Part Eleven: Fox and The Limits of Consolidation or, Never Give a Saga an Even Break

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So where I left off on my previous post, Australian Newspaper magnate Rupert Murdoch had just reorganized his newspaper empire to more easily begin making American investments, Metromedia's CEO was looking for someone to buy his collection of non-network affiliated television stations, and 20th Century-Fox Studios was just purchased by two investors.

The first of these investors, one Marvin Davis, was a Jersey-born Midwestern-residing businessman who made his millions through his father's Davis Oil Company. Davis Oil operated unlike the larger oil companies, relying on smaller wells in less oil-rich areas, backed up by spreading the risk through group investments. (WELCOME TO HOLLYWOOD OIL TALK WITH JOMO!) After several decades of unyielding success in the family business, he sold all $600 million of his oil shares and spent more than half of that on his 20th Century-Fox purchase.

The second of these investors was a Wall Street trader named Marc Rich. His specialty was commodities trading and his SPECIFIC specialty was crude oil commodities trading. His philosophy was that large financial institutions could band together and back up small oil producers to make them just as, if not more, competitive than large oil producers. Importantly this is how he met Marvin Davis. And even MORE IMPORTANTLY... well we'll get to that in just one more paragraph.

Davis and Rich oversaw the continued success that Star Wars had put the studio on. Martin Scorsese's King of Comedy and Sidney Lumet's The Verdict gained the studio both critical (the former) and commercial (the latter) success. With Return of the Jedi hitting theaters the peak of their combined success was realized to great financial boon in May of 1983. It seemed 20th Century-Fox had finally achieved the smooth sailing they'd missed for the past two decades.

Then in September of 1983 Marc Rich was indicted on 64 criminal counts for tax evasion and trading with Iran during the oil embargo, while American citizens were being held prisoners during the Hostage Crisis. Guess there are some small oil producers with which one does not do business! Right before his home and office were raided by the FBI, Rich fled to Switzerland and his assets - including 50% of 20th Century-Fox - were seized by the United States Federal Government.

After five months of negotiations, Davis was allowed to purchase Rich's 50% ownership of 20th Century-Fox, which he immediately turned around and sold to our hungry-for-the-American-media-market Australian businessman Rupert Murdoch.

Rupert had three decades of international media acquisition, consolidation, and expansion under his belt. He saw the ownership of a Major Film Studio as a beginning, not an end, to his American media incursion. He immediately hired Barry Diller, the head of (at the time) Minor Film Studio Paramount Pictures to run 20th Century-Fox. Previously, Diller had become head of Paramount at the age of 32 and the studio had grown in leaps and bounds in the decade under his youthful direction. One of his young, hotshot ideas that he never got off the ground at Paramount was the brass ring in the media world: the launch of a fourth broadcast television network. Now at Murdoch's ear, Diller convinced Murdoch to greenlight the idea. Murdoch began acquisition talks for Metromedia's stations.

But Marvin Davis with his 50% of studio ownership shot down the process. He had seen the failures and halted concepts of "forth networks" like DuMont, MetroNet, NTA Film Network, Hughes Television Network, The Paramount Network, and Operation Prime Time. Davis considered the investment to be too risky. Undeterred, Murdoch - leveraging a different wing of his reorganized News Corp. holding company - bought Metromedia all on his own. Realizing that trying to control Rupert was more trouble than it was worth, Marvin Davis sold his stake in 20th Century-Fox to Rupert Murdoch in March 1985. Two months later, the Metromedia deal closed. In October, Rupert had assembled his team to launch the mythical Forth Network within a year.

And on Thursday October 9, 1986 FOX went live.

Its first three years had slow growth. Hits like The Tracy Ullman Show and Married with Children buoyed the nascent network while the rest of its programming struggled. But unlike previous "fourth network" attempts, any losses from FOX Broadcasting could be absorbed by the successes of 20th Century Fox Studios and News Corp.'s other holdings, as well as reduced production costs as Fox could make a majority of its programming in house for no licensing fees.

Two heavy risks finally catapulted Fox from a ragtag collection of stations to competing with the Big Three networks. First in 1989, Fox took a gamble on the first Animated Primetime series since Wait Till Your Father Gets Home in 1974 and the first single-network Animated Primetime series since The Flintstones in 1966. That show was, of course, The Simpsons which was a lightening-in-a-bottle megahit. The second big risk was a wholly financial one. Since 1956 CBS had broadcast almost all the NFC football games. With 1994 season coming up, CBS had offered the NFL $1 billion for four years' worth of NFC games. Fox blew the bidding process to pieces by offering a whopping $1.58 billion for the same package. The gamble paid off and Fox's ratings soared.

With more ratings came more advertisers and with more advertisers came more purchasing power. 20th Century Fox bought New World Pictures not only for more Film and Television Studio Production assets but also because of New World Pictures' television stations. Suddenly Fox Broadcasting was no longer legally considered "a collection of stations" and were now - at long last - legally defined as a Broadcast Network. The FCC stepped in and after SEVENTY STATIONS in THIRTY MEDIA MARKETS switched call letters & affiliations, the dust settled and The Big Three were now The Big Four.

Meanwhile, the Major Film Studio continued (relatively - for Hollywood) smooth sailing. It remained profitable and in 1994 launched an animation department whose 1998 hit Anastasia put them permanently on the map as a competitor to Disney Animation. They supplemented Fox Animation studios in 1997 with the purchase of computer animation specialists Blue Sky Studios as a way to compete with Disney's business partner Pixar.

Fox had finally found its groove and in the process changed Film and Television models forever.

Until 2013.

In June of 2013 Rupert Murdoch got vote approval from his board to split News Corp. into two companies: News Corp. (which would retain all of his newspaper business) and 21st Century Fox (GET IT - which would retain all of his media business). Something big was afoot.

You see, the purchase of NBCUniversal by Comcast - a four year ordeal that wrapped up in 2013 - sent shockwaves throughout Hollywood. A new round of consolidation was coming. Cable and Telecommunication companies, companies that had been distributing Film Studios' content for decades, had grown well beyond the size of the content producers. And like every business before them, they looked towards vertical growth to reduce costs.

The word was out: Major Film Studios must either grow so large that they would be too expensive to buy, or submit to Distribution ownership.

So in 2014, 21st Century Fox offered 80 billion dollars to buy Time Warner. Not only would it double their content, but it would make 21st Century Fox too large to be affordable for the DishTVs, Verizons, at&ts, Spectra, and Coxes of the world.

Time Warner fought back at the offer and within months the deal fell through. 21st Century Fox executives were frustrated. Time Warner was their best shot. NBCUniversal was already purchased. DisneyABC was too big to purchase. And purchasing National Amusements (Viacom/CBS/Paramount) or Sony Pictures would not give Fox the financial stability to remain independent. The heads of 21st Century Fox realized that reality and began negotiating with possible buyers.

In December of 2017, Disney won the bid for 21st Century Fox at cost of 71 billion. The sale did not include the Fox Broadcasting Company with their O&O television stations nor did it include the Fox Sports, Fox News, and Fox Business cable channels, as Disney executives found these assets more of a brand liability than profit generators. Disney did acquire the 20th Century Film Studio and its associated film & television production studios, its rights to intellectual properties & franchises, and - most importantly - its content library. Disney had insulated itself from Distributor takeover. For now.

So here we are. 113 years after William Fox bought his first movie theater, his namesake company Fox found itself wholly outside the theatrical film world. It exists today only as a Major Broadcast Television Network (nothing to sneeze at!) with limited production capabilities, facing high content licensing fees. So don't be surprised if the Major Film Studio that doesn't wholly control a Broadcast Network - at&t's WarnerMedia - starts kicking Fox Broadcasting's tires. Or if another telecommunications distribution or tech company has an itch to grow and begins eyeing a Major Television network channel (after scooping up an unpurchased Major Film Studio content library first, of course).

And while horizontal growth (such as buying fellow content libraries) can offer short term stability, it is this author's opinion that Disney needs to think vertically (beyond ABC) sooner rather than later.

Folks! The future is happening now!

More... the future! Here! Next week!

• Startups yesterday and today aka aye, matey!
• Promotions!
• Trafficking!
• CUTTING EDGE FOR THE ZOOMERS aka Anime and eSports!
• And ssssssssssssssssso much more!