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Disney would dominate the US box office when it buys Fox



  Disney receives antitrust approval for the acquisition of Fox

Pixar. War of stars. Marvel

Disney is already the king of the box office. And when the company's $ 71.3 billion deal comes through for the bulk of 21st Century Fox, it will include even more reputable franchises ̵

1; including Deadpool, X-Men and Avatar – in its roster.

The Bottom Line: A company with a strength unrivaled by any other traditional filmmaker.

This year's box office sale shows just how big the new super company could be. Thanks to "Black Panther", "Avengers: Infinity War", "Incredibles 2" and "Deadpool 2" Disney ( DIS ) and Fox [19659006] ( FOXA ) according to Box Office Mojo, together account for almost half of Austria's market share in 2018.

Bartcon Crockett, senior analyst at FBR Capital Markets, expects the total to drop to about 40% by the end of the year, as the two studios have already released many of their biggest titles.

But that too is an essential part of the market. He said the merger could make Disney the "Walmart of Hollywood".

Imagine, a company that is so big that it can conquer the market even more than before on blockbusters pick up any coveted industry price. A company that rules theater chains and a command in the evolving streaming market.

"They will share so much that it seems they are bringing them up and down the supply chain," Crockett added. "It's what happens in a world where a studio, mostly Disney, has huge success in doubling its investment, and most other studios seem to be on the heck of it when it comes to making films."

A Stronger Hand

This type of control has its advantages. For example, Crockett said that the new Disney Fox company would have a stronger hand when it negotiates with theaters about its share of ticket sales receipts.

Disney was already doing well in this regard. The Wall Street Journal reported last year that the company received approximately 65% ​​of the ticket revenue from "Star Wars: The Last Jedi," a number that characterized the newspaper as a new high for a Hollywood studio. Studios usually take 55%, according to the Journal.

"If they continue to increase their share of domestic box office, it's hard to escape the conclusion that they'll have leverage over time to get even more movie receipts," Crockett said.

  Box Office Market Share Chart

Disney declined to comment for this story. But his representatives have publicly defended the studio combination and said that the market share in Hollywood is not secure.

Last week, when the New York Times Editorial Board questioned the speed with which US antitrust authorities approved the Disney Fox deal, Disney's antitrust lawyer fired back.

Concerns over market share ignore competition from other studios such as Universal, Warner Bros., Paramount, Sony-Columbia, Lionsgate, Netflix and Amazon, wrote Thomas Barnett, the antitrust lawyer of Disney in the agreement, in a letter to the editor ,

Related: Disney wins antitrust approval to buy most of Fox

Barnett also rejected the focus on just the last five months at the box office. On average, he wrote, the combined share of Disney and Fox studios is lower.

That was historically true. The two studios controlled about 35% of domestic box office last year, according to Box Office Mojo. A decade earlier, they held about 27%.

But Crockett said today's Disney is stronger and better built than the Disney of the past. CEO Bob Iger has partnered with Pixar, Star Wars and Marvel to create an entertainment empire that is a franchise that his company has bought over the last 12 years.

"It's fair to say that the movie business is fickle, there's a story of people who have a hot hand today and then lose it tomorrow," Crockett said. And maybe that's with Disney, he added – "Solo: A Star Wars Story" disappointed when it opened in May.

Although Star Wars falter, Crockett said Disney still has Marvel, Pixar, and the rest of his library.

"I think the certain assumption is that Disney will continue to be very successful in the domestic fund and will have a dominant share," he added.

Creative Consequences

Buying Fox would not only give Disney more blockbusters. The deal also comes with prestige.

Disney would take over Fox Searchlight, a Fox production and distribution arm that cleaned up the Academy Awards. With "12 Years a Slave", "Birdman" and "The Shape of Water", the studio has won three of the last five Best Picture winners.

Disney has long been involved in high-end movies, said Jeff Bock, Senior Box Analyst at Exhibitor Relations. But the quality of adult rates and the level of diversity that Fox offers are at a different level.

"These films have sparked shockwaves throughout the industry, they are sustainable, they are evergreen," added Bock. "You're going to have something truly incredible, and you just hope it stays so autonomous that the mouse house does not mess up what Fox already has."

Iger said he was not interested in changing Fox Searchlight. During the company's annual stockholders' meeting in March, the Disney CEO said he had any intention to uphold the studio's business.

  The Shape of the Water
Fox Searchlight's "The Shape of Water" was nominated for 13 Academy Awards and won four, including the Best Picture.

But there are other questions that make what the new "super studio" would look like, Bock said, including how many movies it would produce.

He added that Disney does not already have a ton of movies on its release schedule. And those who publish it are primarily blockbusters.

"When a big studio suddenly disappears, that's a big problem for theater owners," Bock said.

Local theater owners also see volume as a potential problem.

"I have some concerns as to what a Fox / Disney merger might mean for smaller operators like me," said Lee Akin, co-owner of several theaters in Iowa and Wisconsin. "I'm mainly concerned that the number of films is not shrinking."

The Netflix Question

Treasury power is only one part of the equation. Like other legacy media companies this year, Disney and Fox are motivated to join forces to take over tech giants like Netflix and Amazon ( AMZN ) .

These companies are turning the entertainment industry upside down. Netflix ( NFLX ) alone will spend an estimated $ 13 billion on shows this year, according to a report by The Economist. Apple ( AAPL ) also hopes to complete Hollywood contracts with Oprah Winfrey, Reese Witherspoon and Steven Spielberg.

Related: Oprah meets with Apple as new Hollywood content wars heat up

This type of competition could have been in the minds of antitrust regulators who deal with the Disney Fox two weeks ago Long green lit before, said Jonathan Barnett, a law professor at the University of Southern California's Gould School of Law.

"The agency could reasonably have come to the conclusion that the theatrical exhibition is now only part of a broader video content market," he said. For example, a declining visit to cinemas suggests that at least some people are replacing a trip to the box office with a night on the couch.

If streaming video is seen as part of the same market that cinema releases are, Barnett says, a company like Disney would have less control.

The concern for concentration "would be much lower," he added.

Related: Netflix Looking Around the World for a Growing Audience

Akin, the local theater owner, also pointed to the power of digital newcomers as a problem.

"I would welcome some bigger players competing with the streaming services that I believe are the right companies in the future," he said, adding that Disney and Fox are the future of the business together to a greater extent than the other studios.

The National Association of Theater Owners, an industry trading group, has also suggested Disney could go as a bulwark for the traditional movie.

"Disney is the strongest protector of the cinema window," said the group's president and CEO John Fithian told The Hollywood Reporter in April and noted that Disney is also working on its own streaming service as a Netflix competitor.

Hollywood's Future

In In any case, analyst Bock said the deal could signal changes in Hollywood.

"There's a studio up there, and then the rest fight for scraps," he said, adding that some competitors may want to band together "It becomes a & # 39; we against it & # 39; But Bock also said he hopes the merger could lead to more creativity elsewhere in the market once studios realize they can not compete against a Disney production costing $ 200 million or more.

He pointed to Paramount, the Viacom [ VIA ) owned studio that has long struggled.His last film "A Quiet Place" was a A surprise hit when he made his debut in April, the film made $ 187 million in the United States and cost only $ 17 million, according to Box Office Mojo.

"I think the inventiveness will increase for these other studios," Bock added "Maybe this will be great for filmmaking."

CNNMoney (New York) First published July 11, 2018: 4:34 PM ET


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