There’s an article going around this week sparking some conversation as Mousetown stands on the brink of moving its knights into the Great Entertainment Semi-Finals arena.
The piece, from Matt Stoller’s excellent newsletter “Big” about modern monopolies, is titled “It’s Time to Break Up Disney,” and it makes the case that the mouse has become a restrictive monopoly, using its over-sized powers to inhibit the marketplace of entertainment, and that it is thus time to break up the party.
I don’t usually devote an issue to quibbling with other articles, but this one was interesting and thought-provoking enough that it deserved to be taken seriously and even quibbled with, and it summarized a school of rapidly hardening thought as Disney’s dominance of traditional studiodom becomes more awe-inspiring.
Stoller introduces his piece with this:
As I’ll show, the new Disney is more a private equity group than studio, collecting brands and using them to bargain aggressively with partners, suppliers, and consumers. Imperial Disney is the result not of animation genius but mergers and acquisitions genius. It is not a corporation that pushes the bounds of artistic and technological possibility but a corporation that pushes the bounds of legal possibility under the radical pro-consolidation framework that has existed since the 1990s, as well as the Clinton-era ‘engagement’ framework that encouraged deep integration of American multi-nationals into China.And we should all be very, very worried about the consequences of this new Disney.
I want to take on some of his assertions, Hopefully without getting too deep into the weeds of wonkery, and explain why ultimately, I think Disney, while terrifyingly big, is not a dangerous monopoly requiring force of government arms to pull it apart.
• The first point is the more creative, touchy-feely, subjective case, but I think the truth of it undergirds all other points. I’ve made this case repeatedly vis-a-vis Netflix’s plans to monopolize entertainment, and for the same reason I’ve said that Netflix can’t do that, I say Disney hasn’t done that.
The reason being, the laws of nature forbid a monopoly over entertainment.
At the very core of entertainment and entertaining is surprise; delighting audiences with that which they’ve never seen before. Even a first sequel to one of the most beloved movies on earth has to look like something very different and new or else, audiences shrug and walk on by. As well as Disney is doing today, that success brings with it the greatest enemy an entertainer can have: complacency. The history of Hollywood is a sad tale of people who think they’ve figured out The Formula, only to find that the formula expires the moment it forms in your brain. And there’s nothing like thinking you have a monopoly over entertainment to tell you that you can shut down the creative process and stop taking crazy risks.
If Marvel is having an amazing run, it’s only because it’s broken its own formula repeatedly in just the 11-year Cinematic Universe history. If Disney holds this commanding a presence over the box office ten years from now, it will be because its film divisions have re-invented themselves again, probably a couple times. Whatever cinematic success looks like in 2029, the only guarantee is that it will bear little resemblance to what success looks like today.
This also means that anyone is free to capture it. Any filmmaker who can see where the public imagination is headed can get ahead of it. If Disney has a headstart because of its bankroll and the following its characters have, it also has the burden of shaking off what is easy and familiar.
• Stoller gets quickly into his major point, that he comes at in a few ways: Disney’s size, combined with its control over distribution, gives it the ability to withhold its films from the market and drive up their value.
Disney has traditionally kept its movies in the vault, with theaters unable to show classic Disney fare. The goal is to create artificial scarcity, keep audiences excited that Disney films are something special. Disney is now applying its policy to its 21st Century Fox back catalogue, which includes classics like Beneath the Planet of the Apes, Zardoz, Alien, Aliens, Say Anything, The Princess Bride, Moulin Rouge, and so forth. (Aliens fans are already upset.)
This is a huge amount of film removed from circulation. As the American Prospect’s Brett Heinz noted, Disney, because of its acquisitions of Pixar and Fox, now “owns one in seven of all films to ever receive a Best Picture nod.” It can and does withhold these films from theaters.One way to recognize monopoly power is when a corporation chooses to withhold output, which is what Disney is doing by sticking its old films into the vault. It shouldn’t be able to do this with its new Fox content, this is likely evidence that the merger was anti-competitive, but since neither Obama nor Trump enforced such laws, symptoms of monopoly power are a validation of Iger’s strategy.
He has a point here, but only to a point. As a cinephile, I’d love to see everything out in the public every place I can get it, but this is not a vast hunger that’s going unmet. While I’m sure the worldwide Zardoz fan associations worldwide could mount quite a class action for the emotional stress they’ve endured, Disney is responding to a real problem in the classic film market, which is that the demand for them is beyond niche. The old movies business is tiny enough that until a couple months ago, Netflix’s general position was that it didn’t want these things on its service for any price, and you don’t see other streamers making them a priority. Filmstruck, the one service—the only service—devoted to surfacing the old studio catalog, had such a minuscule following that AT&T chose to just shut it down.
One in seven Oscar-nominated films includes a lot of movies not many people are dying to see. I wish there was more of an demand for them naturally, but if McDonalds can take the McRib in and out of circulation to make you think it’s something you want to eat when it re-appears, maybe Disney can generate a little excitement about The Song of Bernadette when it emerges. Anyway, the preservation and circulation of Hollywood’s historic legacy is a real industry-wide issue, but it didn’t just spring up with the rise of IP Bob.
• Indie Film. Stoller segues from classic film to the effect on the indie-film world:
But there are still 600 independent first-run theaters left in the United States, and independent theaters are different than chains. They often screen films to celebrate old movies, or they show documentaries or iconoclastic movies. Independent theaters are some of the few places indy movie makers can show their films. These are the theaters Disney is now crushing, and what’s left of independent distribution will likely disappear, leaving an oligopoly of theater chains and giant studios controlling movies.
Disney is crushing these theaters? Is it Disney’s fault that people have been shunning independent and revival theaters for a decade now? Is it Disney’s fault that American audiences have slammed the door, for instance, on foreign films? You can say Disney hasn’t helped promote those movies, but you can’t blame them alone for the collapse in interest.
If anything, the flood of cheap streaming content including the ersatz Movie of the Week program from Netflix, which has explicitly made clear that they see theater-going as direct competition, has hurt these films. And with the Fox merger, Disney is now the owner of the biggest producer of indie films—Searchlight—which it hasn’t curtailed in the least.The decimation of indie cinema is a historic tragedy, but you gotta twist yourself in a few pretzels get to the withholding of Zardoz as a leading factor in that.
• Distribution. Stoller is on firmer ground when he talks about Disney’s outsized power to press for favorable distribution arrangements, but he still grasps at straws to when looking for downstream impact of that power:
As Seitz notes, is able to demand coercive terms from theater owners, not just higher fees, but promises to screen Disney films, even ones that are likely to be unpopular. This is a practice known as block booking, where a distributor forces a theater to show movies that are less in demand in return for getting access to must-have content, like say a Star Wars or Marvel movie on opening weekend. Block booking is technically illegal under an old antitrust precedent, but, well…With the market power Disney now commands, theater chains can’t say no. As Heinz reported a few weeks ago, when Disney negotiated the rights to show Star Wars: The Last Jedi with movie theaters, it gave the theaters “a set of top-secret terms that numerous theater owners say are the most onerous they have ever seen,” including giving Disney “65% of ticket revenue from the film, a new high for a Hollywood studio,” and forcing them to “show the movie in their largest auditorium for at least four weeks.”’ If the theater didn’t comply, Disney could impose a 5% tax of box office revenue on top of its already existing 65% share.
Distribution is an ugly, brutal business of hard-fought deals and tiny advantages pushed to the limits. Disney’s deal for Last Jedi might be the best deal a studio ever got for a release, but that’s a difference of inches, not miles. None of these arrangements are unique to this movie, or to Disney.
Again, whether Disney uses its power to create an effective monopoly over movie theaters is worth watching. But the test of that will be whether its power blocks competitor’s releases that would’ve otherwise had more screen space, not because of the exhibitor’s natural desires, but because of the larger company pressure. In this case, the reason Disney has power is partially because it has made movies that theater owners think audiences will want to see, and partially because its competitors haven’t made movies they think audiences will want to see. If theater owners really thought Cats or 1917 or Amazon’s Jean Seberg biopic needed more seats than Rise of Skywalker, they would be in a great position to tell Disney to go shove it. But as it is, are they going to not give Skywalker all the space they can, even with onerous terms?
• Disney+. The wonkery runs higher than I can keep up with when you get into the streaming discussions so I won’t go too deep, but Stoller makes the case that Iger is starving the rest of his business to build up the streaming service, which is hard to argue with.
But what is the reason Iger’s doing this? Because the traditional TV revenue model is collapsing, and if he rides along on the existing revenues, he might find himself without a company soon. Certainly that’s how Wall Street looks at it, which punished Disney’s stock until he went all in on Plus.
Beyond that, is Stoller suggesting that Disney+ is at, approaching, or on the road to monopoly power over the streaming world? With this whole sector totally in flux, is that really what this looks like right now?
For a consumer, living under the sway of a monopoly generally means a curtailment of choice. Would you say entertainment consumers are lacking in choice right now? There may be some very specific things they are looking for that they can’t find, eg, local Zardoz showtimes, but in general the problem people complain about is so many choices they can’t keep track of them all.
If Disney is in a commanding position now, it’s not because they have milked some structural advantage to gain a stranglehold over the marketplace but because across multiple divisions, they keep making movies people want to see. Lots and lots of people.But that is a tenuous grip. One under-performer put a huge question mark over the entire Lucasfilm venture. Two in a row and it would be a full on panic. Marvel may be on the greatest run in Hollywood history, but what would that juggernaut look like if they released three duds in a year? Meanwhile, Warners has been on a roll with its DC films. A couple more hits and its bargaining power with the exhibitors is going to be pretty scary, too.
In the streaming wars, people are going to be so desperate to capture audience attention that they are already giving the services away—and even that is no guarantee at all that anyone will watch. The future will belong to anyone who can make and air a show (or 20) that captures people’s attention, and there’s nothing written in stone about who that will be.
It’s not decreed by the military that every other studio has cleared out the summer months to cede to Disney the most fertile pastures in moviegoing. It’s that no one has the imagination and the spine to take them on. A couple years back, Stacey Snider did—launching Deadpool 2 right in the wake of Solo—and she won big. It’s a feat waiting to be imitated but in the years since, no one has had the guts to try.
If you look ahead to Disney’s line-up next year, there are plenty of promising films, but nothing close to the shoulder-to-shoulder line-up of world-devouring mega-tentpoles they released this year.
Meanwhile, all this is taking place in the context of an industry in deep turmoil where despite Disney’s successes, the path to future prosperity is entirely theoretical and no one can even agree on what the model is that defines success. What people will be watching and how; whom, if anyone, will be going to the movies ten years from now, these are all open questions. And looking over our shoulders are the real monopolies. Break up Disney and what will the result be other than another sector of the economy vacuumed up by the tech sector?
That’s not to say we need our own evil monopoly to fight their evil monopolies, just that this situation is very much in flux and whatever you think is a permanent state of things hangs by a thinner reed than one might imagine.
Disney has clearly won the studio war for now. But all that did was buy it a seat into the next round, the Great Entertainment Semi-Finals. There’s a lot of reasons to like its chances moving forward, but just as many reasons to think victory won’t even look like anything we can imagine right now.
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