Too Big To Fail: Disney’s Acquisition Of Fox And How That Impacts The Indian Market

New York, 16 October 1923. M J Winkler, one of the many distributors in New York, meets a 22-year-old man in California. After a brief discussion, Winkler agrees to distribute a series by the name of Alice Comedies. Based on the book published by Lewis Carroll in 1865, Alice Comedies was about a little girl living in a cartoon world. However, it wasn’t New York or California where Alice made her debut but Kansas, as a cartoon in a series called Alice in Wonderland.

Winkler started distribution of the cartoon series, which led to the inception of a small company called Disney Brothers Cartoon Studio, headed by two brothers as equal partners. Soon, Roy Disney requested for the company to be renamed after the younger brother, Walt, and thus was born Walt Disney Studio.

In 1927, Walt Disney decided to do an all-cartoon series. Alice Comedies had already been running for four years when Walt created a new cartoon, Oswald the Lucky Rabbit. Producing over a dozen cartoons on this character, Walt tried to generate more money from the distributor. Instead, the distributor hired most of the animators working for Walt to eliminate him from the monetary hierarchy.

Isolated, Walt realised that he did not own rights for Oswald and there was nothing he could do to get his creation back. Learning from his mistake, Walt ensured from then on that he owned everything he created.

The loss of Oswald led to the creation of the most iconic character in the history of animation, Mickey Mouse. Ub Iwerks, the chief animator at the studio, along with Walt, created two versions of the cartoon, but were unable to sell both, for they were both silent films. In the late 1920s, the use of sound had transformed the American film industry. Third time lucky, Walt was able to sell Mickey Mouse after giving it a personality that had both audio and video attributes. Opening to a crowd in New York in November 1928, Mickey Mouse was embraced with enthusiasm and received positive reviews. Walt Disney had arrived.

Merchandising was gaining traction among the masses. Seeing it as an additional source of revenue, Walt Disney Studio (referred to as Disney from here on) earned $300 for the use of Mickey Mouse on the cover of pencil notepads in 1930. Soon, toothbrushes, stationery, dolls, comic books, and newspaper strips followed.

By 1937, Disney had had its first successful animated feature film in the form of Snow White and the Seven Dwarfs. It remained the highest-grossing movie of all time until the release of Gone with the Wind. On 8 December 1941, merely a day after the Japanese attack on Pearl Harbour in the Pacific, the army moved into the Disney studio premises for it to serve as a station for anti-aircraft troops. Sixty years later, in 2001, Disney produced and released a movie on the events of Pearl Harbour.

In 1954, Disney debuted on television with the Disneyland series that would go on for 29 years. By 1999, it had 725 stories worldwide, selling merchandise based on all Disney characters one could count. With the launch of IMAX theatres in the 2000s, Disney ushered the production of blockbusters like Pearl Harbour, Pirates of the Caribbean, and Finding Nemo. In 2009, it made its biggest acquisition by taking over Marvel Entertainment.

Ninety-five years since Alice Comedies and 52 years since Walt’s passing, Disney has transformed itself from a small cartoon studio into a global media conglomerate, encompassing all forms of entertainment, audience, and technologies. In terms of footfalls and revenue, Disney caters to a market far larger than that of Sony Pictures Studio, Universal Studios, Paramount Studios, Warner Bros Studio, and 20th Century Fox.

In December 2017, Disney announced its plan to buy 21st Century Fox (the parent company of 20th Century Fox) for $52.4 billion. Before the deal could go through, Comcast, a rival conglomerate, offered Fox $65 billion for the same assets, thereby pushing Disney to increase its offering to $71.3 billion, or more than Rs 460,000 crore.

The assets that will be a part of the acquisition include 20th Century Fox Film and TV Studios, Fox Cable and International Networks, a stake in National Geographic channels, United Kingdom-based satellite TV group Sky, a stake in Tata Sky, and complete ownership of Indian satellite TV group Star India (Star India hosts the Indian Premier League and dramas that have had thousands of episodes aired), along with other critical assets.

Fox will retain ownership of its news, entertainment, and sports properties, and rebrand them under a different company. The merger will make Disney studios the largest media company in the world.

On 27 July 2018, the stakeholders of both Fox and Disney approved the merger. Even though the merger has been given the green light by the US Department of Justice, it would still require approvals from 15 other regulators worldwide, including from China, for a small percentage of Fox’s revenues comes from US’ trade rival. While US President Donald Trump congratulated the leadership of both Fox and Disney, a Bloomberg report claimed that China might not approve the merger, given its trade tensions with the US. However, the merger is set to be wrapped up by the end of 2019.

The merger will have repercussions that will be felt across the world. First, it will give Disney the monopoly on superhero movies. Acquiring Marvel a decade ago in 2009 and now Fox, Disney will have a massive roster of superhero characters to play with. In 2018 alone, Disney has made greater than $3 billion worldwide from Black Panther, Avengers: Infinity War, and Ant-Man and the Wasp.

With the acquisition of Fox, Disney will get character rights for X-Men, Deadpool, Fantastic Four, and more. For a company that has mastered the genre, as evident from its success ranging across a decade and 19 movies, the Fox merger presents an opportunity for Disney to expand its Marvel Cinematic Universe further. Come 2025, you could see the Avengers fight the X-Men or Spiderman going against Deadpool. In simple terms, Disney will own the superhero genre for the next few decades.

Disney had an unsuccessful stint in India with UTV Motion Pictures (under Disney India, a subsidiary of Walt Disney Studios). Exiting Bollywood in 2016 after the failure of two big-budget movies, Fitoor and Mohenjo Daro, Disney has garnered better returns in India for its Hollywood projects.

Earlier this year, Avengers: Infinity War collected Rs 80 crore in the first two days of its release. Disney’s The Jungle Book displaced Shah Rukh Khan’s Fan in the summer of 2016. Given that the Indian film industry has been struggling in the area of content-driven entertainment for a while now, Disney’s merger would further spell doom for production houses in India, who are already struggling to survive in the era of online streaming and mobile consumption.

Netflix, already struggling with sluggish user growth, would be the next victim of this merger. Disney has announced its plans for a separate streaming service, similar to the one offered by Amazon and Netflix. While only a few billion dollars separate Netflix and Disney's market capitalisation, the former has seen its stock prices plunge due to slowing user growth, resulting in some investors calling it an investment bubble.

Given that Netflix has a majority of its customers outside the US, the consolidation of Fox and Disney may push users towards Disney’s streaming service for more content. By 2025, we may even see a world without Netflix.

Disney overtaking Netflix, when the merger goes through, will impact local web content creators in India. However, there are two facets to this. First, most web series are sponsored or co-sponsored by brands. From liquor to cab services, and from condom brands to leading private universities, major corporate entities are now looking at web content creators as new avenues for marketing. While some traditional Bollywood production houses and TV channels have churned out their streaming services in the form of apps, significant amount of online content is created with the help of partnering brands.

With Disney set to make a grand entry into the world of online streaming, the brands may find better returns for their investments in content hosted by Disney. While some players may survive Disney’s presence, many will either perish or be acquired. While it is good news for artists, technicians, and audience, it does raise a different question.

Journalists and other experts from the entertainment industry have voiced their concern against the merger. First, it will give Disney a majority control over content, thus impacting independent and creative thoughts, as some feel. Some journalists have gone so far as to compare Disney with the Vatican for the guidelines it imposes on writers covering their movie premieres and other properties.

There is also the issue of pricing, for theatre owners may now be required to share a greater cut from the ticket sales in order to run Disney properties. Lastly, localised industries in India and across the world might suffer from the dominance, leaving little room for innovation in filmmaking and storytelling. Disney’s expected grand foray into web streaming may eliminate local competition, leaving content creators at the mercy of Disney’s regulations.

In the world of entertainment, it is all about generating profits while sustaining the quality of content. Disney has mastered that formula, and since its inception 95 years ago, it has come a long way. Going forward, its acquisition of Fox will surely leave other studios vulnerable. Also, Disney will be seen optimising its content offering to maximise its presence and growth in a nation of a billion internet users.

Some experts are already pondering over the prospects of Disney buying critical entertainment assets from Sony (character rights for Spiderman are still with Sony). In the world where reel action makes real money, Disney has become too big to fail, and there is nothing that can stop its rise.

Surely, Walt Disney would have been proud.