With Comcast officially announcing that it has dropped its bid for Fox, comic book movie fans are eager to see what Disney will do now that the X-Men and Fantastic Four are rejoining Marvel Studios. It will be interesting to see how they bring together our favorite characters, but what other changes can we expect to see from the merger and how will it reshape the media landscape as it exists today?
Higher Prices at the Box Office
Disney has long had the reputation of using its clout to force theater owners to agree to unfavorable terms that smaller studios could have never dreamed of. In 2017, Disney demanded a 65 percent cut of domestic ticket sales for Star Wars: The Last Jedi, along with a four-week hold in every venue and a 5 percent penalty to any theater owner who broke any part of the contract. Disney will have a 40 percent share in the market, which means most theaters will not have any leverage in negotiations. Given that theaters have historically given studios a 50-55 percent cut from ticket sales, a 15 percent loss on nearly half of the films shown (and in most cases the highest grossing) will most certainly result in higher prices for tickets and concessions.
Streaming Content Shapes Negotiations
Before Disney’s acquisition of Fox, both companies owned a 30 percent stake in Hulu. With a 60 percent stake in the company now, Disney no doubt has majority control, but it still will have to play well with others as the remaining shares are owned by Comcast and Time Warner. Before Disney’s acquisition of Fox, it was scheduled to deploy its own streaming service in 2019. Disney will now have two streaming services to load up with content, which shouldn’t be a problem, but it will be interesting to see if Disney goes another direction and uses Hulu as a bargaining chip to secure preferential streaming rights with distributors such as Comcast and Time Warner now that Net Neutrality rules have been rolled back in favor of internet providers.
Netflix Faces More Competition and Pressure to Create Original Content
Prior to Disney’s acquisition of Fox, it appeared that the company was already focusing on how it would incorporate its shared universes and other new content into its own streaming service. Netflix may lose subscribers if Disney intends to offer its content exclusively on its own streaming services, so the push for new content will be intense. Disney/Fox represent 40 percent of the original content in the market right now, so customers who have become accustomed to waiting for releases on Netflix may find that they now need a Hulu membership instead (or Disney’s yet-to-be-named streaming service). To keep up with the competition, Netflix may begin buying up smaller properties to build its own shared universes or investing in the development of new properties which could become very expensive. Netflix also must navigate a new landscape in which internet providers will now have the authority to determine what services they throttle and which they do not. No matter how it plays out, consumers will likely be in a very unfamiliar place in which they have to choose how much they are willing to pay for cable provided content and which streaming services they can afford.
Your TV Guide Schedule
With Disney acquiring most of Fox’s IP, we may see quite the reshuffle of television programming. While Disney will acquire fan favorites like the Simpsons and Family Guy, the FCC prohibits ownership of more than one broadcasting company (Disney already owns ABC), so Fox Broadcasting will remain with New Fox. It will be interesting to see how this issue is resolved because ABC performs very well against much of Fox’s programming. In April for example, America’s Funniest Home Videos and Celebrity Family Feud outperformed Fox’s Sunday night lineup with over 1 million and 5 million more viewers each, respectively. Disney could shift some of ABC’s programming to accommodate the heavy hitters Fox has in its portfolio, which, if done correctly, would make ABC a powerhouse for ratings. But where will this leave Fox Broadcasting?
A Content Bubble Forms
With much of Fox’s IP under new ownership, Fox Broadcasting will have to develop new types of relationships to remain profitable. The first and most logical direction Fox Broadcasting could take would be to look to independent content producers who are not contractually bound to an affiliated network, similar to the way in which Hulu acquired The Handmaid’s Tale from MGM-TV. This will be increasingly difficult, however, as Netflix, Hulu, and other streaming services vie for original content, a bottle neck may develop, and prices could skyrocket for premium programs. If such a bottle neck formed, new production companies would pop up to meet demand, beginning a content-race that would likely still fall short, giving companies with IP some advantage in negotiations if, for example, Comcast began throttling streaming video.
Alternatively, Fox Broadcasting could look to Disney to lease its assets back from Disney, which would eliminate the need to look for new programming (temporarily) and give Disney time to decide how to merge Fox content with ABC. Conversely, while Disney cannot own two broadcasting companies, it may look to lease Fox Broadcasting which would provide Disney a second point of distribution. Both of the latter two options could mean no immediate changes to programming as it is today.
Although many of these changes will have some impact on how consumers access Disney’s content and what they will pay to do so, I am nonetheless excited to see my favorite mutants enter the MCU for a long-awaited reunion. What are you most excited for in the Disney Fox acquisition?