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Disney could use an outlet for prestige TV. Enter FX.

(Source: www.vox.com)

The big question for many casual observers of Disney’s December 2017 purchase of almost all of 21st Century Fox’s assets has been, “Why?” The answer, a bit disappointingly, lies somewhere between “Disney wants as much streaming content as it can possibly get, and Fox’s film and TV libraries are chock full of stuff” and “because Disney could.”

But it’s also worth looking at the individual Fox assets that Disney will end up owning, should the deal be finalized. (Regulators will have 12 to 18 months to approve or scuttle the deal.) While there are obvious areas where Fox and Disney overlap (like producing films featuring superheroes who originated in Marvel comics), there are also certain things Fox has that Disney doesn’t.

In particular, Disney has never been great at playing to either the prestige film or prestige TV market. No movie released under the Disney banner has won Best Picture at the Oscars (though former subsidiary Miramax won a few times). The company’s fleet of networks (headed up by ABC) have had some success at the Emmys in the comedy categories but lag far behind networks like HBO, Netflix, or FX at recent trophy ceremonies.

Certainly winning awards isn’t everything. But in the TV world, especially, having Emmys and critical acclaim often helps a show go from an obscurity to a staple of streaming services. (See: Mad Men and Breaking Bad.)

Did you notice how I mentioned FX above? Well, guess what cable network Disney just purchased.

In a best-case scenario, Disney turns FX into its own HBO. In a worst-case scenario, it strips the network for parts.

The Night King’s dragon spits blue fire at the Wall on Game of Thrones.

The Night King’s dragon spits blue fire at the Wall on Game of Thrones.

Disney is unusual in that it doesn’t really have an obvious prestige TV player within its massive corporate monolith. Showtime is part of the CBS family. HBO nestles within Time Warner. Netflix makes creating prestige dramas part of its business model.

But Disney, for all its success in certain areas of show business (animated films and big franchise movies; family sitcoms and fast-paced melodramas on TV), lacks an obvious partner to make the sort of big, splashy drama series — think Game of Thrones or Westworld or Stranger Things — that suck up media attention, cultural oxygen, and viewers.

You can make an argument (and, believe me, HBO has) that Game of Thrones is the most-watched show in the world, and it’s the big hit everybody is chasing right now. Why wouldn’t Disney? Thus, it would make sense for Disney to see FX as its best shot at HBO-style prestige drama.

There are a bunch of structural reasons FX might struggle to become as massive a brand as HBO, particularly on a global scale. The network’s workforce (which chief executive John Landgraf pegged in a recent press conference at 270 people) pales in comparison to HBO’s (which has over 2,000 workers). And it doesn’t offer the sort of standalone streaming experience HBO or Netflix does: FX+, while ad-free, is available only with a cable subscription.

That “cable subscription” component reveals perhaps the biggest reason FX has never set its sights on worldwide domination like HBO and Netflix have. While FX can certainly spend plenty of money on a series if it needs to — Landgraf told me in an interview that the network’s per-episode budgets for drama series range from $4 million to $7 million — it’s never found itself with a Game of Thrones-level hit to support.

The massive HBO show’s final season will command a reported budget of $15 million per episode (which is almost certainly lower than what HBO will actually end up paying). As evidenced by AMC’s The Walking Dead, which was a hit at the level of Game of Thrones for much of its run but has never commanded as big a budget, it’s harder for basic cable networks to compete at that funding level.

The reason is simple: Basic cable networks like FX or AMC still receive much of their budget from “carriage fees,” which is what your cable company pays each network per subscriber. Such fees are usually under $1, but when there are enough subscribers around the country, they can add up. Toss in advertising dollars and selling these series’ broadcast rights to streaming platforms and other distributers around the world, and a basic cable network has a lot of different ways to make money.

But the carriage fee component means that one aspect of this overall picture is essentially fixed — and is now gradually decreasing as more cable users cut the cord.

HBO, which makes the bulk of its money off subscriber fees and has a package designed exclusively for those who’ve cut the cable cord (HBO Now), is much less burdened by this decrease, while Netflix, funded by a combination of subscriber fees and massive amounts of venture capital, isn’t burdened by it at all.

FX is still playing catch-up in this arena, and were it to become a closer corporate cousin to Hulu under the Disney banner, it might finally have a natural streaming partner. (At present, FX more or less plays the field, selling rights to its programs to Hulu, Netflix, and Amazon, all three of the major streaming players.)

I asked Landgraf if he thought FX would have been able to continue to support a hit like Game of Thrones at the budgetary level it would require, had it been on his network. He said he didn’t think FX would have a problem doing so, but the question, for now, remains purely hypothetical.

FX’s biggest current hits, American Horror Story and American Crime Story, reset with every season, meaning that they can alleviate some of the increase in actors’ salaries that come with ongoing series (though they do have to build entirely new sets each season, which is expensive).

But Game of Thrones is a unique enough case study in the history of television — no show this big has also required this level of expense — that it’s possible the needs of the show would cause any network to sink more money into it than it had ever spent before. After all, even HBO hasn’t previously had a series budgeted at $15 million an episode. Generally, big hit shows get almost everything they need, and what Game of Thrones needs is lots and lots of money.

Still: We haven’t had to see what FX would do with a Game of Thrones-size hit because it hasn’t had one yet. And in order to facilitate finding a series that humongous, it would make sense for a Disney-charged FX to finally have room to expand directly into territory largely owned by HBO and Showtime, probably with an able assist from Hulu.

When you consider that the network is led by Landgraf, one of the most respected TV executives in the business and someone who’s built an incredibly autonomous operation with an extremely high batting average for making great television, it would make even more sense for Disney to bolster FX with more resources and get out of the way.

Yet at the same time, it’s hard to imagine FX being of much value to Disney without Landgraf, who would almost certainly be heavily wooed by other networks were he to decide not to follow FX over to the Disney lot.

Since government regulations mean that everybody at FX — including Landgraf — has to keep operating as though they’ll continue to work for Fox for the foreseeable future, there’s no good way for anybody to know exactly what Disney has planned, beyond a handful of reassurances from Disney head Bob Iger and the vague rumor that Disney wouldn’t mind a prestige TV maker of its very own. I wouldn’t count it as particularly likely that Disney completely scraps FX, but as worst-case scenarios go, it’s not impossible either.

Landgraf says he’s not an empire builder. But he might have to become one anyway.

2018 Winter TCA Tour - Day 2

2018 Winter TCA Tour - Day 2

“We take time. We’re methodical. We go step by step. There’s a reason why we have almost no failure,” Landgraf told me post-press conference, in a discussion on the strengths and weaknesses of FX compared to the models of HBO and Netflix. “The reason is that we don’t buy things sight unseen for a kajillion dollars. We go through a process that allows virtually everything we work on to be good.”

Landgraf estimates that since he joined the channel in 2004, it has made 30 drama pilots, with 25 of those going to series. FX Productions has stepped up its output, to the degree that FX almost exclusively picks up series from its sister studio (which has also sold series to Netflix, TBS, and others). The network is in a place where “we grow our own food,” as Landgraf puts it.

FX does, of course, enter the crazy bidding wars that other networks do. Landgraf admits to me that FX put in a bid on The Crown, which ultimately went to Netflix, and several years ago the network went after True Detective, which landed at HBO. But its typical process is to develop a project in house with one of its trusted creative voices, like Ryan Murphy, who currently has four series in series production at the network, with another in production under the FX Productions banner for Netflix.

This is by design. FX limits the numbers of series it makes, which has led to its high batting average but also its surprisingly small footprint compared to its most obvious rivals.

“In general, I’m not an empire builder,” Landgraf said. “I’m not someone who is interested in financing a slate and is fine as long as there’s enough success to offset the failure. I wanna win ’em all.”

This is perhaps why he’s been sounding the alarm about Netflix for almost as long as the streaming service has been programming its own series. If there’s a common thread between FX and HBO, it’s that the two networks, by virtue of having to turn a profit, can’t float along on a seemingly endless sea of venture capital like Netflix can.

“When you’re in a situation where even if 80 percent of your series are on year-end best lists, that turns out to be 11 series for you, and Netflix has 41,” Landgraf said, “even if 20 percent of their series are on year-end best lists, [that’s still nearly 10]. … I don’t think we need their level of volume. But I think we need a little bit more volume.”

Presumably, that sea of venture capital will dry up at some point, and the big question is just who will be left behind in the wake of Netflix, which could drive a bunch of players out of business or just contract quite a few into a handful of larger media behemoths.

That, presumably, is where FX is headed, as it seems likely to become part of the Disney empire. If that gives FX the money it needs to compete with Netflix, even a little bit, then the merger might end up being the best thing that could happen to FX.

“If there are 77 programming services that made or marketed a show that one of you [TV critics] put on your year-end best lists, that’s just too many. It’s gonna compress down to a handful of relevant, adult, premium scripted brands,” Landgraf said. “We have all of the wherewithal from the creative, curatorial, marketing, and branding standpoint to be one of those brands. We just need enough resources that we can continue to command the consumer’s attention.”

Then again, as I’m sure Landgraf would tell you, that’s a whole lot of really big ifs.

More Info: www.vox.com

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