The Fox / Disney deal is a whole lot more likely in the aftermath of the AT&T / Time Warner merger. The Justice Department's decision to sue against the AT&T / Time Warner deal sent shockwaves through the entertainment industry. It was the first real sign that the Trump Administration actually intended to follow through on the antitrust rhetoric that had been part of Donald Trump's campaign. In this case, the Justice Department was opposing a merger that everybody had really expected to be approved.
Now, a Federal Judge has ruled against the Justice Department, and in favor of the merger. The deal is perfect for our digital age, combining AT&T's distribution with Time Warner's content. This decision is likely to have far-reaching implications, as it's generally believed a lot of companies have held off on mergers and acquisitions while they awaited the outcome of the trial.
Disney, of course, is one exception. In December, the House of Mouse formalized its bid to purchase the bulk of 21st Century Fox's film and TV empire. No doubt all parties involved have been concerned that they, too, will fall foul of antitrust regulations; but this court decision will ease the pressure on them somewhat.
It Looks Far More Likely The Merger Will Be Approved
In the case of the AT&T / Time Warner merger, the Justice Department had argued the acquisition would lead to fewer choice for consumers and higher prices for television and internet services. The court's view was the Justice Department had been unable to prove their case, and thus the lawsuit against the merger was dismissed. This clears the way for other companies to move ahead with their own mergers and acquisitions, confident the courts will still apply regulations consistently.
It's important to understand the television and film industry is currently in a time of dramatic change. That's why Fox is up for sale in the first place; their execs don't believe the company has the kind of scale to compete in an environment where consumers are increasingly committed to digital mediums. When an industry is in flux like this, companies need to be able to react fast. Clyde Wayne Crews of the Competitive Enterprise Institute gave a perfect example when illustrating the point to Forbes, discussing antitrust concerns that had prevented Blockbuster and Hollywood Video merging back in the early 2000s:
"Government interference and ultimate denial generated vast wasted effort and time when the retail landscapes were changing by leaps and bounds and the companies needed to move fast. It's incredible to think about it now, but what was once a fully staffed Blockbuster where people would line up on a Friday night and rent videos, is now reduced to a Redbox robot kiosk sitting in the CVS that nobody uses."
The entertainment industry had been justifiably concerned antitrust regulations would prevent them being able to conduct the necessary mergers and acquisitions in order to compete in a changing environment. This court decision makes that far less likely.
But this doesn't mean it will be plain sailing for Disney. Rival Comcast is also interested in purchasing Fox's assets, and they're expected to formalize an unsolicited bid in light of the AT&T / Time Warner decision. Although Comcast is offering more money, Fox's leaders were more attracted to the Disney bid because they felt it raised less antitrust concerns. While Comcast had prepared an unsolicited bid, they'd deliberately not formalized it yet, believing the outcome of this court case would indicate whether or not their proposal had a chance of being approved by regulators.
On July 10, shareholders at Fox will vote on whether or not to accept Disney's bid, or instead consider Comcast's offer. That doesn't mean it will be case closed, of course; Disney is reportedly preparing a counter-bid for the eventuality their offer is turned down by shareholders. The reality is, thanks to this court decision, there's now everything to play for - and both Disney and Comcast hope to gain more content for their already strong distribution networks.