Disney Acquiring Sony: Monopoly vs. Market Fragmentation

Following Sony's dispute with Disney over Spider-Man, my half-joking suggestion that Disney should buy Sony and be done with it sparked some heated reactions from my friends.

Some of them are concerned that a Disney-Sony merger would be detrimental to the current media landscape, citing the potential for Disney to become a powerful monopolistic entity.

Current Landscape of Media Ownership

It is true that Disney has already acquired a significant amount of content and media assets, including ABC, Disney Channel, Disney XD, Disney Junior, Freeform, ESPN, 21st Century Fox, Saban Entertainment programming, Marvel and Star Wars properties, and Hollywood Records.

Even if Sony were to be acquired by Disney, the entertainment industry would not become monopolistic overnight. Big players like Comcast, Warner Brothers, ATT, Netflix, and Amazon would still be major forces in content production.

Moreover, the larger media industry is dwarfed by technology giants such as Facebook, Google, Tencent, and Alibaba, indicating that the potential for a true monopoly is more limited than one might initially think.

Reasons Against Entertainment Monopoly

Market monopolies are generally considered harmful for several reasons.

Price Control and Inflation

A monopolistic company can:

Set any price they choose, regardless of market demand, due to the lack of competition. Drive up inflation and economy-wide prices.

Quality and Innovation

Without competition, a monopolistic company may:

Provide inferior products. Lose the incentive to innovate or improve their offerings.

That is why regulatory bodies like the Justice Department need to oversee mergers and acquisitions to prevent monopolies from forming.

Disney's Path to Monopoly

While Disney currently faces competition from various players, each acquisition moves them closer to a potential monopoly.

As of now, Disney's acquisitions include Sony Pictures and other entertainment companies, which bring them closer to controlling a significant portion of the film and television industry.

Conclusion

While the idea of Disney owning Sony sounds intriguing, the reality is more complex. The entertainment industry remains fragmented, with multiple players vying for dominance.

Market fragmentation and the presence of strong competitors make it difficult for any single entity to hold a true monopoly. Therefore, the concept of a Disney-Sony merger should be scrutinized for its potential to affect consumer prices and product quality, but it isn't as straightforward as it might seem.