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Disney deal with Fox would be a ‘home run’ in its battle against Netflix and Amazon, analyst Ives says

  • GBH Insights says Disney's acquisition of Fox's movie and television assets would be the "right move at the right time."
  • "We view this as a home run deal for Disney," analyst Daniel Ives writes.
  • "The marriage of these assets creates a much more formidable Disney on both the content and streaming front for the coming years."

The strategic rationale for Disney buying key media content assets from Twenty-First Century Fox to compete with Netflix is sound, according to one Wall Street firm.

On Tuesday, CNBC eported that Twenty-First Century Fox and Disney are on a "glide path" for a Thursday deal announcement for Fox's movie and television assets.

"With media reports indicating that the Disney/Fox deal looks to have the green light and likely gets announced tomorrow, all eyes will be on Iger & Co. going forward to see what direction Disney strategically takes this 'game changing' $60 billion+ media deal," Daniel Ives, GBH Insights' head of technology research, wrote in a note to clients Wednesday. "We view this as a home run deal for Disney and while its [sic] an aggressive acquisition with a high price tag, in our opinion this is the right move at the right time as the marriage of these assets creates a much more formidable Disney on both the content and streaming front for the coming years."

Ives estimates Disney will have a dominant 35 percent to 40 percent market share of U.S. movie box office sales after the deal. He projects the company will be able to save about $2 billion in costs during the first 12 to 18 months after the acquisition.

Disney will also be in a better position to compete with internet giants with the new assets, according to the analyst. The company announced plans in August to launch a branded direct-to-consumer streaming service in 2019 and an ESPN streaming service in 2018.

"We continue to strongly believe the core underlying driver for this deal in our opinion is the impending battle royale for content and streaming services vs. the Netflix machine," Ives wrote. "Disney with this Fox acquisition in its back pocket would create a fiercer landscape for content and thus put itself in a much healthier position to gain market and mind share vs. the likes of technology stalwarts such as Netflix and Amazon when it officially launches in 2019."

Disney shares are underperforming the market this year. Its shares have rallied 3 percent through Tuesday versus the S&P 500's 19 percent gain.