The Walt Disney Company recently held preliminary talks to buy entertainment assets owned by 21st Century Fox, including the Fox movie and television studio, the FX cable network and a share of Hulu.
The talks were first reported by CNBC on Monday and confirmed by two people briefed on the matter, who spoke on the condition of anonymity to discuss private information. The two companies are no longer talking, although discussions could restart.
Spokeswomen for both companies declined to comment.
The talks, however preliminary, say a lot about the rapidly evolving media industry. Big players like Disney are seeking to get bigger as they follow Netflix into the streaming business and square off against technology giants like AT&T, which is in the final stages of acquiring Time Warner. Medium-size players like 21st Century Fox may be realizing — or accepting — that gaining the scale they need to compete may be out of reach at this point.
In July, Discovery Communications spent $11.9 billion to buy Scripps Media, creating a powerhouse in unscripted television. Sinclair Broadcast Group, the nation’s largest owner of television stations, has been trying to win regulatory approval for its $3.9 billion purchase of Tribune Media.
Disney shares climbed 2 percent on Monday. Disney is scheduled to report fiscal fourth-quarter earnings on Thursday.
Fox shares shot up 10 percent. Fox is scheduled to report fiscal first-quarter earnings on Wednesday.
Buying certain Fox assets — at the right price — would make a lot of sense for Disney, analysts said on Monday. In particular, Fox’s strong television production business would help Disney shore up its own struggling ABC Studios, which recently lost its star producer, Shonda Rhimes, to Netflix. Disney also needs to increase television production so that it can offer exclusive content on a planned streaming service of its own.
“We see the real strategy here as Fox content helping Disney build out its direct-to-consumer strategy,” Steven Cahall, an analyst at RBC Capital Markets, wrote in a research note.
As growth in the traditional cable business slows because of cord cutting, Disney also sees value in Hulu, which focuses on programming aimed at adults, including the Emmy-winning “The Handmaid’s Tale.” Disney owns 30 percent of Hulu now. Fox also holds a 30 percent share, with the balance owned by Comcast and Time Warner.
As part of the talks, Disney also looked at buying Fox’s minority stake in Sky, the Britain-based pay-television service. Fox has been trying to buy all of Sky, but has so far been stymied by regulatory approvals.
Disney would also like movie rights held by Fox, most notably to the X-Men and Fantastic Four characters, which were licensed to Fox by Marvel Entertainment before Disney bought that superhero company in 2009. Fox also controls the “Avatar” franchise, for which there are four sequels in production. Under a licensing agreement, Disney recently opened lavish attractions based on “Avatar” at Walt Disney World.
For 21st Century Fox, which is controlled by Rupert Murdoch, such a sale would amount to an acknowledgment that it cannot compete against media colossuses like AT&T and Comcast, which owns NBCUniversal. Companies like Amazon, Facebook, Apple and Google are also expanding into entertainment.
Mr. Murdoch tried to buy Time Warner in 2014 for $89 billion but dropped the effort after Time Warner spurned the offer.
With some of its assets sold, Fox would remain a powerful player in television news and sports, two niches that remain highly valued by advertisers. The talks with Disney did not include the sale of Fox’s broadcasting network, Fox News or Fox’s sports holdings.
In its last fiscal year, which ended on June 30, 21st Century Fox had $28.5 billion in revenue, a 4 percent increase from a year earlier, and $2.95 billion in profit attributable to Fox shareholders, a 7 percent increase. Much of that profit came from Fox’s cable television unit, of which Fox News is the largest contributor.