Lilly Sweeney
From the big screen to the small, Disney is a common household name. Through several recent acquisitions, Disney expanded its empire and set its sight on new horizons—online streaming services. The most recent acquisition of 21st Century Fox brings Disney one step closer. While the Department of Justice (“DOJ”) approved the merger in July 2018 with very few concerns, the online streaming services component might require changes in the entertainment industry. In addition to owning several of Fox’s big movie franchises, Disney now holds a majority of the shares in Hulu. Disney had already planned on establishing its own streaming service exclusively for Disney titles and had begun to pull its content from Netflix as licensing agreements expired. However, with a controlling stake in Hulu, Disney no longer needs to build a streaming service from scratch and can instead use Hulu as its exclusive streaming service.
Online streaming services have grown to become one of the most popular viewing avenues for consumers, with Netflix, Amazon, HBO, and Hulu among the top competitors in the online streaming service market. However, online streaming services are no longer only offering third-party programing as many online streaming services have begun producing original content. This creates an issue defining streaming services in the entertainment industry as a whole. Are they distributors or producers? Both? How seriously should the DOJ consider the online streaming service when evaluating mergers and acquisitions?
An example of a concerning merger between a distributor and producer occurred during the recent AT&T-Time Warner merger. Though it was ultimately unsuccessful in preventing the merger of the two companies, the DOJ raised concerns about how the market could be affected by a merger between a distributor and producer. This was not the first time the DOJ has intervened to keep one company from controlling both aspects in the entertainment industry. The Paramount Consent Decrees, which resulted from United States v. Paramount in the 1940s, aimed to keep production studios separate from “exhibition,” which was limited to movie theaters at the time. The desire to keep the two separate arose when production studios would limit exhibition of their films to only those theaters which the studio controlled. In doing so, the studio was then able to control the ticket pricing and charge higher prices because the moviegoers could not go anywhere else if they wanted to see that particular film. In 2018, the DOJ announced that it was reviewing the Paramount Consent Decrees and revising them to accommodate for changes in the industry. The DOJ could use this opportunity to address the issues brought about by online streaming services during this revision.
Alternatively, the DOJ could recognize online streaming services as a new category for the entertainment industry, separate from both the producer and distributor labels—perhaps acknowledging it as a mixture of both. This would modernize the law, because online streaming is gaining popularity and many of the film studios see it as the possible future of the film industry. By acknowledging this new combined role, the DOJ would be better equipped to evaluate the online streaming service as a whole, especially when evaluating mergers, thus ensuring that competition was not stifled by any one company. A Disney-only streaming service would attract a lot of customers given the brand loyalty and name recognition. The future is online, and Disney, just like many other film studios, is looking for ways to connect to their viewers in this ever-expanding platform.