By Samantha Cook, Staff Writer
Over the last few weeks, the Walt Disney Company and 21st Century Fox have reportedly discussed the sale of many of Fox’s media and entertainment assets to Disney.[1] Though the details of the talks have been confidential, it seems clear that Disney’s ultimate goal is to continue to grow its share of the entertainment market, like its competitors in Netflix and AT&T, which recently acquired Time Warner.[2] Disney’s media kingdom already includes such notable companies and franchises as Marvel Studios, Pixar, ESPN, ABC, Lucasfilm and Walt Disney Studios, among many others. Now, it may be looking to add Fox’s cable network, FX, and its entertainment studios, which come with the perk of Marvel’s remaining X-Men and Avengers franchises.[3]
This move won’t surprise anyone who has been paying attention to recent trends in the entertainment industry. Technology is quickly changing the way people consume media and entertainment, and the industry must adapt. In 2011, Comcast bought NBCUniversal for $30 billion, including its cable channels, Universal movie studios, theme parks and other assets. Comcast’s chief executive described that deal as “the ideal entertainment and distribution company.”[4] By 2011, Comcast had 23 million video subscribers and 17 million Internet subscribers.
Regulators panicked. Comcast’s transaction with NBCUniversal took 13 months to receive approval from the FCC and the Justice Department, and even then, the approval was conditional. One notable condition was that Comcast had to give up “management rights” to Hulu, the online streaming service. Comcast also had to agree to sell broadband internet service at $49.95 per month for three years, a price set by the FCC, and to many other provisos as well.[5]
Lawmakers, regulators, and courts have been concerned with protecting competitive markets since 1890, when Congress passed the Sherman Antitrust Act. Although the historical anti-trust law was created with railroads and oil tycoons in mind, entertainment empires pose a 21st century monopoly question. Film production companies are rapidly consolidating and scaling to keep up with new faces in the industry like Amazon Studios and Netflix. Large-scale mergers are automatically reviewed by the Department of Justice and the Federal Trade Commission to ensure that the transaction is not “in restraint of trade.”[6] If during the review the DOJ finds that the merger would violate the law, it has the authority to block the merger.[7]
What exactly does it mean for a transaction to be in the restraint of trade? Market share, barriers to entry, potential growth of the industry, and anti-competitive activities are all factors that play into the elusive antitrust analysis. The DOJ and FTC will likely start with Disney’s market share. Last year, Disney and 21st Century Fox shared 40% of total film studio revenue in the United States.[8]. Thor: Ragnarok marks the 17th straight number-one opening for Disney’s Marvel Studios, grossing $13 billion in worldwide revenue since last week.[9] Disney is $1 billion more profitable than Viacom, its next largest competitor.[10]
Disney is known for its high-budget, high-quality films, which are now released at such a rapid rate it seems impossible to keep up. Many other film studios, which have until now been able to thrive on films of a more modest budget, can no longer compete with Disney’s constant stream of blockbusters. Filmmakers’ access to the Marvel universe is arguably one of the most valuable commodities in Hollywood today, where superhero movies seem to have become an industry of their own. Regulators could reasonably consider Disney’s continued success with the Marvel Cinematic Universe films, coupled with its acquisition of the remaining Marvel franchises, and conclude that with great power comes great responsibility.
Sources
[1] https://www.nytimes.com/2017/11/06/business/media/disney-fox-deal.html
[2] Id.
[3] https://www.theatlantic.com/business/archive/2017/11/disney-21st-century-fox/545126/
[4] https://www.reuters.com/article/us-comcast-nbc/comcast-completes-nbc-universal-merger-idUSTRE70S2WZ20110129
[5] http://www.reuters.com/article/us-nbc-comcast/comcast-wins-approval-for-nbc-universal-combination-idUSTRE70G66F20110118
[6] 15 U.S.C. § 1
[7] 15 U.S.C. § 25
[8] https://www.theatlantic.com/business/archive/2017/11/disney-21st-century-fox/545126/
[9] http://money.cnn.com/2017/11/05/media/thor-ragnarok-box-office/index.html
[10] https://www.theatlantic.com/entertainment/archive/2017/11/the-chilling-implications-of-a-disney-fox-merger/545135/
