With the acquisition of Fox network by Disney Inc. It seems like Disney is prepared to take the next big leap in the world of entertainment 2.0. The reason behind majority of mergers and acquisitions is to maintain the ‘Synergy’ between the companies. Disney bought in a deal of $52.4 billion, the rights of 21st Century Fox’s majority of the assets including the movie franchisees and Fox studios. Well what was the reason for Disney spending so much. How will this affect the future of entertainment distribution? What challenges will the Disney-Fox merger bring in for Netflix?
We all know how Netflix, slowly and steadily captured the entertainment market with its new distribution model. It has already kicked off Blockbuster and is on its way to do the same with the cable TV industry. Netflix has two major pillars on which it sustains against the competition or rather disrupts the entire market. One being its online distribution model and the other is its original content. The revenue model of Netflix clearly states that “Profits Aren’t Important” for them. Netflix has believed in investing heavily behind the original content it creates which is nearly $6 Bn. This when compared to its competitors is the highest as Amazon invests $4.5 Billion, whereas HBO and Hulu (owned by Disney) spend nearly $2.5 Billion.
With the change in time, people’s mode of consuming entertainment is also changing. Media consumption on phones and tablets have drastically increased over the period of time. The players offering online video on demand services have benefited the most. Disney being one of the oldest giant in the media industry still had to deliver its content through the cable TV medium. Where the revenue generation was done through advertisement between the programs. The revenue incurred by offering subscription completely went to the cable TV operators. Even though a large number of channels were owned by Disney, the content was completely distributed across the channels and users don’t buy a pack of all the channels.
Netflix on the other hand has its own platform for offering online content. The revenue model being subscription based, there are no advertisements between the programs. The content from other companies like Viacom, Fox, Disney, Marvel which Netflix airs on its own platform is given least priority than the Netflix originals. The Netflix original movies and shows get a unique placement on the platform. As a result, the Netflix original content remains in the mainstream.
How can Disney-Fox merger be a threat to netflix?
Now after the Disney-Fox merger, what Disney will be planning to do is creating a similar platform for video on demand like Netflix. On this platform, Disney will be able to place its own content which it had to do so previously on Netflix. This in turn will bring the content from all the channels owned by Disney at one place. The platform will have same subscription based revenue generation model. Thus by buying rights from Fox, Disney will have rights to great content created by fox in the past. This also includes movies such as Avatar and Deadpool.
In a time of almost 1-1.5 years, we will be able to see this massive online Disney platform. Bringing in direct competition for Netflix as well as the existing incumbents in the market such as Amazon’s Prime video and HBO. The Disney-Fox merger will surely raise the standards as well as competition in the online media transmission industry.