Just what will happen to 20th Century Fox's R-rated franchises after the Disney merger? There have been recent reports that, as feared, Fox will be "significantly downsized" as part of the merger. Although Disney still plans to release all completed Fox movies - meaning we should yet see X-Men: Dark Phoenix and New Mutants - they'll then reportedly be ruthless about deciding what happens next. The rest of Fox's properties may be shelved if they don't fit within Disney's scope of making "family-friendly, franchise-focused" movies.

This is a worst-case scenario for the film industry. Fox is primarily known as a studio that takes risks (explaining why Disney is choosing to keep the award-winning and critically-acclaimed Fox Searchlight brand). Should these reports be accurate, Disney's approach will drastically reduce the number and range of movies released each year.

Related: Everything That Must Happen Before Disney Actually Owns Fox

But will Disney really take this approach? They'll have just spent $71.3 billion purchasing the bulk of Fox's film and TV empire. So does it make business sense for the studio to simply drop so many properties and projects?

Disney Has a History of Releasing R-Rated Movies

screenshot of mayan actors in apocalypto

While it's true that the Disney brand isn't associated with R-rated films, the studio does have a history of allowing subsidiaries to do so. The most notable example has been the Touchstone label, targeted specifically at mature audiences.

In the early 1980s, Disney's family-friendly brand became something of a weakness. The studio attempted to diversify towards the new PG rating, but a number of box office failures - including The Black HoleTron, and Condorman - led Disney to take a different approach. Then-CEO Ron W. Miller founded Touchstone, intended as a label for movies that weren't Disney's typical fare, including both PG and R-rated films. Into the 2000s, the success of the Disney-branded PG-13 Pirates of the Caribbean: The Curse of the Black Pearl led the House of Mouse to reconsider; many PG projects were absorbed back into the main Disney brand. Touchstone continued to release R-rated films like Gangs of New York and Apocalypto through the 2000s, though. The last R-rated movie released under the Touchstone imprint was The Fifth Estate, back in 2013.

In theory, then, there's no reason Disney couldn't continue the practice of releasing R-rated films under a different label. The studio could choose to relaunch the Touchstone brand, for example, or simply retain the existing 20th Century Fox brand, continuing to develop and release their R-rated Fox properties. But would Disney really take this approach?

More: Every Movie Franchise Disney Has Bought From Fox

Page 2: Disney's Stance on R-Rated Movies Isn't Likely to Change

Fox Searchlight Pictures Logo

More Recently Disney Has Been Stricter - And That Won't Change

Historic precedent doesn't necessarily mean that the present-day Disney would release R-rated films. As already mentioned, the last R-rated movie released under the Touchstone banner was back in 2013. Meanwhile, in 2010 Disney sold off Miramax, another imprint they'd previously used for mature content. The last five years have seen Disney double down on their family-friendly reputation, and they're unlikely to change that.

R-rated movies are, unfortunately, largely irrelevant to Disney's current strategic direction. While audiences are excited about the X-Men and the Fantastic Four returning to Marvel, Disney is more interested in access to the Fox Vault, which they can use to boost the amount of content on their upcoming streaming service. The Fox purchase gives Disney both the content and the distribution channels to truly compete online. And, significantly, they've already confirmed that there will be no R-rated movies on the streaming site. That content will instead be pushed to Hulu, which Disney will own a majority stake in after the deal.

Hulu will become the more mature alternative to the Disney streaming service, home to the last remaining adult fare and the Fox Searchlight movies. Disney CEO Bob Iger has suggested that having three separate streaming services - the family-friendly one, Hulu, and ESPN Plus - will give the studio something for everyone, and some industry analysts are speculating that Disney will offer a bundle of the three. But the future of Hulu does seem to be a lower strategic priority to Disney than the main streaming service, and Hulu is only available in the United States. The family-focused streaming service, in contrast, will be international in scale.

It's important to note that streaming services like Netflix traditionally channel more advertising and money into their shows than into their movies. There's a simple reason for this; due to their episodic nature, a TV series drives repeat engagement with a streaming service, whereas most viewers only watch the same movie every now and again. Thus Disney's first priority will be family-friendly content for its main, global streaming service. The second will probably be new and continuing TV shows. R-rated movies will be very low down the list.

Related: Is Anyone Actually Watching Netflix's Original Movies?

The Franchises Are Too Valuable To Be Killed Off

Deadpool Kills Hitler in the Super Duper Cut

And yet, for all that's the case, Disney will have paid a lot of money in order to purchase the Fox portfolio. They're hardly going to sit on franchises as valuable as Alien/Predator, for example, worth almost $2 billion in the worldwide box office (without adjusting for inflation). Disney is also unlikely to ignore the recent success of the Kingsman movies, where both installments grossed over $400 million against budgets of approx. $100 million.

Fan attention has focused on Deadpool. The Merc With A Mouth's R-rated humor has set it apart from the rest of the superhero genre, and star Stefan Kapicic has argued Disney would be fools to change it. "You don’t want to destroy something that created so much money," he noted, "and first of all, you need to satisfy fans." Bob Iger has assured that Disney wants more Deadpool sequels, and even hinted at the possibility of an R-rated Marvel brand. This raises the possibility that Disney will judge each R-rated franchise on its own merits, working on a case-by-case basis.

Page 3: What Will Happen to Fox's R-Rated Brands?

The R-Rated Franchises Could Become PG-13

One possibility is that Disney will choose to turn some of these franchises into hard PG-13s. It's important to note that a PG-13 rating isn't quite so restrictive as is commonly imagined. The rating covers a multitude of films, from The Incredibles to Skyfall, from Madagascar to Battle for Terra. Some studies have suggested there's now more gun violence in PG-13 films than in R-rated movies. Back in 2013, Philomena caused controversy when it was given a PG-13 rating in spite of uses of the "f-word."

In theory, that seems like a solution. In practice, though, it's rather problematic. Disney won't retain their family-friendly reputation by tilting towards hard PG-13s, and a Skyfall-esque Kingsman would look quite incongruous sat next to Beauty and the Beast and Tangled on the streaming service. Lovers of the affected franchises would be furious at the change, and it's unlikely they'd appeal to new viewers either. It's possible there will be some isolated examples where this could work. Perhaps future projects akin to Shane Black's The Predator could become a hard PG-13. But it won't work for all of these films, and probably not for most of them.

Related: Marvel Should Invest in a Marvel MAX Movie Imprint

The Rights Could Be Sold To Other Studios

That brings us to one other interesting possibility - that Disney could choose to sell the rights for some of these franchises off to other studios. They would thus treat these R-rated franchises as a well-timed injection of cash, an additional financial buffer after the expense of the Fox purchase and associated redundancy payments. In financial terms, this would be a smart approach, and it would prevent Disney from getting sidetracked by franchises that lie outside its current strategic direction.

It's true that this would essentially involve Disney selling some tremendous brands to their rival studios. But notice that Disney doesn't actually compete in some of these markets. Black Widow is unlikely to be anything like as sexually charged as Red Sparrow, for example, while none of Disney's alien invasion movies will have the brutality of Aliens. In a strange way, this may also reduce competition in the markets Disney tends to prioritize. as their rivals would have invested a lot of money in order to purchase these R-rated film rights, and would thus concentrate resources and marketing on them.

It's likely there'll be no "one size fits all" solution to this particularly thorny problem. Reports that Disney is focusing on "family-friendly, franchise-focused" movies rightly cause a lot of concern for industry figures, and could have profound implications for the shape of the entire entertainment industry. They'll probably be confirmed - or denied - during Bob Iger's next shareholder call, where, hopefully, we'll get a sense of just what Disney aims to do with these less than family-friendly properties.

More: How The Disney Purchase Has Already Impacted Fox