Homer and Mickey in a 21st Century-Disney?: The modern implications of mergers and acquisitions in the entertainment industry

Naomi Owolabi, LLB student, King’s College London

After Star Wars: The Last Jedi achieved $220 million[1] in its opening weekend late last year, Disney’s potential purchase of 21st Century Fox and its subsidiaries for $52.4 billion[2] (£39 billion) may end up conferring to the company dominance over Hollywood. Disney has publicly stated that its aim with this deal is to enter the market of online streaming and rival its competitors in the sector, the most direct one currently being Netflix.

The Disney-21st Century Fox merger, formally proposed last December, is only the latest and most visible example of a trend of convergence among the big players in the Entertainment and Media (E&M) industry in the last few decades. A convergence that is at the centre of the academic and public eye by reason of its potential compatibility with antitrust regulation and potential economic fallouts. This article seeks to explain the direct and broader economic and legal consequences of this negotiating monumental international merger, which is attracting both praises and critiques from Washington.

A Correlative Trend?: The History of Mergers and Acquisitions in the Entertainment Industry

In 1983, 50 major companies dominated the E&M sector. By the early 1990s, this number was down to 23. In 2000, only the 10 global media behemoths remained on the market: AOL, Time Warner, Disney, General Electric, New Corporation, Viacom, Vivendi, Sony, Bertelsmann, and AT&T.

The trend is of a clear decline in the number of media firms in the E&M industry, with a correlative huge concentration in media ownership and growth in the companies’ bargaining power[3] This was catalysed by the realm of online content in the digital revolution, with platforms such as Amazon Prime[4] and Netflix[5] dominating the industry, encouraging traditional entertainment moguls to evolve accordingly. Thus, cross-border deals among E&M companies are becoming more common. In 2009, Comcast acquired the media conglomerate NBCUniversal. In early November, reports circulated of The Walt Disney Company engaging in a bidding war with Comcast[6], Verizon and Sony to acquire 21st Century Fox and its subsidiaries. This is an unsurprising continuation of the converging trend in this area.

The Direct Consequences of a 21st Century-Disney

The Disney-21st Century Fox deal is, legally speaking, an example of a ‘horizontal international merger’, whereby a company (Disney) buys up a competing corporation (21st Century Fox) that produces the same goods, consolidating its position in the industry. Horizontal mergers are not in principle unlawful7. However, their legality must be scrutinised on the basis of their consequences on the market and the consumers. In this case, the already dominant position of Disney may have direct and potential consequences that can rightly be qualified as ground-breaking. To begin with, as publicly declared by Disney, the company would acquire a huge presence in the digital media market becoming a direct competitor of Netflix. (Notably, Disney would obtain from Fox an additional 30% share in the streaming site Hulu [8], which added to the 30% share it already owns, would give it a 60% stake in the online service). Further, the merger would put the company in a quasi-monopolistic position on the film industry market. Indeed, as Disney and Fox already claim a 40% market share of the film industry together[7], the deal will undoubtedly be questioned by the US President Trump’s antitrust team on the risk of inhibiting customers’ choice. The merger would also make Disney more of an international player, incorporating the overseas Fox’s companies Star India and British Sky (that serves nearly 23 million households in Western Europe) into its cable channels.

A lower-scale discussion has developed regarding the consequences of the deal for European telecoms, namely that this would impact Pay-TV competitors (such as Virgin and BT), since they have invested in content to cross-sell television with mobile services, to gain more customers[10].

In contrast, the news sector can breathe a sigh of relief. The Fox Broadcasting network (Fox News, Fox Business and others) will be spun off into a new company, as Disney, who already owns ABC news, has no desire to supplement its news operations.

Economic Implications

If the deal goes through, Disney will assume Fox’s debt of $13.7 billion, and the merger will be worth more than $66 billion[11].

In addition to the legal consequences of the merger described above, the Disney-21st Century merger, as an enormously relevant economic move towards concentration in the E&A industry, may also have wider worldwide macroeconomic repercussions.

Indeed, macroeconomists[12] have found a link between ‘market power’ and some of the historic and current challenges for the American economy from 1950 to 2014, such as:

  1. Stagnating wages,
  2. Low labour-force participation,
  3. Less business creation, and
  4. Lower interstate-migration rates.

Specifically, the work of De Loecker and Eeckhout [13]  has highlighted causal pathways between companies’ increasing ‘market power’ and the mentioned macroeconomic issues, in the sense that such issues are most prevalent in industries with concentrated market power. Among these industries, there are undoubtedly the technological sector (Microsoft and Apple), the online search platforms (dominated by Google and Facebook), and, as seen in the recent trend discussed above, the entertainment industry (Disney, Time Warner, Fox and Netflix).

For consumers, the general economic effect of concentrated market power can be confusingly both positive and negative. In a positive sense, in the face of the evolution of the E&M market in the above-mentioned sense of convergence, the protection of consumers’ rights will require a greater focus in regulatory law on the part of governments. However, in a negative sense, lack of competition inevitably resolves into fewer incentives for companies dominating the market to keep prices low for consumers, potentially leaving them in a worse condition in the long run.

Ripples in Washington: The Government & Legal Response to the Proposal

Despite the clear antitrust and economic concerns arising out of the Disney and Fox deal, the Trump Administration is publicly supportive of it[14]. This may come as a surprise as the US Justice Department fought AT&T’s $85.4 billion acquisition of Time Warner (a vertical merger of two non-competing corporations)15 in 2016. On that occasion, antitrust regulators insisted that the transaction would hurt both consumers and competitor companies.  Notably, Assistant Attorney General Makan Delrahim of the Department’s antitrust division outlined the ‘higher monthly television bills and fewer of the new, emerging innovating options that consumers are beginning to enjoy’[16] in his extensive criticism of the merger.  At the time, AT&T executives importantly speculated that it was President Trump’s battle with media giant CNN[8] that fuelled the Justice Department’s response, rather than compliance with antitrust regulations.


The Disney-21st Century merger falls into the trend of a transformation of the entertainment industry from traditional platforms to digital sites whose control is concentrated in the hands of few companies.

Beyond the political considerations behind mergers, the role of antitrust law should be recognised as of utmost importance. As seen before, a potential monopoly or quasi-monopoly of Disney of the film industry, combined with its enhanced presence in the sector of online subscription to streaming services may have a negative impact on competition in the E&M industry, on consumers, and, more indirectly, and broadly, on the country’s economy as a whole.

Will a 21st Century-Disney merger meet the definition of a monopoly in the end? For now, Homer and Mickey are yet to tie the knot.


[1] Anthony D’ Alessandro, ‘‘The Last Jedi’ Opens To $220M & Will Send 2017 To $11B: How Disney Still Wins With ‘Star Wars’ Franchise – Monday Final’ (Deadline, 18 December 2017) <http://deadline.com/2017/12/the-last-jedi-star-wars-opening-box-office-records-1202228444/> accessed 10 January 2018

[2] The Walt Disney Company To Acquire Twenty-First Century Fox, Inc., After Spinoff Of Certain Businesses, For $52.4 Billion In Stock, at https://thewaltdisneycompany.com/walt-disney-company-acquire-twenty-first-century-fox-inc-spinoff-certain-businesses-52-4-billion-stock-2/ (accessed 11 January 2018)

[3] Rajesh Kumar, Mergers and Acquisitions in the Entertainment and Media Sector, in Mega-Mergers and Acquisitions (2012, Palgrave Macmillan, London)

[4] Amazon Inc Stock Quote US Nasdaq’ (AMZN Stock Price, 26 January 2018 (last updated)) <https://www.marketwatch.com/investing/stock/amzn> accessed 10 January 2018

[5] Netflix Inc Annual Financials’ (NFLX Annual Income Statement, 26 January 2018 (last updated)) <https://www.marketwatch.com/investing/stock/nflx/financials> accessed 10 January 2018

[6] Meg James, ‘Comcast, Sony Pictures jump into bidding for 21st Century Fox’s media assets’ (Latimescom, 17 November 2017) <http://www.latimes.com/business/hollywood/la-fi-ct-comcast-21st-century-fox-20171116-story.html> accessed 12 February 2018

[7] George A Hay and Gregory J Werden, ‘Horizontal Mergers: Law, Policy, and Economics’ [1993] 5 (1147) Cornell Law Faculty Publications

[8]Todd Spangler, Hulu’s Future: What Disney-Fox Deal Means for TV-Streaming Venture (Variety, 14 December 2017) <http://variety.com/2017/digital/news/hulu-disney-fox-deal-future-tv-streaming-1202640711/> accessed 11 January 2018

[7]Scott Mendelson, ‘Hollywood Is About To Become A 3-Way Battle Between Disney, Universal And Warner Bros’ (Forbes, 13 Dec 2017) https://www.forbes.com/sites/scottmendelson/2017/12/13/hollywood-is-about-to-become-a-cage-match-between-disney-universal-and-warner-bros/#210ab9cd43fa accessed 2 February 2018

[10] Liam Proud, Disney’s Fox Deal May Force European Telecoms to Retreat (The New York Times, 14 December 2017) </https://www.nytimes.com/2017/12/14/business/dealbook/disney-fox-europe-telecoms.html/> accessed 10 January 2018

[11] Cynthia Littleton and Brian Steinberg, Disney to Buy 21st Century Fox Assets for $52.4 Billion in Historic Hollywood Merger (Variety, 14 December 2018) <http://variety.com/2017/biz/news/disney-fox-merger-deal-52-4-billion-merger-1202631242/> accessed 11 January 2018

[12] Jan de Loecker and Jan Eeckhout, ‘The Rise of Market Power and the Macroeconomic Implications’ [2017] NBER Working Paper No.23687, 1-44

[13] Ibid

[14] Dominic Rushe, ‘Trump applauds Murdoch over Disney-Fox deal amid row over Time Warner’ (The Guardian, 14 December 2017) <https://www.theguardian.com/media/2017/dec/14/donald-trump-rupert-murdoch-disney-fox-merger> accessed 2 February 2018

[15] Cynthia Littleton, Judge Sets First Hearing Date in AT&T-Time Warner Merger Lawsuit (Variety, 29 December 2017) <http://variety.com/2017/tv/news/att-time-warner-merger-lawsuit-1202626286/> accessed 11 January 2018

[16] Department of Justice, Office of Public Affairs, ‘Justice Department Challenges AT&T/DirecTV’s Acquisition of Time Warner’ (The United States Department of Justice, 20 November 2017) <https://www.justice.gov/opa/pr/justice-department-challenges-attdirectv-s-acquisition-time-warner> accessed 2 February 2018

[8] Josh Kosman, ‘Legal experts say Trump is free to meddle in AT&T merger’ (New York Post, 27 November 2017) <https://nypost.com/2017/11/27/att-struggles-to-blame-trump-for-blocking-merger/> accessed 2 February 2018