Buyers Say Disney’s Fox Deal Will Accelerate Audience Targeting

It will take months for the ripple effects of Walt Disney Company’s just-announced $52.4 billion acquisition of 21st Century Fox to fully play out. But in their early reactions to the deal, buyers are intrigued by Disney’s markedly improved portfolio, and are optimistic the merger could accelerate some of the audience targeting innovations the industry has been clamoring for. Prior media mergers across networks and studios “have not stifled competition, but instead have given media buyers more choices within a certain ‘family,’” said Betty Pat McCoy, svp, managing director and director of investment, GSD&M. “That allows us, in some cases, to spend more with a network that we might not have purchased heavily in the past.” That will certainly be the case with Disney-ABC, which will be adding networks like FX and National Geographic to its ad sales portfolio of female-skewing networks like ABC and Freeform. (ESPN’s ad sales team is separate from the portfolio for Disney’s other TV properties, which is overseen by Rita Ferro). The edgier FX, the younger-male-skewing FXX (a counterpart to the younger-female-skewing Freeform), along with National Geographic, gives Disney a well-rounded portfolio. "You can go to them and reach a wider breadth of audience, different demos, particularly male, than you might have been able to in the past with ABC or Disney, so that’s interesting,” said David Campanelli, svp, director of national broadcast for Horizon Media. The merger “could be interesting since FX offers originals that push the envelope on content, something we really don’t see currently across Disney properties. They also have FXX, that can open the door to younger male viewers in the 18-24 demo,” said McCoy. “I think it would be a mistake if [Disney] tried to change what FX was, because that’s a strong brand with strong original programming,” said Campanelli. “It’s one of the prestige, ad-supported cable networks, along with AMC, that competes with the Netflixes and the HBOs. The awards and all the stuff matter, and the talent that it draws. Hopefully they enhance that, and not try and change it.” The Fox Sports Regional Networks, which have lucrative carriage fees for cable companies, could help offset some of ESPN’s subscriber revenue losses, assuming that Disney doesn’t sell the networks post-transaction, said Campanelli, who noted that ESPN’s ad sales team doesn’t have experience selling ads on a local level. Buyers are also intrigued by what the deal means for Hulu. Disney will now have a 60 percent controlling stake in the streaming service, as the company also plans to launch its own direct-to-consumer streaming service in 2019. “Is it a competitor to Hulu? Is it a compliment to Hulu? What does that mean for those two properties moving forward?” said Campanelli. Fox Broadcasting, meanwhile, which is not part of the deal, faces a tougher road with the loss of much of the Fox Networks Group portfolio—Fox execs said the remaining assets will be known as "New Fox" for now—as brands have been able to buy across multiple networks for a few years. While CBS still goes it alone without the backing of a larger portfolio, Fox’s linear ratings aren’t as strong, “so I think it becomes a bit of a tougher sell in the market,” said Campanelli. “They still have a significant sports presence, which helps.” While Fox, under new ad sales chief Joe Marchese, has taken a lead in digital initiatives, like moving away from traditional 30-second spots on FX’s digital and VOD platforms, it could cause Disney to up its digital offerings on the Fox networks it is acquiring, “which could be a huge benefit for agencies,” said McCoy. Pivotal Research Group senior analyst Brian Wieser echoed that observation in his report on the deal, suggesting that if Disney adapts some of Fox’s national ad sales initiatives, including the OpenAP audience targeting platform that Fox created with Viacom and Turner, it will accelerate the industry’s shift away from age and gender-based buys to other audience targeting. (Wieser also said the deal’s impact on the overall TV advertising market would be “limited,” as Disney’s new TV portfolio would still be smaller in the U.S. than NBCUniversal or Viacom.) With mega-deals like Disney-Fox and AT&T-Time Warner “we may finally find the answer to common currency [and] reporting across all platforms–something we all want,” said McCoy. “If bringing these entities together allows them to provide more and better content, than in the end it is a good move for all.” But is it a good move for Fox’s Marchese? Other buyers privately wonder about his future at New Fox after the Disney deal goes through. “They’ve lost a lot of digital assets,” said one. “It’s a less attractive position than it was a year ago.” For now, while they want to see what happens with Marchese, Ferro and the other execs involved with the mega-deal, buyers said they won’t immediately change their approach to buying inventory on the networks that will be jumping from Fox to Disney. “We will definitely wait to see how things shake out and how [Disney] decides to approach the marketplace,” said McCoy.