Much of Disney’s second-quarter earnings call Tuesday focused on its more than $70 billion acquisition of 21st Century Fox. Now that the deal has received approval from regulators and shareholders, analysts were eager to hear about Disney will optimize assets, grow margins and create new profits.
What wasn’t asked about, however, was the topic that some experts say may ultimately determine the success of Disney’s deal, or any merger: talent. “If talent in an increasingly digital-first world was an issue before a merger, it is even more so now, post-merger,” says Henry Topping, senior client partner specializing in media, entertainment, and sports at Korn Ferry. “Any merger involves bringing together at least two corporate cultures, if not more. How do you combine them to create a common vision, mission and understanding of where you want or need to go?”
Behind much of this media consolidation over the last two years is the need for legacy media organizations to keep up with the pace and scale of Amazon, Apple, Facebook, Google, Netflix and other technology companies. Those tech-focused firms are bulking up on content, more efficient at distribution, and bigger drivers of advertising and subscription revenue. “By controlling the value chain and user experience, they have enormous and direct insights into what consumers are consuming,” Topping says of the tech giants competing with legacy media. “This overarching competitive advantage underpins the rationale for all the traditional merger activity.”
Simply merging or acquiring another company doesn’t necessarily equate to greater insights into the user experience or better value across the supply chain. Achieving those results requires a methodical assessment and integration of talent to form a cohesive, collaborative, data-driven workforce.
Prior to its deal with Fox, Disney already ranked as the largest legacy media and entertainment organization by employee count with a total global workforce of 199,000 at the end of 2017. Another 21,700 people—Fox’s total global employee count at the end of its most recent fiscal year—will be added to Disney workforce upon the deal’s expected closing next summer. By way of comparison, Amazon has more than 563,100 employees, but Netflix has just 5,500.
Disney isn’t planning to retain all of its employees—part of the $2 billion it expects in cost synergies within two years of the deal’s closing will come from layoffs and job eliminations. Beyond that, however, how Disney or any other company evaluates and prioritize its post-deal talent is directly related to its product offerings and go-to-market strategies. For instance, part of the rationale for the Fox acquisition is to add high-quality talent around content creation, digital distribution, and data analysis to develop a streaming video offering to compete with Netflix. To do that it needs to assess incumbent and new talent to determine who has the skill set needed to turn raw viewer data into smarter content bets.
“To an extent, getting better informed about what is resonating with consumers is what these mergers are all about,” Topping says. “Getting the talent and organizational design right for the newly combined entity is mission critical.”