A month after it sued to block In&T’s purchase of Period Warner, President Trump’s Justice Division may have to get started on scrutinizing another big media package: Disney is widely expected to acquire the majority of 21st Century Fox.
In a few respects, a potential Disney-Fox deal would pose more antitrust problems when compared to a mixture of AT&T and Time Warner, CNN’s mother or father company.
A Disney-Fox merger would couple last year’s major movie studio by box office sales (Disney) with the third-largest (Fox), as tracked by comScore. It would bring together Disney’s Marvel superhero movies, which have included all of Marvel’s big-money heroes except the X-Men, with Fox’s X-Men franchise.
The offer would also combine Disney’s cable channels ESPN, Freeform and the Disney Channel with Fox’s FX, National Geographic, and Superstar India. (Fox Reports, Fox Sports activities and Fox’s broadcast network very likely won’t be section of the package, according to varied news reports.)
Combining all those stations and film franchises could create problems for consumers. The Justice Division will consider to what extent the new business could dominate the marketplace, which consists of increased leverage to drive cable companies and distributors to give higher rates to transport Disney and Fox content.
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For instance, could the combined business negotiate with Comcast by upping the purchase price for FX, threatening to draw ESPN off the atmosphere if Comcast refuses to pay the bigger rate? Those are the scenarios regulators will get investigating.
“Combining two entities with major articles assets in TV and film would typically raise a high degree of concern from an antitrust point of view,” stated Jonathan Barnett, a good professor of media antitrust legislation at USC Gould Rules School.
These sort of so-called horizontal mergers between competition tend to generate a lot more scrutiny than the “vertical” mergers just like the AT&T-Time Warner deal, where one company adds a fresh occupation by buying another, but — at least theoretically — doesn’t remove any competition. And the Trump Justice Division signaled that it won’t get an antitrust pushover: It shocked the business community when it sued to block AT&T’s Period Warner acquisition.
Regulators can pay particularly close focus on Disney and Fox’s rationale for his or her package once it’s announced. Disney has been rumored to be in the marketplace for another giant articles maker to protect itself against Netflix and additional streaming competitors. That might not move regulatory muster in the brand new antitrust era.
The Justice Division has recently indicated that it’s particularly sour on “defensive mergers,” meant to push away competition. Just in the past 2 yrs, antitrust regulators blocked mergers between Staples and OfficeDepot, Haliburton and Baker Hughes, Aetna and Humana and Anthem and Cigna — which claimed they had a need to combine because of difficult market conditions.
Yet each package is unique, and there are several reasons why the Justice Division could allow Disney to get Fox.
For instance, with the notable exception of superhero movies, the two movie studios actually produce several types of content. Disney’s movies are typically geared towards children. Fox has a successful but much less prolific animation studio, and its own primary concentration is action-adventure movies and adult comedies.
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Similarly, Disney’s cable channels revolve around sports activities and family entertainment. Fox’s lineup centers around humor, intrigue and education. Regulators could start to see the company’s property as complementary, instead of competitive.
And the Justice Department could even view one main area of the deal as great for the media market: the companies’ combined stake in Hulu.
Presently, Disney and Fox each individual own 30% of Hulu, which is a third-place but budding streaming player in market dominated by Netflix and Amazon. By combining, Disney would have a bulk stake in Hulu and could turn it in to the go-to destination to watch Superstar Wars, X-Men, Disney Princesses and Kung Fu Panda.
That could place pressure on Netflix and Amazon to lessen their prices. But producing Disney and Fox content exclusive to Hulu could also make customers need to purchase multiple services to view almost all their favorite movies and displays. Regulators would examine that as well.
“By making Hulu more robust, the Justice Division could view the deal as pro-competitive” Barnett said. “On the other hand, that’s not necessarily beneficial to consumers.”
Without a conclusion to the AT&T and Time Warner case, it’s difficult to fully grasp how regulators would react to a Disney-Fox deal.
It would appear prudent for Disney and Fox to hold back for the court’s decision about AT&T and Period Warner’s merger. A Justice Division succeed could empower the regulator to crack down extra heavily on media mergers, giving Disney uncertainty about its odds of success in gaining approval.
Yet by announcing the deal today, the AT&T-Period Warner court circumstance could be concluded before the Justice Department possibly has a probability to weigh in on Disney-Fox. Waiting until following the decision could delay the deal by six months to a year.
In the rapidly changing media landscape, time is of the essence.