Fox News, Fox Sports, FX, National Geographic and STAR Asian Country are made to be the focal points in the growth of 21st Century Fox. Their planned groundwork is to empower the aforementioned brands by delivering exceptionally good creative output. Additionally, the corporate is also targeted on being the essence of innovation itself regarding the customers’ experience with their products and realizing the ideal of providing a profusion of customer shopper selections in content access across varied media.
3.0 Analysis of Findings
3.1 How the acquisition contributes to 21st Century Fox’s strategy
In achieving the company’s strategy, the decisions and actions of the company must follow the right direction to not waste time and be as efficient as possible to obtain the best results. Hence, advance closer to where the company wants to be such as being the market leader.
As mentioned in findings, the company’s growth strategy is to produce standout innovative output and at the same time proliferating the number of customer choices in accessing content across multiple medias. As of now, Disney has acquired many of the large companies as their assets in the entertainment industry: Marvel, Lucasfilm, Pixar and Touchstone Pictures. On the other hand, 21CF itself has its own impressive assets to bait competitors. 21CF owns subsidiaries grown from their own original brand like Fox Entertainment Group, FX, Fox Sports and Blue Sky studios which has produced iconic mainstream movies such as the ‘Ice Age’ Chronology.
This acquisition can open doors to mass production in entertainment. These two well-known brands will work together and create diverse innovative products as mentioned in 21CF’s strategy. Both corporations already have their existing reputation for quality movies and television. Therefore, this deal is beneficial to 21CF’s progression. There is a possibility to create an online platform to let consumers have access to all their movies and television series as an attack against Netflix, which is currently both 21CF’s and Disney’s main competitor in entertainment.
- Mission: Utilise audiences by focusing on all 3 areas (creativity, sports and well-being, knowledge and exploration)
- Objective: Premium content to increase revenue
- Strategy: Empower its core business (mentioned in 2.1)
- Tactic: Selling off 20th Century Fox (to focus on it core brands)
3.2 21st Century Fox’s financial performance
3.2.1 Net Profit Margin
Net Profit Margin = Net Income / Total Revenue In millions $
Year 2014 = ( 4,646 / 31,867 ) x 100
= 14.6%
Year 2015 = ( 8,537 / 28,987 ) x 100
= 29.5%
Year 2016 = ( 3,016 / 27,326 ) x 100
= 11%
Year 2017 = ( 3,226 / 28,500 ) x 100
= 11.3%
Year 2018 = ( 4,762 / 30,400 ) x 100
= 15.7%
3.2.2 Liquidity ( Current Ratio Application )
Current Ratio = current assets / current liabilities
Year 2014 = 15,376 / 8,856
= 1.7
Year 2015 = 17,348 / 7,042
= 2.5
Year 2016 = 14,949 / 7,068
= 2.1
Year 2017 = 16,434 / 7,386
= 2.2
Year 2018 = 19,333 / 8,244
= 2.3
3.3 Evaluation
Graph 1
Graph 2
In the year 2015, 21CF acquired 73% of National Geographic. This explains the peak in that particular year, both in the graph of the net profit margin and current ratio. After that, there’s not much difference in both graphs but gradual increments since 2016 (announcement year of 20th Century Fox’s sale). Based on this, we can see that this acquisition has affected the company financially. Through Graph 2, it indicates that liquidity has increased as well as revenue shown in Graph 1. This goes in favour with 21CF’s objective which was to increase revenue.
3.3 Advantages and disadvantages of the acquisition for 21st Century Fox
Internal
- Expansion of brand loyalty
- Save capital by not going against Disney
- Lose one big competitor
- High redundancy
External
- Fox given executive positions
- Financial essence of the deal given to 21CF
- High possibility of standout production (Movie crossovers anticipated by people) accordingly to 21CF’s strategy
- Mutual competitors
- Streaming Media
- Utilisation of 20CF
- Overshadowed by Disney
- Stakeholder conflict
This acquisition that has caused a major controversy amongst mainly entertainment companies, due to Disney being market leader with a market share of 34.8% and 21CF taking the seventh place in ranking with a market share of 4.2%. Other than the financial essence that 21CF receives, there are many external advantages to this acquisition in the favour of 21st Century Fox in relation to Walt Disney’s market leadership and ownership of many other entertainment companies like Hulu. Walt Disney owns 70% stake of Hulu where 21CF has bought 30% of the same company. Since 21CF is now acquired by Disney, this means the entirety of Hulu is in both of the companies’ control.
Technology has advanced and consumers demand more platforms online such as Amazon and Netflix. However, 21CF does not have any streaming services as such. Hence, it would make sense to take advantage of Disney’s similar issue and sell 20th Century Fox.
Due to the failure in taking over Time-Warner in 2014, 21CF’s share value has gone down so before it decreases any further, Murdoch made the right decision to sell off the company to Disney. Moreover, 21CF will be financially aided by Disney to progress the growth of Disney’s and 20th Century Fox’s streaming service brand called ‘Disney-Fox’ to level with their competitors. The combination of the products of both companies will cover a wider range, therefore a wider audience. There will be high chance of standout production, relating to 21CF’s strategy, specifically in film; for instance, very anticipated crossovers of 21CF’s iconic characters with those of Disney. 21CF will be credited as 20CF’s parent company and will expand their brand loyalty.
On the other hand, there are also downfalls. The Disney-Fox deal will lead to high redundancy in all levels from smaller positions to higher-ups. As 20CF is to cooperate with Disney, it is possible for stakeholder conflicts to occur, more so when 21CF given executive positions in Disney; there will be slight clashes on opinions or regulations. Moreover, a subsidiary of 21CF is now a division under Disney so the parent company will be downsized since Disney controls a part of it.
4.0 Conclusion
Financially, I have not yet seen a drastic change in 21CF’s financial performance but revenue is slowly increasing since the acquisition which is a great recover from the fall in 2015 (refer to Graph 1 & 2 in section 3.3).
Source: https://www.macrotrends.net/stocks/charts/FOXA/fox/stock-price-history
Figure 1 (21CF Stock price)
It was clear that Murdoch’s intention was to sell its movie business before losing its value (as seen in figure 1, the rapid decrease from 2015 – 2016) and going up against Disney would mean more capital to produce such movies which is risky. That is the reason and benefit of the acquisition, for 21CF to lose a huge competitor and work with a market leader instead. This way 21CF can focus on its core businesses which are news and sports. Overall, the advantages outweigh the disadvantages as listed in section 3.3, showing that 21CF made the right choice.
2019-6-17-1560743365