Mega-Mergers: Impact on Business and Consumers


ollowing Comcast outbidding Disney for the purchase of Sky, a European satellite broadcaster, the next deal on the horizon seems to be a merger between CBS and Viacom. This comes hot on the heels of Disney’s acquisition of 21st Century Fox, and AT&T’s acquisition of Time Warner. With traditional players in the industry bulking up to counter the rise of streaming video giants such as Netflix, Amazon, Apple, and Google, the market for original content is changing in ways that will impact business and consumers alike.

  1. Branded VOD Services and Rising Costs to Consumers

Fewer companies having greater control over their product, including many beloved franchises, could mean rising costs for end users wishing to access the same variety and quality of content. Disney, for example, has withdrawn from its output deal with Netflix starting with its 2019 releases, in preparation for the release of its own streaming service. With the acquisition of Fox, Disney has added the Marvel franchise to its own considerable intellectual property holdings, which include the Avengers and Star Wars. AT&T, owner of, among other properties, Game of Thrones and Harry Potter, has recently announced plans to unveil its digital streaming service in late 2019. This model, pursued more broadly, would essentially create a handful of brand-specific streaming services. This has the potential to result in higher costs for the consumers who wish to access a wide variety of content. In the years to come, the traditional cable subscription may be remembered as a bygone bargain.

  1. The End of the Seller’s Market? Not So Fast

The reduction of the number of players in the market may change the current dynamic between buyers and sellers. At the moment, the robust competition among Netflix, Apple, Google, and Amazon (as well as the traditional broadcast and premium networks) has generated a seller’s market for writing and acting services. But when Fox and ABC are both owned by Disney, there is one fewer buyer, even though, from the consumer’s perspective, the number of television channels remains the same. In such an environment, writers and actors will have fewer choices and decreased leverage. Notwithstanding the foregoing, creatives may take heart: while CBS may merge with Viacom, Apple, Google, and Amazon are unlikely to combine, if only because the Department of Justice might balk at the idea of a company that controls both shopping and search, with a market cap larger than the United Kingdom’s GDP.

  1. Profit Participation When the Studio Is Also the Network

Profit participation is easy business when the studio is licensing its content to networks for specific fees; participants are paid their respective percentage shares of the total license fees generated. But when the studio is both producing and distributing the content (perhaps through a sister company or even directly), the studio will “impute” a license fee in order to generate a profit participation pot. If this sounds confusing, that’s because it is. In this scenario, agents and lawyers for writers and actors will want to know the basis for the imputed fee in question. Studios, however, are rarely forthcoming in this regard, with the imputed fee remaining a frustrating black box for representatives who want to know how their clients’ services are being valued.

  1. From Fewer Providers to Newer Providers

As content providers merge, so, too, will c-suites. This means many media executives may become free agents in the near future. While some will undoubtedly find new homes in existing companies (or on existing golf courses), others will likely go forth into the marketplace and blaze a path of their own. While 30-minute and 1-hour content blocks delivered by television or online stream are the norm, new content delivery models are beginning to emerge. For instance, Jeffrey Katzenberg’s Quibi, a new video platform that promises to tell long stories through bite-sized chunks, has already amassed at least $1,000,000,000 in funding. In addition, Viacom has recently renewed its partnership with Snapchat, contracting to produce more original content for the social messaging platform. It is anyone’s guess where or how the next generation of consumers will watch their favorite programming, but in the meantime, the adventurous are beginning to place their bets.

Filed in: Legal Blog

October 31, 2018