Although consolidation within the media landscape is not a new phenomenon, it has become of strategic significance against the backdrop of the emergence of digital verticals. Where tech companies are moving in the direction of becoming content producers, content producers are moving in the direction of becoming more tech oriented. Each of these instances are aiming for controlling every aspect of the digital value chain, ranging from interface, platform, infrastructure to content. Welcome to the game of stacks.

Our observations

• In a $52 billion deal Disney acquired the majority of the assets of 21st Century Fox. Furthermore, Disney decided that it would pull its movies from the Netflix library. In the past Disney already acquired content companies such as Marvel, Pixar, LucasArts and Miramax.
• After a total investment of $ 2.58 billion, Disney currently owns 75% of BAMTech, a technology company known for building streaming platforms. Disney thereby possesses the means to build their own streaming platform.
• Citi analysts speculated that there is a 40% chance of Apple buying Netflix. In that same report they attribute a 20-30% chance of Apple and Disney teaming up.
• In turn, Netflix and Amazon acquired content companies (respectively MillarWorld and Rooftop Media)  with the purpose to expand their content library.
• Apple is also making an attempt at content production with a budget of $1 billion dollars, reportedly with Steven Spielberg under contract for the anthology series ‘Amazing Stories’.
• With the repeal of Title II telco companies can leverage their position to strike deals with distribution platforms, or by prioritizing their own content distribution platforms.

Connecting the dots

According to Thompson’s Aggregation Theory, distribution platforms derive their success from attracting users through offering a premium user experience, which in turn attracts the necessary suppliers. In these instances, the power moves from the supplier to the distributor. We have seen this dynamic with the taxi (Uber) and the hospitality industry (Airbnb). Interestingly, when it comes to media content, it turns out that they are harder to commoditize as they represent unique products with loyal consumers, thereby providing the media owner presumably enough leverage to bootstrap themselves into a distribution platform role. Hence, with the acquisition of multiple content companies and BAMTech, Disney is currently taking all the steps necessary for building its own streaming platform. In contrast, we see tech companies like Apple, Amazon and Netflix moving in the opposite direction to create enough substance for their existing platforms. Apart from subscription fees, the biggest value for Disney in creating their own distribution platform, lies in the possibility of having a more intimate relation with their consumer for the purpose of selling adjacent services and collecting and capitalizing customer data. With regards to future acquisitions and strategicmoves other content producers could follow Disney’s example. Furthermore, it is to be expected that tech companies will continue to acquire content producers (for example, Apple could revisit the idea of buying Time Warner). Another option is that the bigger tech companies could team up. As proposed by Citi analysts, Apple could acquire Netflix in order to shortcut their way into video streaming while Netflix could benefit from Apple’s ecosystem. Lastly, tech companies will also compete with each other by beating the other at their own game; Amazon, Microsoft, Google are already trying to compete with Apple at the interface level by developing their own user hardware (e.g. Kindle, Hololens, Google Home) in order to increase lock-in effects for their media content.

Implications

• After having completed their vertical within media, companies could try to enter other verticals (similar to Amazon premium) for the purpose of capitalizing and enriching their customer data. One could imagine that somewhere in the future Disney could personalize their other products and services (e.g. theme parks and merchandise) based on data collected through their streaming platform.
• Other content producers could also think of creating their own streaming platforms, possibly leading to the fragmentation.
• Against the backdrop of the repeal of Title II, distribution platforms will try to seek exclusive deals with telco providers in the attempt to also compete at the infrastructure level.