May 16, 2024
Disney+ and Warner Bros Discovery are set to begin selling a bundle combining their streaming offerings to consumers within the next few months. Commercially aware lawyers will follow with interest.

What is the context?

The market for at-home entertainment via streaming is huge. Recent data suggests that 99% of all US households pay for at least one streaming service according to Forbes, and the market as a whole is worth an eye-watering half a trillion dollars.

However, there is fierce competition within this space. While Netflix originally established itself as establishing some form of dominance in the early years, in the past few years greater competition has emerged from a number of alternative offerings, which has sometimes limited the giant’s growth.

While Netflix currently maintains around 250 million subscribers, Amazon Prime Video has now clocked up around 200 million, and Disney+ sits around 150 million (other big-name competitors like Apple TV, at 25 million subscribers, still have a long way to go in order to catch up). Despite this recent competition, then, it is clear that Netflix (which recently posted an increased subscriber count of 13% YoY) still leads the way here.

Why have Disney and Warner reached this agreement?

Situated in that context, it becomes clear that the rivals to Netflix need to do more in order to grow their shares of the industry. 

Disney+ is owned, of course, by Walt Disney – but some consumers may not be aware that the services of both Hulu (approximately 50 million subscribers) and Max (approximately 100 million subscribers) are held jointly by Warner Bros Discovery. All in all, then, these three services combined currently total 300 million subscribers – more than Netflix itself (though note that many subscribers have more than one subscription – these are not mutually exclusive head counts). 

By offering a package combining all three of these already immensely popular services, Disney and Warner clearly intend to poach customers from the likes of Netflix looking for a wide variety of content elsewhere. 

And this is, in itself, a key reason for the joint venture – the diversity of the content on offer. Disney+ have generally become known for their child-friendly offerings. The service is probably most well-known for providing access to Pixar films, some of which were previously available on Netflix but were taken down around 2018 when news broke that Disney were planning to create their own streaming service.

This is a niche which has certainly served them well so far, but is ultimately limited in how many consumers it is able to bring in (and the company are very aware of this – recent ad campaigns in the UK have tried to demonstrate that they do offer some more ‘mature’ content on the site tailored to adult viewers, too).

Furthermore, the idea of any service at the moment focusing on a particular niche will almost certainly make it more susceptible to customers cancelling their subscriptions amongst the ongoing cost-of-living crisis in many countries. The same Forbes data from above also suggests that 45% of consumers have already cancelled one of their streaming subscriptions due to seemingly ever-increasing costs, and the most common name on the chopping block when it comes to cancelling services is, unsurprisingly, Disney+. 

Warner Discovery’s options, on the other hand, in the form of Max and Hulu, are generally seen as more adult-orientated. For example, Max (HBO) has hosted all episodes of the hugely successful Game of Thrones series for some time. Households looking for one package which can satisfy both kids and adults alike, then, might certainly be drawn to the new offering from two of the biggest players in the industry.


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Key takeaways: what should aspiring lawyers take from this deal?

There are a wide variety of points that any aspiring lawyer could take from this. Whether a solicitor applying for vacation schemes and training contracts, or a barrister looking for pupillage, the talking points here (think about the open nature of interview discussions) are very wide.

First, understanding these kinds of ‘business’ stories demonstrates a solid basis of commercial awareness. This is something that corporate-focused law firms and chambers, in particular, are very interested in hearing more about. Some Magic Circle and elite US firms, in particular, have become known to hold separate case-study commercial awareness interviews alongside more general ones – at which point you could draw comparisons between your scenario and stories like this one.

Developing your commercial awareness is key, and stories like this are the perfect way to do that – not only reading them, but also thinking (as this section prompts you to do) about how it could relate to the activities of your target organisation.

Second, understanding this story might also showcase your knowledge of an area which your target firm or chambers has a particular specialism in. Some of the law firms who are especially active in this area (according to Legal500 rankings) include boutique names like Bird & Bird – alongside huge corporate players like Latham & Watkins.

More specifically, there are a number of tangible practice areas of law which come up here (and being specific on your application form is often a great move). First, consider the IP (intellectual property) implications here. There will be a number of agreements already in place for each side to hold certain rights over the intangible assets at play here (something Disney is known for being fiercely defensive over in particular), and they will need to be brought into an alignment to some extent in order for this agreement to work.

Second, you could think about the international law implications for this deal. While it is currently only a US offering, if the brands were looking to expand further in the future (certainly possible if this initial move goes well), it is likely that large firms with experience working on cross-jurisdictional matters would need to be involved in order to negotiate how the agreements would transfer across.

Finally, you could point out that this agreement between two huge names in the industry could raise potential competition law concerns over a monopoly. This is a very common concern in the US, where large media companies are involved (see our analysis of Microsoft’s troubled Activision Blizzard takeover attempt). In streaming contexts, specifically, there has been tension here already – just last month, a proposed joint offering of sports streaming between Disney, Fox and Warner was interrogated in Congress by Jerry Nadler and Joaquin Castro (the concern being that, by dominating the market, they can reduce choice and so increase prices even further, ultimately hurting consumers even more).



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