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Wednesday, August 7, 2019

Disney Expanding, Not Limiting, Epic Competition and Choices

by Ray Keating
August 7, 2019

After the recent Fox merger, the Walt Disney Company has been called (for example, in an IGN.com article) “the most powerful movie studio that has ever existed.” Wow. 

That phrase, of course, strikes fear into the hearts of many, including people who assume that consumers and creators will suffer under a “monopoly” or some kind of tremendous economic power, with competition and choice being lost. Nothing could be further from the truth.

First, a little history. Big does not guarantee success in the competitive marketplace. The history of business are strewn with companies that once dominated or were major players in their respective industries, and went on to be wiped out. Think Sears, Pan Am, Kodak, Borders, Blockbuster, Burger Chef – the list goes on and on. 

Second, a little economics. The term “monopoly” means a single seller of a product for which there are few good substitutes, and the industry has high barriers to entry. The Walt Disney Company stands as a major player – but far from the only player – in the broad entertainment industry. Consumers have seemingly countless and multiplying entertainment products and services on which they can spend their hard earned dollars. High barriers to entry, especially when considering the dramatic advancements in technology in terms of producing and distributing content, certainly don’t exist. 

For good measure, monopolies in the free market are more about the over-active imaginations of politicians, the media and assorted economists, rather than economic reality. Monopolies usually come about due to government (for example, public schools) or government protection (for example, back in the day, Ma Bell), not market competition. Sure, significant market share can be gained in the market. But that is accomplished by serving customers well, and that market share can and often does disappear due to competition and innovation. 

Talk of Disney being a monopoly or wielding some kind of overwhelming economic power amounts to economic fiction. In fact, Disney’s products, services and investments serve to expand rather than limit competition and choice.

Consider Disney’s announcement on August 6ththat it’s going to bundle three streaming services – Disney+, ESPN+ and Hulu – into one affordable package of $12.99 per month. The bundle will be available on November 12 with Disney+ coming online that day.

In the company’s August 6thearnings call, CEO Bob Iger spoke about the long-term value of the Fox acquisition; the volume and variety of content scheduled for Disney+; flexibility among platforms; the need to maintain a flow of quality for its more traditional television networks like ABC, FX and Freeform; and the need “to be more resilient than any of our competitors.”

Low prices, and emphasis on investment in platforms and content are not signs of monopoly, but instead, they signal a company fighting for profits and market share in a competitive arena. Disney is taking on Netflix, Amazon, YouTube and others in the online video market.

In addition, a recent announcement points to the competitive nature of another major part of the overall entertainment industry where Disney is a leading player, i.e., theme parks. But it wasn’t an announcement from Disney, but rather from a major competitor – Comcast.

On August 1, Comcast’s Universal Orlando Resorts announced that it would be opening a new park – its fourth – called “Universal’s Epic Universe.” The details are pretty vague at this point, except that this promises to be a major investment by a major competitor to Walt Disney World in Orlando. 

In the Comcast statement, it was noted, “Universal’s Epic Universe will take guests on a journey where beloved stories expand into vibrant lands – and where that journey is as much a part of their adventure as the ultimate destination.” Brian L. Roberts, chairman and CEO of Comcast, said, “Our new park represents the single-largest investment Comcast NBCUniversal has made in its theme park business and in Florida overall.”

According to Universal Orlando:

“Universal’s Epic Universe will offer an entirely new level of experiences that will forever redefine theme park entertainment. Guests will venture beyond their wildest imagination, traveling into beloved stories and through vibrant lands on adventures where the journey is as astounding as the destination. The new location will feature a theme park, an entertainment center, hotels, shops, restaurants and more. Ultimately, this expansion will create more space and freedom to let loose and create lasting memories with the people you love.”

Universal’s Epic Universe sends a clear signal that Disney both faces and spurs competition from rivals. It certainly is not the case of other businesses throwing up their arms in a surrender to a monopoly. 

Of course, a new theme park coming from Universal, along with Disney’s Galaxy’s Edge, or the Disney streaming package taking on Netflix and Amazon, serve as examples of competition that can be easily seen. But there’s much more going on among entrepreneurs, innovators and inventors that is hidden from the public, if you will, because it’s just getting started or in early development stages. These entrepreneurs are working to come up with the next big leap forward, whether it be related to content, technology or simply improved service. 

In the end, a company like Disney spurs competition, and must itself invest and innovate in the face of current and future competitors. The real economic power lies with consumers, and entrepreneurs and businesses must work and compete to provide new and/or improved products and services in order to succeed – and remain successful.

For consumers, such competition is, to borrow a word, epic.

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

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