Disney Will Rue Its Merger With Fox

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"Buying Fox and Sky cements Disney in the past," says BTIG analyst Rich Greenfield, "because it adds networks that are tied to the legacy ecosystem." For instance, one of Disney's tried-and-true strategies has been to sell all of its networks--ESPN, ABC and Disney--as a package in negotiating with cable distributors... But over the long haul, as subscribers continue to abandon cable TV, having all those networks is more likely to become an albatross.

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[Further,] Disney and Fox together now control 40 percent of the movie business, and one has to wonder whether the Justice Department's antitrust department will insist that the companies divest some of their movie assets to reduce their power over the theaters. Given the government's current opposition to the proposed AT&T-Time Warner merger, I suspect that the answer is yes. Which of course would negate the point of the deal, at least in terms of the movie business.

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As for Hulu, it is unclear what Disney would be able to do with it without the consent of Comcast, which will still own 30 percent of the service. And in any case, it is hard to envision what it might do with Hulu that would in any way harm Netflix... if Iger truly were looking to the future, the last thing he'd be spending Disney's money on would be Fox. Wrong deal, wrong time.