Disney buys 21st Century Fox: a monopoly on entertainment?

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 Since March 20, Disney becomes the owner of 21st Century Fox and has access to a wide range of franchises and characters

On November 6, 2017, CNBC reported that The Walt Disney Company had been talking for a few weeks with the 21st Century Fox management about the possibility of buying the company. According to the CNBC report, the most important executives of 21st Century Fox shared the opinion that, given the changes that have been developing in the field of media and entertainment thanks to the growth of companies such as Netflix, Google and Facebook , the company would need to achieve a global presence on a large scale that by itself would not achieve, opting for the search for the financial strength of a much larger company like Disney.

Leer en español: Disney compra 21st Century Fox: ¿un monopolio del entretenimiento?

After a few weeks of the report, on December 14 of that same year, Disney officially announced the plans to buy 21st Century Fox for US $ 52.4 billion. After a little over a year and a short bidding war with Comcast, on March 20, 2019, Disney announced the completion of the purchase of 21st Century Fox for US $ 71.3 billion. What does this mean for Disney and for the world of media and entertainment?

With the purchase, Disney has acquired Fox's television and film studios (which include 20th Century Fox and 20th Century Fox Television), the television networks under the name of FX and Fox Sports, National Geographic, the Indian television networks Star India and the 30% of Hulu that was part of the assets of 21st Century Fox ( which makes Disney the major owner of the streaming platform with 60% of the shares of the company).

This means that now Disney is the owner of a large number of franchises and characters among which highlight X-Men & The Fantastic Four (giving Marvel Studios, a company owned by Disney, the opportunity to produce films of almost every character of the comics), The Simpsons, Avatar (film that, being the highest grossing in history for its US $ 2.7 billion in profits according to Box Office Mojo, will have two sequels scheduled for 2020 and 2021 respectively), American Horror Story, Alien , Family Guy, among many others.

Without real competition in the film industry

Given the exponential growth of Disney with the acquisition of the franchises and characters of Fox, is there any other company capable of dealing with it in the world of cinema?

According to different reports made by Deadline Hollywood, a virtual publication specializing in the entertainment industry, Disney has dominated the film industry for the past three years, staying in the first place among the studios with the highest annual global earnings, always above Warner, a company that has remained in second place.

In 2018 it achieved earnings of US $ 7.3 billion (representing 26% of the US market share and 14.2% of the international, respectively 9.7% and 2.05% more than Warner's), in 2017 of US $ 6.5 billion (21.8% of the US market share and 14% of the international market share, respectively 3.4% and 3.24% more than Warner) and in 2016 of US $ 7.6 billion (26.3% of the US market share and 17.2% of the international share, respectively 9.6% and 5.5% more than Warner).

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If Disney's profits were taken and added to Fox's, the outlook would change in such a way that it would be difficult to conceive how Warner or any other company could compete: by 2018, the sum of profits would be US $ 10.8 billion (36.3 % of the US market share and 22.19% of the international market share, respectively 20% and 10.04% more than Warner); for 2017, it would be US $ 10.3 billion (34.7% of the US market share and 22.5% of the international market share, respectively 16.3% and 11.75% more than Warner); and for 2016, it would be US $ 12 billion (39.6% of the US market share and 28.1% of the international market share, respectively 22.9% and 11.3% more than Warner).

What's more, according to Box Office Mojo, if you check the profits that Disney and Fox have had together in the US market alone in the short time since 2019, they would already amount to US $ 498.7 million (US $ 133.6 million more than what Universal has won, a company that until now is in the second place of earnings in the US film market).

The possibility of a monopoly

Since before Disney's acquisition of Fox was completed, industry figures expressed concern about the possibility of forming a monopoly.

For example, the Writers Guild of America West, a union that represents film and television writers, published a statement in December 2017 stating that "Disney and Fox have benefited for decades from the oligopolistic control exercised by the six major media conglomerates from the entertainment industry (…). Now, this proposed integration of direct competitors will make the situation even worse by increasing the market power of a corporation composed of the combination of Disney and Fox. The anti-competitive concerns that emerge from this deal are obvious and significant".

During the same days, the publication Axios characterized the purchase of Fox as a case of horizontal integration -when a company buys or integrates with another of the same industry and a similar financial power-, pointing out how this can be seen as a situation in which a company is eliminating its competition.

However, despite the criticism and concerns, Disney has managed to pass anti-competitive practices regulations in the countries where it operates. For this, according to The Hollywood Reporter, the mega-company has agreed to sell 22 regional sports networks in the United States, its sports networks in Brazil and Mexico, and its shares in television networks such as Lifetime and History in Europe.

LatinAmerican Post | Juan Diego Bogotá

Translated from "Disney compra 21st Century Fox: ¿un monopolio de entretenimiento?"