Fox-Disney talks, scandals, and the conservative case for anti-trust

The entertainment industry has become mired in scandals in recent weeks, as decades of abusive behavior has finally come to light — as has the machinations of those in power to avoid the reckoning. It seems like an odd time for rumors to swirl of a major Hollywood studio consolidation that will concentrate such power into even fewer hands. And yet, CNBC reported yesterday that 21st Century Fox had opened discussions with Disney to acquire most of their non-broadcast assets:

21st Century Fox has been holding talks to sell most of the company to Disney: Sources from CNBC.

For Fox, the willingness to engage in sale talks with Disney stems from a growing belief among its senior management that scale in media is of immediate importance and there is not a path to gain that scale in entertainment through acquisition. The company is said to believe that a more tightly focused group of properties around news and sports could compete more effectively in the current marketplace.

The media landscape has changed considerably in recent years with giants such as Facebook, Google (Alphabet), Amazon and Netflix changing the way people consume media and dominating the digital distribution of digital video content. Being able to compete in that changing landscape, many people believe, requires scale that a Disney has, but 21st Century Fox does not.

For Disney, the opportunity to take control of another movie studio and significant TV production assets as it readies a direct-to-consumer entertainment streaming offering is attractive as is Fox’s significant exposure to international markets, such as the U.K., Germany and Italy — both through its networks and 39 percent ownership of Sky. Disney recently announced it will pull all of its movies from the Netflix platform and will establish two direct-to-consumer offerings: one for sports and one including its key franchises such as “Star Wars” and Marvel.

Both sides later played down the reports, and both claimed that talks were not in progress at the moment. The Washington Post’s Steven Zeitchik noted that this morning, but also explained what was at stake in the potential assimilation of Fox into Disney:

First, Disney. The company is already robust, with Pixar, Lucasfilm and Marvel Studios all part of its empire on the film side, and ESPN, ABC and a host of other networks under its television umbrella. In a number of key entertainment-oriented metrics, the Robert Iger-led conglomerate is outpacing some of its biggest competitors, such as Comcast or Time Warner.

So what does it gain by adding to the lead? For starters, big can always get bigger. Negotiating deals with content distributors requires leverage, and scale helps. It’s much easier to set fees with cable operators if you have a broader suite of channels to offer, and you can push theater owners to take and hold your product much longer if you control the keys to many more movies.

Scale — and, more specifically, diversification — also helps when you’re a company of Disney’s size. Look at how ESPN has been rocked by cord-cutting and the high costs of live programming in the past few years, which has led to layoffs. FX and National Geographic aren’t going to single-handedly offset that. But they’ll help, because historically some cable networks are up when others are down, and vice versa. And others — National Geographic among them — have simply figured out how to use social-media platforms to great effect.

Yes, let’s talk about the leverage. Larger companies have more of it, and the executives at the top wield it with less accountability in place to ensure it’s used wisely. As corporations grow larger through consolidation, it makes it more difficult for competitors to remain in the markets, which reduces accountability even more. If this deal does get picked up, it would come at a moment where we have already seen the corrupting influence of concentrated power in the entertainment industry, as I write in my column for The Week:

However, as more and more of Hollywood production shifts into fewer hands, the opportunities for both competition and accountability shrink, and bad behavior becomes easier to bury.

The Weinstein scandal has proved instructive in this regard. At least two efforts to expose Weinstein before last month got buried in legal threats and cajoling by Weinstein’s industry cronies. Weinstein, who sold Miramax to Disney at the height of his creative power, also used his power to co-opt entertainment industry journalists by signing them to deals, as well as using his power to end careers to push his victims into settlements with non-disclosure agreements. As Ronan Farrow noted in his blockbuster report for The New Yorker, Weinstein would use his media relationships to smear his victims and pre-empt their claims. When Ambra Battilana Gutierrez went to the police in 2015, “negative items discussing her sexual history and impugning her credibility began rapidly appearing in New York gossip pages.”

That might be enough to stoke progressive angst enough to push harder on anti-trust issues, but it should be enough for conservatives to reconsider it, too. Hollywood isn’t the only industry where consolidation has led to crony capitalism and unaccountable power, and fighting further consolidation may be the only way to make progress on deconstructing federal power:

Conservatives have long preferred a laissez-faire policy when it comes to anti-trust enforcement, eschewing government intrusion in free-market decisions. At the same time, however, conservatives have grown frustrated with crony capitalism and its rent-seeking behavior from government, which distorts the free markets that conservatives champion.

It also creates an ever-increasing pressure to expand government for the benefit of the largest corporations in order to allow them to flex their political and economic power at the expense of smaller competition, which might create better accountability. We now have “too big to fail” financial institutions, a defense industry with only a handful of effective prime contractors left, tax codes that overwhelm all but the largest corporations, and an American working class that feels more disconnected from effective power than they have been in decades.

Laissez-faire may have worked in the 1980s before the wave of consolidation became a tsunami, but it has now distorted markets and government and crippled accountability in both. Anti-trust enforcement presents a golden opportunity for conservatives and populists to work toward common goals.

If we want to ever achieve small-government reforms, we have to address big government and “too big to fail” corporate power at the same time. They reinforce each other too much to ignore any longer.