By CCN Markets: The Walt Disney Company’s merger with 21st Century Fox was hailed in the entertainment industry as a great deal for both companies. There’s a lot of truth to that, particularly for Disney, as far as revenue is concerned.
Disney obtained the rights to numerous franchises under the Fox banner, including Avatar, Men In Black, Alien, Die Hard, Home Alone, Maze Runner, Night at the Museum, Planet of the Apes, and X-Men.
This, however, has not been such a good thing from the standpoint of creativity, originality, or economics for Disney or Hollywood.
Welcome to the Disney Oligopoly
With the number of film studios dwindling, the movie industry faces the same challenges that any oligopoly faces: lack of innovation.
It becomes much easier for film executives to lean on franchises and blockbusters, which are known quantities, than risk capital and reputations on new projects.
Hollywood hates accountability. Everyone has a boss and nobody wants to have to tell that boss that they messed up by green-lighting a lousy film that loses money. That’s because their boss will have to explain it to THEIR boss.
It’s easy to palm off responsibility for producing the failed “X-Men: Dark Phoenix” by pointing out it was a film in an established franchise. There was no risk taken in making the film, so why should anyone lose their job?
Hollywood Hates Risk
Because Hollywood is averse to risk, it will rely more and more on established properties.
For entities like Disney, whose shareholders also don’t want risk, that leaves the path of least innovation.
The danger, however, is that oligopolies also lead to product of reduced quality over time. If there is limited competition, then why bother trying to defeat what doesn’t exist? Corner will get cut. Less expensive talent will be hired. The films will suffer in quality.
The Numbers Tell the Story
Of the top 15 all-time box office revenue winners, 12 belong to Disney or Fox. "BV" is Buena Vista, Disney's distribution arm.
The trend towards oligopolistic control over films of declining quality has been evident since 2002. The number of tickets sold in North America has been trending down – off 22% from its 2002 high.
Box office revenue (in billions) has increased 30 percent during that period...
...but that’s only because of a corresponding 55 percent increase in the average ticket price. Hollywood offsets declining attendance with higher prices.
Things won’t improve. The studios have effectively abandoned low-to-mid-budget range films to Netflix and Amazon.