A Closer Look at the Disney vs. Netflix Debacle

Jennifer Holt remarks in her book Empires of Entertainment that “just six conglomerates now dominate the global media marketplace, sharing the common traits of convergence, consolidation, and a major international presence along with the apparent drive to ‘control everything’…” (2)

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Disney’s extensive list of media assets.

Disney is one of these six key players—as has been remarked upon in other posts on this blog—and has been since their “Renaissance” period of the 1990’s. Notably, Disney has continued their trajectory of success in recent years by acquiring media assets such as Marvel and LucasFilm. These acquisitions, and the successes that have resulted, prove that Disney has established themselves overall as a leader in the production and distribution of a host of major franchises, from Star Wars to The Avengers and beyond.

In addition to production and distribution, Disney is beginning to move toward taking control of the exhibition of their most successful features. This observation comes on the heels of CEO Bob Iger’s announcement that Disney plans to rescind their exclusive streaming deal with Netflix, with the intent of launching their own direct-to-consumer streaming service by late 2019.

This announcement was alarming to some entertainment insiders, but it’s also a decision that is not without precedent. In fact, this announcement mirrors, in some ways, the circumstances behind the “Premiere” controversy of the early 1980’s, which Holt also chronicles in her book. She summarizes that in late 1979, “Paramount, MCA/Universal, Twentieth Century–Fox, and Columbia…began developing plans for a new pay television channel” called Premiere, which would “allow the studios to distribute their own films exclusively to their own pay cable outlet.” (29) These four studios entered this deal “with the goals of increasing revenues and gaining tighter control over the pricing and distribution of feature films in pay television…” (30)

One could draw a direct correlation between these earlier motivations to those of Disney today; after all, both situations involve industry leaders seeking greater control over the exhibition of their features on a new industry-shifting media platform, from pay cable then to digital streaming now. In fact, Iger has expressed this exact sentiment in a statement to CNBC: “This represents a big strategic shift for the company,” he says. “We felt that having control of a platform we’ve been very impressed with after buying 33 percent of it a year ago would give us control of our destiny.” (my emphasis)

While we have yet to witness Disney’s destiny, we can recall the notoriously disastrous outcome of the Premiere case. Holt writes of these results:

“Unfortunately for the studios (and much to the delight of HBO), Premiere’s timing would prove to be the crucial misstep. With the Carter administration’s antitrust division still at work, attitudes toward the film industry and prevailing interpretations of antitrust statutes were not yet driven by the neoliberal economic philosophy that would guide regulatory practice once President Reagan was in office. …

On December 31, 1980—less than four months after the deal was announced and just three days before Premiere was scheduled to begin service—a preliminary injunction was issued that restrained the channel from going on the air, and the launch was abandoned.” (33)

Premiere was disbanded by the FCC on the grounds that the channel would create an “unfair competitive advantage in the workplace”, thus violating the Sherman Antitrust Act of 1890. (33) With that said, it is important to acknowledge that the climate that produced this decision has since been radically changed. Since the dawn of the era of “structural convergence”, a culture of conglomeration has burgeoned the rise of the aforementioned “Big Six” in the global media marketplace. In other words, we now have a different climate in the entertainment industry that might make something like the Premiere case more accessible for a major studio to undertake, unfair advantage or otherwise.

In any case, perhaps the most concerning aspect of Disney’s announcement concerns Netflix’s response; so far, they’ve actually been doing quite well. In fact, Disney’s market shares went down after the announcement, whereas Netflix’s remained largely the same. Netflix also struck back at Disney shortly after their announcement by signing Shonda Rhimes for an exclusive deal, thus drawing a crucial creative force away from the Disney-owned ABC network. Ultimately, it seems that Netflix has remained largely nonplussed about the matter; chief of content Ted Sarandos remarked the following just last week at an investors interview:

“I think that everyone is going to have their own strategies and it’s exciting that everyone is trying to make over-the-top (OTT) television better and better. … Whether or not one of our partners decide to produce for us or compete with us, that’s really a choice they have to make based on their own business.”

Serandos and Netflix CEO Reed Hastings also cited the fact that many studios and networks—not just Disney—are moving toward building their own streaming platforms instead of relying on existing services like Netflix to distribute content. Overall, this belies an interesting (and potentially dangerous) trend of media convergence that will prove to be something to watch in the coming years, especially given the precedents of similar cases from the past.

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