The Walt Disney Company has come to an agreement to buy most of 21st Century Fox’s assets for $52.4 billion, but before the deal goes through, it will face scrutiny from antitrust regulators. The Department of Justice (DOJ), under the Trump administration, made the surprising and misguided decision last month to sue to block the merger of AT&T and Time Warner, so it’s hard to predict how DOJ will react to the Disney-Fox deal. Given that the deal will increase competition in online streaming and might encourage Hollywood to keep taking risks on big-budget films, the government should let the transaction go through.
Although Disney and Fox compete in many markets, the rapidly shifting media marketplace has undermined the strong position that these companies have long occupied. With the rise of online streaming platforms such as Netflix—valued at over $80 billion—and Amazon—valued at over $560 billion—Disney and Fox face stiff competition from Internet rivals.
Apple and Google are also major players in the world of video distribution, and their importance will only grow as consumers increasingly consume video programming online.
Meanwhile, Disney, Fox, and the other major Hollywood studios continue to earn disappointing box office revenues as consumers turn their attention to other sources of entertainment.
Against these shifting tides, the combination of Disney and (most of) Fox is a strategy aimed at keeping up with an array of deep-pocketed rivals. The merged firm might be able to cut its film distribution and production costs, making it easier to gamble on risky film ideas, from indie flicks to big-budget would-be blockbusters. Under the same roof, Disney and Fox would have a controlling stake in Hulu, a streaming television service that lags behind Netflix and Amazon in terms of subscribers and original programming.
Hopefully, antitrust regulators will recognize the long-term logic of this deal, instead of dwelling on the companies’ respective market shares and assuming that big is the same as bad. The Department of Justice has already made one major mistake this year with the AT&T-Time Warner lawsuit. Seeking to block Disney from buying Fox would be yet another blunder.