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Consumer Watchdog, Anti-Trust Experts Warn of Higher Prices From Disney-Fox Merger

Consumers can expect to pay more for streaming subscriptions if regulators give the greenlight to the proposed $52.4-billion merger of Disney and Fox, a consumer advocacy group and anti-trust law experts warned Thursday.

The deal would combine the media content of two massive entertainment companies whose combined stable includes franchises like “Star Wars,” “Avengers” and “Avatar” plus various television shows. Disney’s acquisition is in large part motivated by its desire to acquire more content ahead of the 2019 launch of its own branded streaming service, which will serve as a direct competitor to Netflix and Amazon. Netflix, in particular, has emerged as a must-have streaming service for nearly 110 million subscribers. If the Fox acquisition is approved, Disney can then add an entire Fox library to its streaming service that would include popular programs like “The Simpsons,” as well as the original “Star Wars” film, to which Fox owns the rights.

Christopher Sager, a Cleveland-Marshall law school professor and anti-trust expert, said that when consumers look at available options, they’ll see some of their favorite TV shows and films scattered across more streaming options, making it more expensive to access the same amount of content if the deal were approved.  “Disney would be in a position so that even if Netflix gets really big, there’s still some stuff you have to buy from Disney if you are a consumer,” Sager said.

He adds: “I think that is probably Disney’s motivation is here, and it’s also the theory for why this deal could hurt consumers.”

Sager said the Disney deal would be an interesting question for regulators to consider, in part because of Disney’s aim in building and supplying content to its planned streaming service. “The reason I think regulators will take this more seriously is because it’s pretty clear that Hollywood considers a switch to OTT delivery…pretty imminent, and that seems to be the chief threat to incumbent firms,” Sager said.

The deal is unlike the planned AT&T-Time Warner merger, which would combine a major distributor with an entertainment company whose portfolio includes CNN, HBO and Warner Bros. Disney at the moment is not a major digital distributor, but it intends to be one in the streaming arena, Sager said, raising unique anti-trust considerations.

Jamie Court, president of the Santa Monica-based Consumer Watchdog group, argued that anti-trust regulators should put the kibosh on the deal.

“In the entertainment industry, my fear is that there will be a real push to leverage the power of one big company to withhold content from competitive platforms or demand higher prices, or possibly draw a lot of business from companies that today are godsends for consumers.”

Court’s cynical view of Disney’s motives was cemented by the company’s hardball tactic following the publication of a critical Los Angeles Times series on Disney’s municipal tax incentives. Disney banned Times journalists from previews of its upcoming films, but relented after a fierce media backlash.

“That episode revealed the company’s culture,” Court said. “Disney plays hardball and rewrites the rules. This deal gives it the leverage to do that.”

Already, one union group has emerged as a harsh critic of the proposed merger, the Writers Guild of America West. Soon after the deal was announced, the WGA released a statement saying “This proposed merger of direct competitors will make matters even worse by substantially increasing the market power of a combined Disney-Fox corporation,” arguing that the deal would harm Hollywood’s creative community.

Scott Hemphill, an NYU Law School professor, said regulators should closely scrutinize the implications of the merger on the streaming market.

“Given the success of these online video outlets as an alternative to traditional cable and satellite distribution, I would expect the Justice Department to want to see the continued competition that those outlets are providing. You wouldn’t want to see that stymied by (the Disney-Fox) transaction.”

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