Hollywood Merger Mania: Is Consolidation the Future of Media & Entertainment?

The rise of on-demand entertainment platforms –– Netflix, Facebook, Hulu, and Amazon, to name a few –– has brought on massive change in the way people consume news, movies, and TV shows.

To compete in this fast-paced digital media marketplace, large content studios and networks are being forced to look for ways to bulk up in market share and reach. And the landmark Fox-Disney merger is testament to this changing tide.

Disney’s $52.4B acquisition of Fox will undoubtedly transform Hollywood’s most successful studio into an even more powerful force. If the deal is approved, it would give Disney control over Rupert Murdoch’s global entertainment empire which includes:

  • 21st Century Fox's movie studio
  • Cable channels FX and National Geographic
  • 300-plus international channels and 22 regional sports networks
  • Ownership of important titles such as Avatar, The Simpsons, and countless other franchises
  • Fox’s 50% share of Endemol Shine Group, the Star India satellite service
  • Fox’s 39% interest in European pay-TV provider Sky
  • Fox's 30% stake in Hulu

The agreement, which was announced in December, is now working its way through the regulatory process. And according to a recent statement from Bob Iger, it’s expected to take about 12 to 18 months to complete.

So, what does this kind of historic deal mean for the industry?  We sat down with our CEO, Jason Kassin, to get his take.


The Disney-Fox deal will be the second largest ever, after the AOL-Time Warner merger in 2001 for nearly double the amount at $103.5 billion. What prompted this deal?

Jason Kassin: Disney and Fox represent the “Old Guard” (i.e., physical studios that produce and distribute content). Back in the day, you needed a massive infrastructure in order to compete at this level. But when the Internet came about, everything changed. Today, we’re in the middle of a digital world where Amazon, Netflix, and Hulu are the innovators. In order to compete with this new business model, the traditional Hollywood system realized they had to pivot. What I find most interesting about this acquisition is that Disney will be getting a larger share of Hulu which could give them serious firepower to compete against Netflix and Amazon. Though it will be interesting to see how this unfolds relative to their recently announced family-oriented SVOD system.

 

Given the massive shift to digital, what do you predict the media & entertainment landscape will look like in the next 5 years? Will consolidation continue? Will the market shrink?

Jason Kassin: Well, for starters, the tech giants will continue to rise to the top because they’re unfettered by the constraints of the traditional Hollywood business model. The way they create and source their content is holistically different; moreover, they don’t have an antiquated system based on decades of corporate legacy. They have a different approach to filmmaking that is born out of the Internet age.

The traditional studio era that we’ve all known for the past several decades is coming to an end. The world of being a physical studio with a backlot has been supplanted by the Netflixes and Amazons of the world. The modern era studio is now a digital studio. Over the next five years we’re going to see major change: to avoid becoming irrelevant, every major player in the industry will be forced to evolve into a digital studio.

 

Additional Reading:
The Future of Now: Adapting to a Culture of Convenience