21st Century Fox and Disney could strike a surprising deal

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If 21st Century Fox sells the majority of its assets to Walt Disney Co., the result could be a news and sports media company, according to a report from CNBC, which cites unnamed sources and states that its story may not be more than a rumor.

“Talks have taken place over the last few weeks and there is no certainty they will lead to a deal. The two sides are not currently talking at this very moment, but given the on again, off again nature of the talks, they could be revisited,” according to the report.

CNBC’s sources claim, “For Fox, the willingness to engage in sale talks with Disney stems from a growing belief among its senior management that scale in media is of immediate importance and there is not a path to gain that scale in entertainment through acquisition. The company is said to believe that a more tightly focused group of properties around news and sports could compete more effectively in the current marketplace.”

The story goes on to point out how much the media landscape has transformed in recent years. Social media giants such as Facebook, Google, Amazon and Netflix are identified as drivers in changing the way people consume media and dominating the digital distribution of digital video content. “Being able to compete in that changing landscape, many people believe, requires scale that a Disney has, but 21st Century Fox does not,” the sources note.

Disney is likely eyeing the opportunity to take control of another movie studio and Fox has significant TV production assets, the sources say, noting that the company is getting ready to offer direct-to-consumer entertainment streaming. Disney recently announced it will pull all its movies from the Netflix platform and establish two direct-to-consumer offerings: one for sports and one including its key franchises, such as “Star Wars” and Marvel.

Fox brings to the table significant exposure to international markets, such as the U.K., Germany, and Italy — both through its networks and 39 percent ownership of Sky Television.

People with knowledge of the talks told CNBC that Disney would not purchase all of Fox.

“The company could not own two broadcast networks and would therefore not buy the Fox broadcast network. It would not buy Fox’s sports programming assets in the belief that combining them with ESPN could be seen as anti-competitive from an antitrust standpoint and it would not buy the Fox News or Business channel. Disney would also not purchase Fox’s local broadcasting affiliates,” according to people familiar with the negotiations.

In addition to the movie studio, TV production and international assets such as Star Wars and Sky, Disney may also add entertainment networks such as FX and National Geographic.

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