Walt Disney Corporation-s recent $52.4 billion mega-deal for most assets of 21st Century Fox represents something extraordinary for media consumers: A new boon to the golden age of streaming.
Essentially, we’re seeing the old entertainment giants working to keep up with the market challenges put forth by companies like Netflix and YouTube. Good, old-fashioned competition. In the process of adapting to this new world for entertainment, the deal represents how Disney is seeking to improve the experience of their consumers.
Among the assets Disney has acquired from Fox include television stations FX and National Geographic, profitable film franchises like Avatar and X-Men, ESPN, Fox’s negotiating position in talks for Sky, and it’s 30 percent stake in Hulu. Each of these entities presents Disney with opportunities to expand its brand in its efforts to stay relevant in an era of declining ticket sales at theaters, and the slow death of cable television.
Assets such as FX provide Disney with darker television shows it can use to experiment with newer distribution techniques. Indeed, Disney has been one of the major studio holdouts from plans to allow for new releases from cinema to be released almost immediately for video on demand rentals.
Disney hasn’t adapted to online platforms as quickly as other industry giants, knowing that if it adapts film release schedules to reflect the digital age, it will surely speed up the end of cinema chains. Disney has instead opted to take a comprehensive approach by expanding their properties, allowing them to experiment with new distribution models.
The Disney-Fox merger allows Disney expand their catalog, enabling Disney to launch an expansive streaming service without jeopardizing properties like the Marvel University and Star Wars brands. After all, those brands rake in the profits from record breaking box-office openings.
While details are not fully known, acquisition of Fox’s stake in Hulu may provide Disney with the exact means to compete directly with Netflix after their contract with the streaming service ends in 2018. Although Hulu’s complex ownership structure presents a challenge to Disney – with Comcast owning an equal stake in the company – it may be possible to expand the US-only-streaming service to international markets, increasing industry competition.
At the same time, purchasing cinema rights for properties like “X-Men” allows Disney to introduce new characters into the Marvel Cinematic Universe, expanding upon the spectacle these films could offer. By doing so, it could breathe new life into their theatrical releases, providing people with a reason to keep cinemas afloat.
Concerns about Disney’s size after this merger are unwarranted. Despite Disney gaining market shares in conventional distribution channels such as theatrical releases and television, these channels represent an ever-shrinking share of total content consumption.
Studio giants from a pre-streaming era need to engage in deals such as this in order to increase their rate of content production. By changing its business model to reflect market demand, Disney can compete with Netflix and other streaming options.
Online content consumption represents a very different dynamic than TV or cinema-based content consumption. Consumers pick sites with immensely diverse content in order to have the opportunity to watch whatever they want. Unless studios can produce enough content that then becomes as valuable as services in and of themselves, they become reliant on dominant players such as Netflix, YouTube, or iTunes for distribution. Only by adapting to consumer demands for increased availability of titles can studios enter online distribution markets.
This means that the Disney merger is likely to start a massive rethink in studio space, encouraging a reshape of long-term strategies from their major competitors. This will, in the long-run, benefit consumers the most, as there will be more titles being produced, and more choice for which services they would like to stream from.
All this would lower costs for the consumer and provide yet more content in today’s golden age of streaming content. It’s something consumers of all media should applaud.
Ryan Khurana is a research fellow at the Consumer Choice Center and the Institute for Research in Economic and Fiscal Issues. Follow him on Twitter @RyanKhurana.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.
