Vox - Disney is buying most of 21st Century Fox https://cdn.vox-cdn.com/community_logos/52517/voxv.png2017-12-18T12:37:56-05:00http://www.vox.com/rss/stream/165405272017-12-18T12:37:56-05:002017-12-18T12:37:56-05:00ESPN boss John Skipper, one of TV’s most important executives, is leaving at a crucial time
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<img alt="ESPN boss John Skipper at Code Media" src="https://cdn.vox-cdn.com/thumbor/JQN3U6C9qw717gSOzxTxd4467vw=/0x0:911x683/1310x983/cdn.vox-cdn.com/uploads/chorus_image/image/58024427/codemedia_20160217_201432_0511_XL.1513618675.jpg" />
<figcaption>Asa Mathat for Vox Media</figcaption>
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<p>Disney is about to make a huge bet on TV sports — when sports looks riskier than ever — and it will do it without its top sports exec.</p> <p id="ja0KH2">Last week, Disney announced a $52 billion deal to acquire most of the Fox empire. Now it says it will move forward without one of its key executives: ESPN President John Skipper, who has had the top job at Disney’s powerful sports network since 2012, is stepping down, <a href="http://www.espn.com/espn/story/_/id/21804776/john-skipper-resigns-espn-president">citing “substance addiction.”</a></p>
<p id="29Msu5">We’ve seen a bunch of <a href="https://www.recode.net/2017/11/7/16619238/murdoch-fox-time-warner-bewkes-scripps-sale">big-deal media executives start to head for the exits</a> recently, but this one is different: ESPN is both one of the most important properties in the media world and one whose clout and importance — once unquestioned — is very much up for debate.</p>
<p id="0ZIhJP">But Skipper, who had re-signed a deal this year that was supposed to keep him at ESPN through 2021, presumably felt he could make a go of it.</p>
<p id="pvZDYT">Over the next three months, Skipper will be replaced by his predecessor George Bodenheimer. Whoever Disney CEO Bob Iger taps as ESPN’s permanent boss will face significant challenges, both immediately and down the road.</p>
<p id="Avr05l"><strong>Near-term: </strong>Next March, ESPN is scheduled to launch ESPN Plus, its repeatedly delayed digital subscription service. While Iger has played up the launch as part of his strategy to bring Disney products directly to consumers, ESPN executives have privately worried that the service will underwhelm consumers, since it won’t have any of the big-ticket sports ESPN runs on linear TV. It also won’t have any of the lesser-ticket sports ESPN currently carries on its ESPNWatch digital platform, which it provides to pay TV customers.</p>
<p id="isQEXH">Instead, ESPN Plus will carry ... something else. Think pro tennis and small-school college sports. Managing expectations and reality for this one will be difficult no matter who is in charge.</p>
<p id="6Xttor"><strong>Long-term:</strong> Over Skipper’s five-year run, ESPN laid out billions of dollars for sports rights for leagues like the NBA, in an effort to solidify its status as the dominant sports network — and to freeze out would-be challenges from Rupert Murdoch’s Fox and Comcast’s NBC. Those deals did indeed give ESPN nearly full control of sports TV. But it also left the network <a href="https://www.recode.net/2017/4/26/15439446/espn-layoffs-subscribers-content-cost-chart">exposed as cord-cutting and cord-nevering eroded its subscriber base, and the revenue that base produced through affiliate fees and advertising</a>.</p>
<p id="ItOsW7">ESPN has been trying to deal with some of those effects via a series of layoffs, while insisting it was still going to invest in talent.</p>
<p id="kmwXF3">But that hasn’t been enough to shore up long-term trends working against ESPN and TV in general. And the erosion has been substantial enough that ESPN had begun to re-think its lets-buy-all-the-sports-all-the-time strategy. </p>
<p id="OKBeiK">It has even started to mull the notion of living without the NFL. ESPN has a deal to air “Monday Night Football” through 2021, but faced with the prospects of drooping NFL ratings, coupled with cash-rich tech competitors like Amazon, the network has been imagining what life would like without Monday night games, or any other pro football deals.</p>
<p id="T3riJZ">On the other hand, <a href="https://www.recode.net/2017/12/14/16775198/espn-disney-fox-rsn-sports-tv-ratings-subscription-rupert-murdoch">Disney’s Fox deal contemplates betting even more money on TV sports</a>, by acquiring Fox’s 22 regional sports networks. If regulators sign off, Disney would end up with exclusive deals — and the accompanying bills — to show local games from 44 pro sports franchises.</p>
<p id="sTvUyr">The operating theory seems to be: Even in a world where pay TV is a much smaller business, sports will be a crucial part of that business, so why not own as much as possible?</p>
<p id="tE7KB0">That’s now a question for someone other than Skipper to answer.</p>
<p id="upKwxn">I talked to Skipper about some of the challenges he was facing in an extended interview at Recode’s <strong>Code Media</strong> conference in 2016. <a href="https://www.recode.net/2016/2/26/11588250/espns-john-skipper-calls-the-plays-on-digital-content-esports-and">You can read a transcript of that conversation here</a>, or watch the whole thing below:</p>
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<aside id="QQUuWf"><div data-anthem-component="newsletter" data-anthem-component-data='{"slug":"recode_daily"}'></div></aside><p><small><em>This article originally appeared on Recode.net.</em></small></p>
https://www.vox.com/2017/12/18/16790858/espn-john-skipper-disney-fox-departure-riskPeter Kafka2017-12-14T10:21:08-05:002017-12-14T10:21:08-05:00If Disney and Fox combine, they’ll dominate the box office — owning 40 percent of this year’s top hits
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<p>Together they brought in more than $3 billion in domestic box office revenue this year.</p> <p id="I4Q4iX">Disney’s $52 billion <a href="https://www.recode.net/2017/12/14/16771712/hulu-disney-acquisition-fox-means-dis-foxa-21cf">Fox acquisition</a> would mean Disney takes a bigger share of <a href="https://www.theatlantic.com/business/archive/2017/09/hollywood-blockbusters-summer/539235/">declining</a> box office revenues. </p>
<p id="fji4xQ">In 2017, a combined Disney Buena Vista and 21st Century Fox would represent 40 percent of the top 15 highest-grossing movies in the U.S. and 31 percent of total domestic box office revenue, according to Box Office Mojo.</p>
<p id="Utp6Rn">Adding Fox films like “Logan” and “Boss Baby” to Disney blockbusters “Beauty and the Beast” and “Guardians of the Galaxy Vol. 2” would give the combined company over $3 billion in gross box office revenue this year. Alone, Disney’s Buena Vista raked in $1.8 billion, while Fox totaled $1.3 billion so far this year. </p>
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<p><small><em>This article originally appeared on Recode.net.</em></small></p>
https://www.vox.com/2017/12/14/16775984/disney-fox-acquisition-40-percent-box-office-hits-2017Rani Molla2017-12-14T09:30:07-05:002017-12-14T09:30:07-05:00Disney is buying 21st Century Fox businesses in a big bet on streaming over TV
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<figcaption>Bob Iger and producer Kathleen Kennedy | Jesse Grant/Getty Images for Disney</figcaption>
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<p>Price tag: $52.4 billion. With debt: $66.1 billion. All stock deal.</p> <p id="xpZeCb">Disney has <a href="https://thewaltdisneycompany.com/walt-disney-company-acquire-twenty-first-century-fox-inc-spinoff-certain-businesses-52-4-billion-stock/">agreed to buy most of 21st Century Fox</a> for $52.4 billion in a big bet on streaming services over traditional TV. It’s a landmark deal that also unravels the media empire Rupert Murdoch had built over 60 years.</p>
<p id="w1v2kV">The entertainment giant will get Fox’s film and TV studios, which includes the “Avatar” franchise, its <a href="https://www.recode.net/2017/12/14/16775198/espn-disney-fox-rsn-sports-tv-ratings-subscription-rupert-murdoch">regional sports networks</a>, its international businesses and Fox’s 30 percent stake in Hulu, <a href="https://www.recode.net/2017/12/14/16771712/hulu-disney-acquisition-fox-means-dis-foxa-21cf">giving Disney a majority of the streaming service</a>.</p>
<p id="MFQ49l">The deal gives Disney an oil field of content. In addition to “Avatar,” Disney will also get the “X-Men” film franchise and “Titanic,” and on the television side, it will own long-running hits like “The Simpsons” and newer series like “Empire,” “This Is Us” and “Homeland.”</p>
<p id="gvZdNu">Coupled with Disney’s already well-known properties, including “Star Wars” and Marvel’s hit films, the additions create a new pipeline of content for Disney’s forthcoming streaming service — a key aspect of its strategy to sell direct to consumers instead of through the pay TV ecosystem that has long fueled the media industry. </p>
<p id="2yxE3y">The acquisition will also give Disney sports rights via the regional sports networks that could conceivably boost its ESPN offering.</p>
<p id="l6R2aF">Bob Iger, the CEO of Disney who orchestrated the deal, emphasized the expanded streaming capabilities the deal provides, as well as the bonus in controlling Hulu.</p>
<p id="Sr0zhz">“We believe Hulu is obviously a great opportunity to expand in the direct-to-consumer space,” he said on a conference call. “But having control of it will enable us to greatly accelerate Hulu into that space and be even more viable competitively.”</p>
<p id="JxgOCJ">The competition, of course, is Netflix and the internet in general, which has cut into the pay TV industry. With fewer people paying for TV, programmers like Disney and Fox are seeing less carriage fees and lower ad revenue. Disney’s ESPN in particular has taken a big hit in the ratings.</p>
<p id="oLlqAh">Buying Fox also gives Disney rights to regional sports like the Yankees via the YES network. Iger sees this as the “perfect complement to the ESPN offering.”</p>
<p id="QwF9cR">He underscored that these local sports networks will still be distributed through the traditional pay TV distributors but didn’t rule out the possibility of a streaming offering at some point later on down the road.</p>
<p id="5uTqWz">Disney this spring is set to unveil a sports streaming product based on ESPN’s lesser-watched channels, but not ESPN itself.</p>
<p id="J5mDvQ">The deal will likely have to undergo regulatory review, a prospect that hasn’t helped another major media transaction: AT&T’s purchase of Time Warner. The U.S. Department of Justice has sued AT&T to block the merger, saying it would hurt consumers. Justice had floated the possibility of AT&T selling the Turner division, which owns CNN, to win approval. President Trump’s frequent tirades against the media in general and CNN in particular has put a political spin on Justice’s lawsuit.</p>
<p id="5m1FjC">In the case of Disney’s Fox acquisition, one key point of difference is it doesn’t involve any news businesses. Even so, there could be a big cost if the DOJ doesn’t approve the merger. Under terms of the agreement, Disney would have to pay Fox a <a href="https://www.sec.gov/Archives/edgar/data/1001039/000095015717001599/form8k.htm">$2.5 billion termination fee</a>. If Disney changes its mind on the agreement irrespective of a regulatory review, it will have to pay $1.5 billion. </p>
<p id="7whvC7">Disney also announced in connection with the merger that Iger will extend his contract to stay through 2021, at least the third time his tenure has been extended. There had been reports that Fox CEO James Murdoch — and Rupert’s son James — would join Disney as part of the deal, but no formal arrangement has been struck, Iger said on the call.</p>
<p id="ERPdMF">“We see James as integral to the integration of these two companies, and at some point we’ll see if there’s a role for him,” Iger said.</p>
<p id="74QV25">It’s not hard to imagine James potentially running the international businesses that come with the deal: Satellite service Sky and Indian media giant Star. James used to run Sky before returning to the U.S. to concentrate on the domestic TV business, and he has extensive experience in the European pay TV market.</p>
<p id="PiEF4V">Separately, in a statement, Iger praised Murdoch: “We’re honored and grateful that Rupert Murdoch has entrusted us with the future of businesses he spent a lifetime building, and we’re excited about this extraordinary opportunity to significantly increase our portfolio of well-loved franchises and branded content to greatly enhance our growing direct-to-consumer offerings.”</p>
<p id="5VsRzP">For the 86-year-old Murdoch, this is a surprise retrenchment. He was still in empire-building mode as recently as a few years ago when he made an aggressive bid to buy Time Warner. That didn’t work out, and the media giant eventually agreed to sell to AT&T, a deal that’s facing an antitrust lawsuit.</p>
<p id="4aax9P">Murdoch still controls News Corp, the publishing empire that includes the Wall Street Journal and newspapers in the U.K. He will also retain Fox News, Fox broadcasting and the FS1 cable sports network. Sources say he’s looking to recombine those businesses into News Corp. </p>
<p id="DCjN1z">Murdoch is the last of the media moguls who rose to power in the latter part of the last century, part of a colorful cohort that includes Sumner Redstone, John Malone and Barry Diller, merciless executives who forged the TV industry as cable and satellite became the dominant platform for entertainment.</p>
<p id="TvCxfu">But that changed precipitously in the last decade thanks to the internet.</p>
<p id="0QIvfs">Some deal housekeeping: The acquisition is for all stock, and 21st Century Fox shareholders will receive 0.2745 Disney shares for each 21st Century Fox share they hold. Disney sees about $2 billion in cost savings following the deal, and it will also take on $13.7 billion of Fox debt. Disney said it plans to spend up to $10 billion in stock buybacks over the next few years.</p>
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<aside id="TLGGUh"><div data-anthem-component="newsletter" data-anthem-component-data='{"slug":"recode_daily"}'></div></aside><p><small><em>This article originally appeared on Recode.net.</em></small></p>
https://www.vox.com/2017/12/14/16775934/disney-buys-21st-century-fox-win-internet-21cf-dis-foxaEdmund Lee2017-12-14T06:00:04-05:002017-12-14T06:00:04-05:00Disney’s Fox deal means ESPN is going to double down on big, expensive sports TV deals
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<p>Rupert Murdoch doesn’t want them. Why does Bob Iger?</p> <p id="6QY2A9">For the past couple years, ESPN has been stuck with a seemingly unsolvable problem: It is on the hook for expensive sports deals that keep getting more expensive. At the same time, its subscriber base — and the revenue that generates from subscription fees and ad sales — has been melting. </p>
<p id="RIHg3p">ESPN’s proposed solution is a surprising one: It is going to put itself on the hook for even more expensive sports deals.</p>
<p id="krXQ0Z">That’s what will happen if Disney gets the go-ahead for the $66 billion Fox deal it wants to make. Because included in the deal are the rights to Fox’s big regional sports networks.</p>
<p id="o221sV">Fox has 22 RSNs across the country, which have deals with 44 pro sports teams to deliver local games to cable TV subscribers that carry the networks.</p>
<p id="8dQszO">If you want to watch a Yankees game in New York, you do it via Fox’s <a href="http://web.yesnetwork.com/index.jsp;">YES network</a>; if you want to watch a Timberwolves game in Minnesota, you do it via <a href="https://www.foxsports.com/north">Fox Sports North</a>. </p>
<p id="8KBBF1">The deals to secure that programming cost a ton of money. And just like the national programming deals, they keep getting more expensive. Up until now, it has been worth it for Fox. Pay TV subscribers pay more for RSNs — generally, whether they want them or not — than any other network. Except for ESPN.</p>
<p id="hSQPTx">But if locking into big-ticket sports deals at a time when pay TV subscribers are swapping out big subscription packages for skinny ones — or simply dropping subscriptions altogether — is a problem for ESPN, why sign up for more of the same?</p>
<p id="ofopiN">Some of the commentary I’ve seen suggests that adding Fox’s sports deals to ESPN is good for ESPN Plus, the digital subscription service it will (finally) launch this spring.</p>
<p id="dWdXAG">But that doesn’t make any sense.</p>
<p id="9GWiIW">None of the valuable stuff Fox owns can go into ESPN Plus, for the same reason none of the valuable stuff ESPN owns will be in ESPN Plus — it’s all tied up in pay TV deals, and will be for years to come. The stuff you’ll see on ESPN Plus will be the stuff ESPN doesn’t think is worth putting on TV. Adding more leftovers from Fox won’t make it much more appetizing.</p>
<p id="OTFSKH">There are more compelling arguments. For instance, buying up the Fox sports channels means those local deals won’t end up in the hands of someone else, like Comcast’s NBCUniversal*, or a theoretical tech bidder like Amazon or Apple. </p>
<p id="zHXF3N">Another decent argument: Scale. Adding dozens of teams and territories should make life better for ESPN’s sales force, who can tell advertisers they can deliver even more valuable sports eyeballs. In theory, it could also give ESPN more leverage when it comes to negotiating future rights deals. </p>
<p id="hqdVKx">In other words, if you’re going to be in sports TV, why not <em>really</em> be in sports TV and go all in? There are lots of hardcore sports fans in the U.S. (and around the world, where Disney will also be buying some Fox sports assets). So why not direct more of their dollars your way?</p>
<p id="6inX6n">Except: Local sports aren’t different from national sports, which aren’t different from anything else on TV — they’re having a <a href="http://www.sportsbusinessdaily.com/Journal/Issues/2017/02/20/Media/NBA-RSNs.aspx">hard</a> <a href="http://www.sportsbusinessdaily.com/Journal/Issues/2017/10/09/Media/MLB-RSN.aspx">time</a> hanging onto eyeballs. And if you’re the kind of person who wants to pay for TV but doesn’t want to pay for ESPN, you won’t want to pay for a Fox sports channel, either. </p>
<p id="tkGkkq">So the most logical argument would be that at some point, the number of people who want to pay for sports will stabilize, and that number will be pretty big, and sports rights deals will eventually rationalize to fit that number.</p>
<p id="kzTt6Y">Fair enough! Except that Rupert Murdoch doesn’t think so:</p>
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<p lang="en" dir="ltr">Source says Murdoch has not been high on the RSNs for several years. Same old media story: rights fees rising at a faster rate than affiliate revenue. <a href="https://t.co/cqODqsOcoU">https://t.co/cqODqsOcoU</a></p>— John Ourand (@Ourand_SBJ) <a href="https://twitter.com/Ourand_SBJ/status/938068714167119873?ref_src=twsrc%5Etfw">December 5, 2017</a>
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<p id="c2zbBN">And if <a href="https://www.recode.net/2017/11/6/16614806/rupert-murdoch-james-lachlan-fox-disney-sale">Rupert Murdoch is selling</a>, I’d <a href="https://www.recode.net/2017/11/7/16619238/murdoch-fox-time-warner-bewkes-scripps-sale">think very, very carefully</a> about what I’m buying.</p>
<p id="MugDU3">* Comcast is an investor in Vox Media, which owns this site.</p>
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<aside id="yPprCx"><div data-anthem-component="newsletter" data-anthem-component-data='{"slug":"recode_daily"}'></div></aside><p><small><em>This article originally appeared on Recode.net.</em></small></p>
https://www.vox.com/2017/12/14/16775198/espn-disney-fox-rsn-sports-tv-ratings-subscription-rupert-murdochPeter Kafka2017-12-14T06:00:02-05:002017-12-14T06:00:02-05:00Disney’s Fox acquisition means the end of Hulu as we know it
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<figcaption>Hulu</figcaption>
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<p>It’s not going away — but it will look very different.</p> <p id="aBwLDq">Hulu used to answer to three different bosses — Disney, Fox and Comcast — each owning an equal stake in the streaming service. Now it will have one boss: Disney.</p>
<p id="zgHGqG">The entertainment giant has <a href="https://www.recode.net/2017/12/14/16775934/disney-buys-21st-century-fox-win-internet-21cf-dis-foxa">agreed to buy most of 21st Century Fox</a> for about $60 billion (including debt), which means the owner of the “Star Wars” franchise and ESPN will also own Fox’s TV and movie studio, including “Avatar,” its foreign businesses and, crucially, Fox’s 30 percent stake in Hulu, giving Disney majority ownership.</p>
<p id="AFfEGP">That also means the end of Hulu as we know it — not that it’s going away. But it will look very different going forward.</p>
<p id="TrcMQS">That’s because whenever one media player owns/starts/controls its own streaming service, it turns into a walled garden.</p>
<p id="T36Mi7">Hulu has always been an odd stepchild of a business. As a joint venture between three massive media conglomerates, its leadership hasn’t always been able to determine its own future. But the company has been successful in creating something of a barrier (small as it is) to Netflix and to cord-cutting, and since it readily came with streaming rights to three major broadcasters — ABC, Fox and NBC — it quickly developed an audience.</p>
<p id="iIEpvx">But now a single company will own more than half of the service, which makes it less likely the other owners, specifically NBC parent Comcast*, will want to continue selling its shows to Hulu. (Time Warner, a silent partner, has a 10 percent stake, which will go to AT&T if it prevails in the lawsuit brought by the Justice Department.)</p>
<p id="sUyczH">Disney already announced plans for its <a href="https://www.recode.net/2017/8/8/16115402/disney-netflix-espn-streaming-service-2018-2019">own streaming business</a>, which will feature films from Disney and Pixar, content that specifically won’t be available on Netflix. Disney’s Marvel and Lucasfilm franchises will still appear on Netflix as part of a multiyear agreement, but that runs out in a few years. The point: Disney appears set on a world where almost all Disney content streams only on a Disney-owned service.</p>
<p id="9b8cxB">That brings us back to Hulu, which has more than 12 million subscribers and about 250,000 for its new live TV streaming offering, the online TV package that replicates a small cable bundle.</p>
<p id="uEi0m0">Disney’s streaming ambitions won’t get under way until 2019, and when it does it will be starting from zero. By that point, Hulu will easily have more than 12 million subscribers, making it an obvious place to piggyback Disney’s new streaming business. Or, more simply, it could convert Hulu into Disney’s streaming service.</p>
<p id="Uf5aVP">There are any number of wrinkles to either scenario. Comcast has remained a silent partner in Hulu as part of a consent decree it accepted when it bought NBCUniversal, but those terms end in September, before Disney can realistically complete its Fox deal.</p>
<p id="9rpczv">Comcast may claim Hulu’s 12 million-plus subscribers belong equally to it, since its content and investment dollars helped generate that audience, or at least a third of it. The cable company could ask the Justice Department to review the acquisition and force a sale of Hulu.</p>
<p id="MoiSMU">That’s not an out-of-the-ballpark scenario, given recent moves by Justice’s newly minted antitrust executive Makan Delrahim, who generally favors a sale of assets in any troublesome merger. (Justice has already filed a lawsuit against AT&T’s proposed purchase of Time Warner, <a href="https://www.recode.net/2017/11/20/16681716/us-federal-government-att-time-warner-cnn-hbo-lawsuit-antitrust-tv-merger-president-trump">after AT&T refused to sell the Turner division to win approval</a>.) </p>
<p id="FH4j6t">Rich Greenfield, an analyst with BTIG, <a href="https://twitter.com/RichBTIG/status/941034599957848064">outlined a case</a> where Comcast prevents Disney from making any major changes to Hulu to the point of frustration, thereby forcing Disney to sell the streaming service to, yes, Comcast.</p>
<p id="sUspwW">But there’s a big risk to owning Hulu outright — it loses lots of money. Hulu lost <a href="https://www.sec.gov/Archives/edgar/data/902739/000116669117000031/cmcsa-9302017x10q.htm">$560 million</a> in first nine months of this year, 55 percent more than its $360 million loss for the same period last year.</p>
<p id="E62nOk">If you’re Comcast, it might just be easier to stop selling its content to Hulu, or simply sell its 30 percent stake to Disney, thus absolving it of any of its losses.</p>
<p id="N8CI6H">Hulu, of course, will eventually look very different in any of these outcomes. The service, which won an Emmy this year for the harrowing series “The Handmaid’s Tale,” will ultimately have to rely less on broadcast networks for its content and could become a place for more originals, a tack Netflix and Amazon have taken.</p>
<p id="Jdh4LH">There is one other possibility: Disney lets Hulu run its course, and after all its media rights expire it shuts down the service altogether. It would be an end to one of the more forward-thinking experiments ever attempted by a legacy media venture.</p>
<p id="QXHCWL">But it wouldn’t be surprising, either.</p>
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<img alt="Top-grossing domestic box office hits of 2017" data-mask-text="false" src="https://cdn.vox-cdn.com/thumbor/RSBI4NmrdW8_ScSkXnm7ZFr7N6o=/800x0/filters:no_upscale()/cdn.vox-cdn.com/uploads/chorus_asset/file/9868841/disney_fox_01.png">
</figure>
<p id="b6s5VA">* Comcast’s NBCUniversal is a minority investor in Recode parent company Vox Media.</p>
<hr class="p-entry-hr" id="utzyM2">
<aside id="UErmGY"><div data-anthem-component="newsletter" data-anthem-component-data='{"slug":"recode_daily"}'></div></aside><p id="UFfDZe"></p>
<p><small><em>This article originally appeared on Recode.net.</em></small></p>
https://www.vox.com/2017/12/14/16771712/hulu-disney-acquisition-fox-means-dis-foxa-21cfEdmund Lee