Disney's Monopoly: Antitrust Laws Broken?

Disney has faced scrutiny for its business practices, with some alleging that the company engages in anti-competitive behaviour and leverages its market power to stifle competition. In October 2023, a US federal judge ruled that Disney must face consumer antitrust claims in TV streaming lawsuits. The company has been accused of using onerous contracts that create unfair obstacles for potential rivals and drive up prices for consumers. Additionally, Disney has been criticised for its aggressive acquisition of intellectual properties and copyrights, leading to concerns about its market power and potential monopolistic behaviour. While Disney's market share may not trigger antitrust laws, the company's influence in the entertainment industry and its ability to shape distribution markets have sparked debates about the relationship between antitrust and copyright laws.

Disney's monopoly on copyright law

Disney has been described as a copyright empire, with its entire business model relying on the government-granted temporary monopolies that copyright provides. This allows Disney to profit from the work of its artists and creators, and to stop others from doing the same.

Copyright law is complex, and the terms of licensing vary. Copyrights can last for the life of the author plus an additional 70 years, and there are terms such as mandatory licensing to consider. Disney has been able to use copyright law to monopolise markets, and this has been a cause for concern for some.

Disney has been a fierce defender of its intellectual property rights, filing lawsuits against those who violate copyright and trademark laws. The company has also lobbied for federal legislation to prolong copyright protection. The Sonny Bono Copyright Term Extension Act, also known as the Mickey Mouse Protection Act, extended copyright for new works and those published before 1978.

Despite these efforts, some characters have entered the public domain, including Steamboat Willie, an early version of Mickey Mouse. This means anyone can reproduce the work and create new derivative works, as long as they only use elements in the public domain.

Disney's ability to lobby for enhanced copyright protection has been complicated by political battles, such as the ongoing dispute with Florida's Ron DeSantis, who has opposed copyright extensions due to his belief that Disney is too "woke".

Disney's acquisitions of IPs and copyrights

Disney has been incredibly active in acquiring intellectual properties and copyrights over the past few decades. The company has been described as a fierce defender of its intellectual property rights, filing many lawsuits against companies and individuals for copyright and trademark violations.

Disney's first significant lobbying effort led to the Copyright Act of 1976, which extended the copyright duration to the author's lifetime plus 50 years for individual works and 75 years for corporate-owned works. However, the company didn't stop there. Through further lobbying, Disney influenced the Copyright Term Extension Act of 1998, also known as "The Mickey Mouse Protection Act." This act extended copyright protections, allowing up to 120 years for corporate works.

Disney has a vast portfolio of copyrights and trademarks that limit the use of their characters and images, and they have actively protected these rights. For example, in 1989, Disney threatened to sue three Florida daycare centres unless they removed murals featuring their characters. In another instance, Disney sued the Academy of Arts and Sciences for using the portrayal of Snow White in an opening number for an Academy Awards telecast without permission.

Disney's acquisitions have played a significant role in its growth and dominance in the media markets. One notable acquisition is the merger with Twenty-First Century Fox, which included film and television studios, cable networks such as FX and Nat Geo, and international television businesses, including a 30% interest in Hulu. Disney has also acquired other IP-intensive companies, such as Pixar, Marvel, and the Star Wars franchise.

The company exploits its IP resources through various platforms, including media networks, studio entertainment, and direct-to-consumer (D2C) platforms. Media networks are currently the most profitable, while the D2C platform is the fastest-growing in terms of contribution and growth rate.

Disney's success in acquiring and exploiting intellectual property and copyrights has contributed to its status as a leading entertainment producer and provider worldwide.

Disney's market share

In 2023, Disney's total revenue was around $32.6 billion, with its biggest revenue source being its entertainment segment, which generated over $40 billion. The company's parks and resorts segment was the second-largest revenue source, generating $32.6 billion. Disney's sports segment, including ESPN, brought in $17 billion, or 19% of its revenue.

Disney's box office market share in the US and Canada stood at 16.2% in 2023, second only to Universal, which held 20.3%. Disney's share has fluctuated over the years, surpassing 25% in 2022 and every other year since the second half of the 2010s.

Disney's DTC operations, including streaming services like Disney+ and Hulu, brought in over $5 billion in the last quarter of 2023.

Disney's anticompetitive practices in TV streaming

Disney has been accused of anticompetitive practices in the TV streaming market, with a US federal judge ruling that the company must face antitrust claims from consumers. The judge, Edward Davila, stated that Disney must face allegations that it manages its businesses as a single entity, which has allowed it to drive up prices for live-streaming pay TV services.

The proposed class action lawsuit targets Disney's ownership of Hulu, the second-largest live-streaming pay TV provider in the US, and ESPN, the most expensive channel on cable, which is controlled by Disney. The plaintiffs, subscribers of Google's YouTube TV and AT&T's DirecTV Stream, allege that Disney has asserted "unmitigated power" to increase the prices of competitors' streaming services. Specifically, they claim that Disney requires streaming services to carry ESPN in their lowest-priced channel packages, driving up costs for consumers.

Disney's attorneys have argued that the plaintiffs "misconstrue basic antitrust and economic concepts" and that "the antitrust laws exist to protect competition, not individuals." However, Judge Davila ruled that the plaintiffs' "detailed allegations of barriers to entry" establish a sufficient foundation for an antitrust lawsuit. He also noted that Disney's "infrastructure and agreements have produced barriers to entry", making it difficult for new competitors to enter the market.

The plaintiffs are seeking an injunction to bar Disney from further engaging in anticompetitive practices and preventing them from entering the live-streaming pay TV market. While the judge ruled out the possibility of monetary damages, he allowed the case to move forward, stating that the plaintiffs could not seek damages as they are "indirect" purchasers not directly involved in the contracts and agreements at issue.

Disney's use of copyright to build power in adjacent markets

Disney's use of copyright law to build power in adjacent markets is a complex and multifaceted issue that has been widely discussed and analysed in recent years.

One of the key strategies employed by Disney is the acquisition and protection of intellectual property rights. Disney has been known to aggressively defend its intellectual property, often filing lawsuits against those accused of copyright and trademark violations. This includes instances such as threatening to sue Florida daycare centres for having murals featuring their characters. In addition, Disney has successfully lobbied for federal legislation to prolong copyright protection, such as the Sonny Bono Copyright Term Extension Act, which extended the renewal term for works published before 1978.

Disney's approach to copyright has been described as a "copyright empire", leveraging the temporary monopolies granted by copyright law to profit from its creations. This has allowed Disney to control and monetise its popular characters and franchises, such as Mickey Mouse and Star Wars. By doing so, Disney has been able to create 'must-have' content that drives demand for its streaming services and other offerings.

Another strategy employed by Disney is the use of vertical integration, where the company controls multiple stages of the value chain, from production to distribution to retailing. This allows Disney to bundle its content and services, such as its streaming service Disney Plus, creating a powerful offering that competitors struggle to match. Disney has also been accused of using block booking, a practice where distributors force theatres to show less popular movies in return for access to more desirable content. While block booking is technically illegal under antitrust law, Disney's market power makes it difficult for theatre chains to refuse.

Disney's acquisition strategy has also played a significant role in building its power in adjacent markets. By acquiring popular franchises and production companies, such as Pixar, Lucasfilm, and Marvel, Disney has expanded its content portfolio and increased its market share. This has given Disney even more leverage in negotiations with partners, suppliers, and consumers.

In conclusion, Disney's use of copyright law, vertical integration, and acquisition strategy has allowed it to build significant power in adjacent markets. While Disney's practices may not explicitly break antitrust laws, they have raised concerns about the company's market dominance and the potential negative impact on consumers, creators, and the entertainment industry as a whole.

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