In November 2017, it was first announced by the news network CNBC that The Walt Disney Company was considering an acquisition of 21st Century Fox. Later that year, a deal was made by the two companies, stating that Fox would sell a portion of it’s assets to the company for $52.4 billion. A bidding war soon ensued with entertainment rival Comcast, but Disney followed through on it’s acquisition quest, officially buying 21st Century Fox on March 20, 2019 for $71.3 billion.
So What’s the Deal?
21st Century Fox stated it’s reason for the sale was to merely exist in the modern and changing entertainment world of the 2000s. Viable competition was springing all around, from companies like Netflix, Facebook, and Google, who were rumored to soon be changing the face of media altogether. Fox stated that joining a financial strong company like Disney would help Fox to further it’s capabilities and continue giving audiences great content.
However, lawmakers and competitors have seen this entire acquisition much differently. Since the deal was made, Disney has been accused by multiple sources of creating a monopoly within the entertainment sector of business. Similar allegations were made popular in recent times by a number of companies in various industries, the most popular being Anheuser Busch InBev, which is one of the three brewers that control 75% of the United State beer market.
How Does Disney Benefit?
The holdings and scope of entertainment with the confines of The Walt Disney Company are endless. Both whole companies, and portions, include ABC, ESPN, A&E, History Channel, Lifetime, Pixar, and Vice Media. Theme parks through Disneyland are also integrated into this content.
Possibly the biggest income source will come from the many characters and names Disney holds within the comic book and movie world. With the Fox acquisition, the titles of X-Men and Deadpool will be rejoined into the Marvel Universe, and all that in addition to Disney’s ownership of the Star Wars Universe through Lucasfilms. Spider-Man and The Avengers are also other popular titles.
The Fox acquisition also brings Buffy the Vampire Slayer, The Simpsons, Aliens, The Planet of the Apes, and Predator.
So Is This a Problem?
Disney has dominated the film industry for the past three years. The combined earnings of both Disney and Fox in 2019 has amounted to almost $500 million. This is more than three times the amount of earnings for Universal, who would come second in this race.
If this is not enough, Disney will also get it’s feet wet in the streaming video services sector through Fox’s part ownership of Hulu. This sector has been made widely popular and profitable through Netflix, and Hulu is not far behind in offering great entertainment.
With Disney’s large revenues and extra cash on hand, the company could use it’s resources to expand Hulu into a video streaming service giant. ESPN sports content is a viable option to be added to this service, in addition to the characters and movies the company holds. Netflix also has many shows of Marvel which Disney produces, and it could easily detract them to provide viewing content on Hulu.
Television is also an avenue worth exploring when discussing Disney’s growth possibilities. In addition to the content it could add to Hulu, the company will acquire television programs of Fox, ABC, the Disney Channel, A&E, and the History Channel. ABC and Fox are among the top TV networks in the United States. Combined cross reference material could bring the Simpsons to Disneyworld, for example, thus increasing viewers and profits. The only negative here would be the decreasing profits in the television industry as a whole.
How Are Others Reacting?
The threat of anti-competition legal cases appear to be imminent, as the endless amount of character holdings and the inclusion of Hulu could cause Disney to enter near-monopoly standings. Companies like NBC and Netflix may be first in line to set up cases against the media giant, to limit their platform capabilities. With streaming video services gaining such popularity, it may be in Disney’s mind to combine all of their media into one central location, thereby making all their content accessible in one place with the mere click of a button. From this viewpoint, one could watch a serious dramatic movie from Fox, and immediately switch over a child friendly cartoon with one of the many Marvel comic book characters.
However, smaller companies would have a very difficult time bringing in lawsuits due to the amount of money it would take to bring Disney down. However, it would be no surprise if certain politicians would step up to help these companies out and maintain Disney from reaching such heights.
The Cash Cow
Hulu will provide sufficient amounts of revenue well into the future from subscriptions, and this would definitely help Disney expand it’s business and fight out various lawsuits they may encounter as time goes on. In addition, other streaming services using characters and movies from Disney are constantly paying them a fee for usage, and this too will make it more difficult to be hit too hard by lawyers.
Disney is currently a very profitable company, and these recent acquisitions have only added to their revenue. It was reported that in the 3rd quarter of 2018, revenues of the company grew by over 11.75%. The company showed operating income of $3.078 billion and a gross profit of $2.322 billion.
Cash has also been increasing in Disney’s overall revenues. All of these things could make the Disney stock a more profitable place to invest. Amazon is also a potential monopoly that has come under fire in recent years, using various tactics to increase it’s size and strength. The Walt Disney Company has been showing very similar signs. Disney’s stock is much cheaper than Amazon, with plenty of room to grow in the future. Disney also pays a dividend while Amazon does not. All of this could veer investors away from Amazon, and they may start investing in Disney instead.
With everything else said, there are a lot of media companies out there, and it seems impossible for Disney to acquire them all to create a surefire monopoly situation. Some of these other companies include NBCUniversal, WarnerMedia, Sony Corporation, CBS Corporation, Vivendi, and Bertelsmann.
Some reputable names in the entertainment industry have showed their dejection of Disney’s act. The Writers Guild of America West have put out press releases stating that Disney has gotten into some anti-competitive type waters with this acquisition. Axious publication has also said that Disney is silently edging towards monopolistic behavior by eliminating it’s competitors.
But the truth is Disney has passed all the anti-competitive practices regulations within the various countries around the world in which it holds it’s corporations. They have even went as far as to sell some major sports networks worldwide, as well as sell off shares in network television like Lifetime.
Time will only tell what Disney and the entertainment industry has lined up for the future.