Disney-Fox Is A Lousy Deal For Consumers

Can anyone with even the most nominal understanding of these businesses argue that having one company own the ESPN channel group along with the Fox regional sports channels would be good for consumers and competition?

Having covered these rackets for some 35 years now, there are a lot of things that were expected — and some even predicted in this space — would occur.

Rupert Murdoch throwing in the towel was not one of them.

Yet that is exactly what happened last week, when the Murdoch family agreed to sell many of Fox’s marquee assets to Disney.

Keep in mind Rupert Murdoch not so long ago sold DirecTV — a company he coveted for years in a business he tried to enter for decades before — just to keep his family’s control over these properties after John Malone stabbed his sometimes friend in the voting shares back.

There are those who suggested Murdoch’s oldest children drove the decision to sell to Disney. Others wondered if the need to address future estate tax issues were involved.

Regardless of the motive, it was in many ways just sad to see Rupert Murdoch — the once brash, keep building the company swashbuckler, trying to argue why he was not essentially giving up.


Putting aside what anyone might think of Murdoch’s political views, it would be hard to dispute his acumen and brilliance as a businessman. That all came crashing down last week.

Even if the deal never closes, the perception of Murdoch has changed forever. The consumer media, not surprisingly, focused far more on the simplistic, superficial aspects of the Disney-Fox deal rather than on the real core of the matter.

Disney buying most of Fox’s assets would represent an alarming consolidation of the domestic content and content distribution industry.

Simply put, can anyone with even the most nominal understanding of these businesses argue that having one company own the ESPN channel group along with the Fox regional sports channels would be good for consumers and competition?

Or, put another way: How moronic would it be to claim the consumer subscription fees for sports channels will go down as a result of the potential Fox-Disney deal?

Or, to be more precise, given the market realities that everyone has recently seen, will the rate of the increase in the such subscriptions fees accelerate even more as a result of the deal?

The rationale for Disney in wanting to own the Fox regional sports networks is blatantly obvious: It needs the money from the highly profitable Fox regional sports networks to subsidize the declining revenues of the ESPN channels.

Related Story  BET Plans All-Star Coronavirus Special

Under that scenario, Disney will have numerous cross promotion opportunities between the channels. It will also implement endless wholesale price increases for all of the sports channels it controls.

Think a seven buck per month regional sports network “surcharge” that subscribers pay in some markets is high now? How about $10 per month, or $12 per month in the near term if Disney is permitted to buy the Fox regionals.

Think there are numerous blackouts when a video service cannot reach an agreement with Disney over retransmission consent fees for the ABC owned and operated stations and the Disney/ESPN channels now?

Then again, maybe that is what Disney wants. Maybe it wants to force Dish Network or another video service to decide it can no longer provide the channels Disney would own.

Maybe Disney sees its future as providing its services direct to consumers over the Internet, cutting out the middleman—cable and satellite TV services—and taking in  all the revenue from a consumer.

Sounds like a familiar business plan, say, circa, 1985, when program companies saw satellite TV as a way to bypass cable operators. Only then, the programmers did not have the leverage to make their plans stick.

If Disney is allowed to buy these Fox channels, maybe it will. Does that sound like a good deal for consumers?

Disney is best known for its perception of being “the magic kingdom,” where all is make-believe and everything is wonderful.

In his numerous public appearances last Thursday, Disney Chairman Bob Iger sounded like he lived there. The industry and nation’s capital Iger was talking about and the ones that actually exist had little resemblance.

Iger all but predicted the demise of traditional cable and satellite TV services would take place week from Thursday. And in Iger-land, the legal and industry issues involved in such a mammoth transaction were nothing major.

Iger almost made Randall Stephenson on the day the AT&T-Time Warner deal was announced seem knowledgeable. That is not easy.

Then there are the legal and anti-trust issues this transaction would raise. AT&T and Time Warner have spent the last year trying to trumpet that their deal is a classic vertical merger, since they do not compete in the same markets, and as such should be approved by the Department of Justice.

Related Story  Sports Anchor Fred Roggin Celebrates 40 Years At KNBC

Quite obviously, Disney and Fox cannot propound the same argument. Their deal would be a classic horizontal transaction, since they operate in the same market segments.

So, are vertical mergers acceptable? Or are horizontal mergers acceptable? Will the anti-trust lawyers who filed the AT&T-Time Warner suit look the other way so Disney can buy the Fox movie and production studio, the Fox regional sports networks, and the other channels and businesses?

What “behavioral conditions” would this Justice Department, which has already said it has no interest in supervising the operations of companies as a remedy to a deal, be willing to agree to in order to approve this deal?

From a broader perspective, how much consolidation can take place in the programming/content and video distribution businesses before only a handful of companies control everything?

Or has that already transpired, and a Disney-Fox deal would simply exacerbate a problem that should have been prevented from developing in the first place?

There are those who argue this deal is “juiced” at the White House because of the Donald Trump-Rupert Murdoch relationship.

Under most circumstances, and in light of the way Washington operates, that would rule the day. But this is not a typical administration. As history has shown, Donald Trump is as loyal to his friends as a high-priced Washington lawyer — creatures half a step above prostitute on the loyalty scale.

The president is going to have a hard time saying he supports the Disney- Fox deal when he has opposed AT&T buying Time Warner.

This president, of course, has often just made stuff up to justify his actions. But in this case, he would have to do that as his re-election campaign gears up.

Unfortunately for the president, the Murdoch/ Fox News constituency and his are the same. And that will not get the president over the victory line again.

In the end, it may come down to choosing to push through the Disney deal for Murdoch, or giving his opponents yet another heavy hammer to pound him with. 

Bob Scherman is the editor and publisher of Satellite Business News, an independent trade publication. Scherman has covered the satellite TV, cable, and related businesses for almost 35 years. Comments on this column can be sent to [email protected].

Comments (10)

Leave a Reply

Ninh Nguyen says:

December 18, 2017 at 9:56 am

Not defending the merger but I don’t think ESPN and FOX sports will be under the same company if approved.

    John Bagwell says:

    December 18, 2017 at 10:10 am

    FS1 & FS2 are not part of the deal, but the FOX sports regional sports networks are part of the deal.

Dan Levitt says:

December 18, 2017 at 9:57 am

But TVnewscheck thinks Sinclair-Tribune is a dream. Funny how TVNewscheck didn’t mention FCC $13 Million fine for Sinclair PAYOLA – that negative Sinclair news usually gets buried on Friday

    Kristina Veltri says:

    December 18, 2017 at 10:28 pm

    They did mention it. It was on the site all weekend and still in the archives.

Sean Smith says:

December 18, 2017 at 9:59 am

I don’t understand what all the hoopla is about. The bottom line is what it’s going to cost me as a consumer. Are Disney and Hulu’s subscription rates projected to go up? Will ESPN’s subscription rates be going up? To me, the average buyer of services, exactly what is the merger going to cost me sitting at home in my den? All I’ve heard is alarm bells from naysayers who just don’t like the idea of two privately-owned businesses legally and lawfully merging, sounding off about stifling competition, the shrinking marketplace, the over-valuing of property. It’s the same debate with Sinclair-Tribune. Until I see the dollar amount difference up or down to my pocketbook, I don’t really care if they merge or not. Put up the numbers or shut up. And you’ll find most people feel the same way. Until you show me the money, I’m showing you the door.

Dan Levitt says:

December 18, 2017 at 10:00 am

oh, my bad TVnewscheck- the Sinclair payola WAS buried on Friday. in fairness the day the news came out.

Lady Success says:

December 18, 2017 at 10:01 am

Yeah, it was my understanding that Fox News, Fox Sports, the Fox network and O&O’s would not be part of the deal. It’s mainly the Fox film and TV studios that Disney wants.

Snead Hearn says:

December 18, 2017 at 10:40 am

Who cares if they merge and why would this cause such a “the sky is falling”? Disney makes movies and shows and having the movie and television studios from Fox makes sense. Fox has already said they want to concentrate on more television stations (I believe they tried to purchase Tribune) so again I don’t see why this merger (if legal) is a problem. I feel the same with Sinclair-Tribune if it is legal then why not? The FCC opened this door 15 years ago and these companies/groups are doing what is supposedly legal transactions to grow and improve their future.

Gregg Palermo says:

December 18, 2017 at 11:08 am

It’s really hard to feel sorry for sports viewers who have been living off the kindness of little old ladies who never watch sports. They’re on fixed incomes, paying at least $10 per month for shows they never watch. You sports fans have been in the catbird seat for decades, paying maybe $2 per month for shows you never watch. For shame, quit yet b itching.

Michelle Underwood says:

December 18, 2017 at 1:18 pm

Over 90% of this past weekend’s box office was Fox and Disney. Concerned now? With that kind of concentration they can squeeze theater owners who will in turn raise ticket prices.

More News