Disney may be violating the bedrock of U.S. antitrust law.
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In 1948, the U.S. Supreme Court made a landmark decision that changed the movie industry forever,
in a 7-1 vote in the case United States v. Paramount Pictures Inc. the Court ruled that
movie studios could no longer own and control the theatres in which their films were shown.
Up to this point, in an era known as Hollywood’s Golden Age, the major movie studios were completely
vertically integrated, they created the films in their own lots with writers, directors,
editors, etc. that were all under contract with them, processed and created the movie
prints, and owned the distribution through the theaters that were only allowed to show
a particular studio’s films.
Imagine having to go to one theater to watch the new Star Wars film and a different theater
if you want to watch the latest scary movie from BlumHouse.
But, wait this sounds kinda familiar, doesn’t it?
That’s basically the business pitch behind Disney+.
If you want to watch the Mandalorian to be a part of the Baby Yoda hype or watch Disney’s
extensive catalogue of films that aren’t available anywhere else, you have to pay $6.99/month
for Disney+.
And you won’t find any content on there that Disney doesn’t own.
In fact, in the last few years it seems like every major movie and TV studio has come out
with their own streaming platform and in the case of Netflix, they vertically integrated
backwards by becoming a distribution platform that now also produces its own content.
Of course, since they also still distribute far more content they do not own, which separates
them from the likes of Disney+.
The 1948 Supreme Court case that broke up production and distribution is based on antitrust
laws.
Which are a set of laws with the purpose of regulating private business to promote healthy
competition with the explicit purpose of benefiting consumers.
Essentially, whenever companies control a market in such a way that the consumer is
forced to spend more money, there’s usually an antitrust case to be made.
The idea is, if there’s a lot of competition amongst companies in the same industry, they
will gain market share by appealing to consumers through better products and services and of
course by offering lower prices for those products and services.
If one or two companies already have a majority of consumers buying what they’re selling,
due to a lack of other options, then those companies can essentially charge as much as
they want without fear of losing customers to someone else.
This is called an oligopoly and was exactly the situation with the major movie studios
at the time, lead by Paramount the largest studio at the time.
Making theaters independent allowed for smaller studios to get their films in front of audiences
and actually compete with the big guys.
And it also led to more competition amongst theaters themselves.
In my opinion, there is an antitrust case to be made around streaming services as consumers
are forced to pay monthly subscriptions for access to content by some of the biggest studios,
with Disney leading the pack.
This is particularly true as media properties are increasingly consolidated.
Disney alone has gobbled up Marvel Studios, Fox, Pixar, Lucasfilm, ABC, FX, National Geographic,
ESPN, A&E, Lifetime, History Channel, and a bunch of other intellectual properties.
Once these so called streaming wars come to an end, I suspect there will only be a few
winners because consumers aren’t going to subscribe to ten different platforms, they’re
going to go where the most and best content is, in other words the platforms with the
deepest pockets and most extensive catalogues.
Once that happens and you’re hooked on Disney+, you can expect that $6.99/month to start ticking
up, just like the monthly fee for Netflix has risen over the last several years while
it was essentially the only big player in streaming.
To me it’s pretty clear that streaming platforms are the new theaters and philosophically there’s
very little difference between them besides the fact that you don’t have to leave your
couch to watch a film.
Allowing big production studios to fully own the distribution of their content will eventually
lead to less competition and a higher cost for consumers.
While I personally spend way too much time watching Netflix and more recently Apple TV+,
I wonder if we’re just reliving Hollywood’s Golden Age, both the benefits and the consequences.