There’s a lot of fear in the offices that comprise Rupert Murdoch’s and Bob Iger’s media empires.
By the middle of March, the majority of the staff at 21st Century Fox will be working under new owners. Many are already staring at an uncertain future, one that will likely include brutal rounds of layoffs. The Walt Disney Co., which will also suffer some job losses because of redundancies, has cleared regulatory hurdles in Mexico and Brazil and expects to close the deal for 20th Century Fox, FX, NatGeo and the bulk of Murdoch’s film and television assets within weeks.
Before that happens, the Murdochs will unveil Fox Corp., their slimmed-down media company that boasts Fox Broadcasting and Fox News, to the investment community, likely with details of how it will be capitalized as well as some executive hires. Disney is expected to assume ownership of the rest of Fox within a day of that announcement.
“There are good reasons for people to be nervous,” says Hal Vogel, a veteran media analyst. “There are lots of highly regarded, well-paid executives at both companies, but in some cases there will be two people with the same job. That means there’s only room for one of them.”
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There have been mergers in Hollywood before. But the marriage of Fox and Disney is uncharted territory in the media landscape. There’s rarely been an acquisition of this size or a union of two such storied brands with distinct cultures. Disney, with its buttoned-down air, is far removed from the more Darwinian approach to management long favored by Fox. If the two companies are able to successfully join forces and become an entertainment powerhouse, it could provide a road map in an industry that is likely to consolidate further. There is a sense that the landscape will be roiled by more mergers as traditional players try to increase their scale as a way to contend with the streaming and social-media upstarts that are challenging old methods of doing business.
Insiders at the studios say they are uncertain how smoothly Disney will be able to integrate Fox and how quickly it will make its presence felt. As many as 4,000 jobs are expected to be cut in the process, but the expectation is that the first round of layoffs will hit more senior executives who carry higher salaries before things turn to those lower on the corporate ladder. Disney is looking for $2 billion in cost synergies. Fox’s film business will likely be more impacted, with the ax falling hardest on jobs in its marketing, sales and distribution arms.
It’s not just layoffs that are worrying employees at the film studio. Producers are concerned that some of their movies will be relegated to Disney Plus, the company’s new streaming service, instead of being released in theaters. Then there are fears that projects that are in various stages of development will be killed or deemed not “Disney-friendly” enough. Some filmmakers were relieved, however, after Disney CEO Iger said that the studio would make R-rated movies after it buys Fox. That’s a rating Disney has avoided as it tries to preserve a family-friendly image.
“I think they talk about potentially rationalizing the film slate,” says John Hodulik, media analyst at UBS. “Having two large studios under one umbrella, they want to make sure the slate is optimized so that they don’t end up competing with themselves.”
A few film executives, such as Twentieth Century Fox Film vice chairman Emma Watts, Fox 2000 chief Elizabeth Gabler and Fox Searchlight co-heads Steve Gilula and Nancy Utley, will be making the move to the combined company. But aside from this core group, few executives have been told if there will be a place for them in the mix, though many have had meetings — which they’ve seen as informal auditions — with the team at Disney. What has bothered staffers at Fox is just how little clarity there’s been about what the future will bring; they say they’ve been stuck in a holding pattern for the past 12 months, unsure if they should start packing boxes or preparing for life as a resident of the Magic Kingdom.
The melding of Fox and Disney’s TV production assets will surely be a complicated process. Fox’s 20th Century Fox Television rivals Warner Bros. as one of the industry’s largest suppliers of scripted TV series. Fox’s production infrastructure also includes Fox 21 Television Studios, home of Showtime’s “Homeland” and “The Chi”; FX’s “Mayans M.C.”; and many other shows. The unit typically produces for cable and streaming outlets, while 20th Century Fox TV focuses on broadcast networks. Disney has smaller operations in ABC Studios and ABC Signature Studios, among other units.
The task of managing all of this production activity will lie with Peter Rice and Dana Walden, the Fox alums who have been handed the keys to most of Disney’s TV kingdom (sans ESPN) by Iger. Rice has been tapped as chairman of Walt Disney Television and co-chair of Disney’s Media Networks wing. Walden is chairman of Disney Television Studios and ABC Entertainment. Walden’s title suggests that Disney may consolidate the production companies under the Disney Television Studios umbrella. But that still raises the question of whether the enlarged Disney will keep the existing ABC- and Fox-branded labels operating as separate entities.
A number of Walden’s top Fox lieutenants are set to make the move to Disney, including 20th TV creative affairs president Jonathan Davis and business affairs president Howard Kurtzman. Fox 21 Television Studios president Bert Salke and Fox Television chief marketing officer Shannon Ryan are expected to port over as well. But their specific roles at the studio or possibly ABC are still unclear.
Sources close to the situation say Walden is expected to take some time to evaluate the expanded operation before making any structural changes or big personnel moves. Complicating any effort to integrate or foster collaborations across the divisions is that the Fox units will remain located on Fox’s Century City lot for the foreseeable future under the terms of the seven-year lease agreement Disney struck as part of the larger acquisition deal. The physical separation from the Burbank-based Disney team will add another layer of challenge in bringing the companies together as an integrated operation.
FX Networks, headed by John Landgraf, is expected to remain a separate entity in the combined company, along with its FX Prods. arm. Landgraf’s tight-knit executive team figures to stay mostly intact.
The Disney and Fox TV production divisions will be under extreme pressure to produce hit shows for ABC, the nascent Disney Plus streaming service, the cabler Freeform and non-Disney outlets.
Disney is under intense scrutiny from investors to prove that the $71.3 billion Fox acquisition will be worth it in the long run. There’s no avoiding a significant reduction in staff. Besides sales, marketing and distribution, the departments seen as most vulnerable to layoffs are those where there is clear duplication at Disney and at Fox.
The long slog to getting the transaction completed has taken a toll on 20th Century Fox TV’s talent roster. The studio saw its starriest producer, Ryan Murphy, exit last summer for an ultra-rich deal at Netflix.
Phil Lord and Chris Miller are among the more prominent names expected to end production deals at Fox once their current deal expires in June. According to sources, the celebrated duo is “running out the clock” at the studio. They are believed to have had discussions with streamers Netflix and Amazon, with more traditional studios also said to be in the mix.
One source noted that Sony is looking to sign some big names to remain competitive with studio rivals and streaming services, and might be willing to shell out big bucks to land creators with the profile of Lord and Miller, who recently collaborated with Sony on the Oscar-winning animated hit “Spider-Man: Into the Spider-Verse.”
Also in play is “Modern Family” co-creator Steve Levitan, whose deal at the Fox TV studio runs out in August. Levitan has previously stated that he would wait until the fate of “Modern Family” was decided before making any post-merger plans. That time has come, as it was announced that the show would return for an 11th and final season this fall. Levitan is believed to have several options before him at present.
Then there is Fox favorite Seth MacFarlane, the creator of animated powerhouse “Family Guy” and the live-action sci-fi series “The Orville,” on which MacFarlane also stars. MacFarlane’s deal is up in June, and the major streamers and studios are all said to be courting him.
Fox’s union with Disney is taking place at a time of disruption and consolidation. AT&T has purchased Time Warner, Comcast is planning to buy BSkyB, and a raft of digital players such as Apple and Netflix is challenging the more traditional studios. That means that displaced Fox and Disney employees may have to be more flexible when it comes to finding their next jobs. They may not be greenlighting shows or planning movie premieres from an executive suite on a studio lot; they may have to settle for fewer creature comforts and fresh uncertainties.
“Maybe they’re not sitting in a high-paying job at one of the studios,” says Vogel. “Maybe they’re at a start-up. And maybe your lunch tab and first-class travel aren’t coming out of the company’s pocket — it’s coming out of your own pocket.”
Brian Steinberg contributed to this report.