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The creation of a new Hollywood juggernaut combining Walt Disney and 21st Century Fox would change the balance of power between traditional media and internet streaming services such as Netflix and Amazon Prime, who would become more reliant on a single company for television shows and movies if the merger is completed.
Disney’s expected acquisition of Fox’s entertainment assets, which could be announced as soon as this week, follows its decision to end its current movie licensing deals with Netflix in 2019 to launch its own “over the top” streaming services.
The two media groups are already shareholders alongside Comcast in Hulu, one of the biggest rivals to Netflix and Amazon in TV and movie streaming.
Together, a combined Disney and Fox would own 19 per cent of the most popular TV shows available on Netflix in the US, making it the second-largest provider of content to the streaming service after CBS, according to YipitData, which collects and analyses web data for institutional investors.
Their joint share would exceed that of Netflix’s own original series, adding greater urgency to the Silicon Valley company’s multibillion-dollar investment in TV and movie commissioning.
The streaming company produces or commissions 15 per cent of TV shows ranked in IMDB’s top 500, according to YipitData research, compared with 12 per cent from Fox and 7 per cent from Disney.
At Amazon Prime, the ecommerce group’s video service, Fox and Disney combined would make up about 9 per cent of the same sample of 500 top shows.
That would leave both companies vulnerable to a strategic shift away from third-party streaming services by the new Hollywood group but Netflix would be at the greater risk, says Michael Sloan, research analyst at YipitData.
“If Disney and Fox come together and want to monopolise their own content by moving it all to Hulu, Netflix has a lot more to lose than Amazon Prime,” he says.
YipitData analyses terabytes of information scraped from publicly available websites every day. For this study, it looked at TV series that are listed in IMDB’s top 500 shows and are available on Netflix or Amazon, and grouped them by the original TV network that created them.
Netflix has already seen the number of Fox shows on its platform fall by half over the last year, from 39 titles in late 2016 to 20 in October 2017, according to YipitData. This included popular shows such as The X-Files and Buffy the Vampire Slayer, which disappeared from its catalogue even as they remain available on Hulu.
However, many of the licensing deals that Netflix and Amazon have signed last for several years. Even if a broadcaster decides to pull its content from a streaming platform, its shows could still be available for up to a decade through different licensing “windows” agreed in the original contract.
Some in the streaming industry see an opportunity from the potential merger of Fox and Disney, as integration challenges may distract them from competing more effectively with online upstarts. In the meantime, Silicon Valley companies including Apple, Facebook and Google-owned YouTube are all investing heavily in their own content, outside the traditional broadcast model.
Netflix has said it hopes to produce at least 50 per cent of its content in-house or to license it directly from the producer by 2020. The strategy to reduce its dependence on providers such as Disney and Fox for its catalogue began in 2013, as it anticipated growing competitive tensions with its partners in the traditional media industry.
The relationship between streaming platforms and traditional media groups is complex, with co-productions as well as competition.
“The reality with big media companies is that their interests are diverse and become even more complicated in their international interests,” says Dan Cryan, analyst at IHS Markit. “The narrative that it will be a bloodbath is far too simple to describe a relationship which is very multifaceted.”
This post originally appeared on Financial Times