Fox agreed to shed film business

Twenty-First Century Fox (FOX)(FOXA) described the deal to sell most of its assets to Walt Disney (DIS) as marking a return to its “first love, which is news and sports.” In the $52.4 billion deal with Disney, Fox agreed to sell its film and television production business alongside a host of other media and entertainment assets.

“We’re proud that we make great movies and TV shows, but it takes a long time,” Fox’s executive chairman Rupert Murdoch said in an interview with the Wall Street Journal. The comments suggest that Fox felt running the 21st Century Fox studio didn’t fit in with the future it envisions.

How the Disney Deal Could Reshape Fox

Looking to advertising for revenue

The post-deal Fox is expected to rely on advertising sales and television programming fees as its primary sources of revenue. After eliminating much of its entertainment operations, Fox is expected to generate roughly $10 billion in annual revenues. The original Fox, now being dismantled, generated $28.5 billion in revenues in fiscal 2017.

25% stake in Disney

The Murdoch family, which controls Fox, separated the company from its publishing-focused sibling, News Corp. (NWSA), in 2013. New Corp. operates newspapers such as the Wall Street Journal and The Times, which is based in London (EWU). Now, with Murdoch talking about going back to the “first love,” it remains to be seen if he might want to reunite the stripped-down Fox with News Corp.

For now, though, the deal with Disney would give Fox shareholders a 25% stake in Walt Disney. Fox and Disney agreed on an all-stock transaction. The AT&T (T) and Time Warner merger deal involves cash and stock.

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