Movie Studios Make Massive Monopoly! X-Men in the Marvel Cinematic Universe?!

Nathan Potter, Associate Member, University of Cincinnati Law Review

*This article is intended to be the first of two. This article will inform readers about the history of Marvel and introduce concerns about Disney’s pending acquisition of Fox. The second article will more heavily focus on the legal issues facing the pending acquisition and will be published in December.

After decades adrift in the multiverse, some of Marvel’s biggest heroes are returning home! Walt Disney Company’s (“Disney”) purchase of 20th Century Fox (“Fox”), which is proceeding at inhuman speeds, is reported to be ready for closing in early 2019.[1] Is this team-up of two of Hollywood’s “Big ” the assembly of titans we have been waiting for, or is it just part of some sinister plan?[2]

It is important to understand Marvel’s tragic backstory before looking into any potential legal issues of the Disney-Fox acquisition. The Modern Age of comics (1985 – present) saw a supersonic boom in sales, followed by a beast of a decline. This dastardly descension into financial collapse is primarily attributed to three factors: (1) market over-saturation by Marvel and its competitors; (2) the dissatisfaction of comic book collectors as they realized most Modern Age comics would not appreciate in value like those from the Golden and Silver Ages; and (3) the distributor wars.[3] This culminated with Marvel Entertainment Group’s (“MEG”) filing for chapter 11 bankruptcy on December 27, 1996.[4]

In both their success and despair, Marvel started heavily licensing its more popular franchises in 1993.[5] The X-Men were among the first wave of volunteers, being licensed to Fox for an impressive $2.6 million (this is not a typo, it is Million, not Billion) and about 2% of worldwide ticket sales.[6] Not too bad for Fox, considering the deal was for both live-action and animated rights.[7] These figures are mortifying in hindsight, but remember that X-Men (2000) and Spider-Man (2002) are the two films which started the successful modern trend of using comic books as source material. The real problem facing Marvel for the last 20 years is that most of these licensing contracts with movie studios render Marvel powerless. Many, if not all, of the contracts stipulate that the licensee (the one who holds the license) will retain the live-action film rights if the licensee starts production on a sequel or other production using characters from the franchise within so many years.[8]  Evidenced by Marvel regaining the Daredevil rights in 2012 after the franchise went unused since 2005’s Electra movie, these periods appear to be seven years.[9]

Ideally, Marvel and movie studios would work together for profit, but this fantasy often goes up in smoke. Spider-Man: Homecoming (2017) is the first exception to this trend. Sony agreed to work with Marvel (in sweet symbiosis) for movies in the current Marvel Cinematic Universe (MCU) and the Spider-Man: Homecoming trilogy. Marvel agreed to help produce the Homecoming movies while receiving none of the profits.[10] At least Spidey swung his way back into the MCU.

Considering Marvel’s history and current situation as background, is Disney a hero or a villain? Yes, if the deal goes through, then Marvel will get the X-Men back, but at what price? The Federal Trade Commission (FTC) says that “[t]he greatest antitrust concern arises with proposed mergers between direct competitors (horizontal mergers).”[11] Disney and Fox are both members of the “Big Six”, meaning that they are direct competitors. While an occasional crossover is a comic book treat, would Disney grow too strong to strike down after acquisition of Fox’s assets? As of October 2018, the Disney and News Corporation (Fox’s parent company) make up 29.5% and 9.8% (respectively) of the estimated Box Office Market Share.[12] Meaning Disney will own about 40% of the box office markets. This will strengthen Disney’s position and allows the possibility for Disney to assert more influence over movie theatres, streaming services, and more. Disney already showed us their dark side when they enforced unprecedented terms on movie theatres before allowing those theatres to show Star Wars: The Last Jedi Additionally, Disney has been pulling its movies from services such as Netflix.[14] Maybe it is because Disney will gain a 30% ownership in Hulu, Netflix’s biggest competitor, if this acquisition is completed.[15]

It looks like the Department of Justice[16] and FTC[17] have already approved Disney’s acquisition of Fox, but is this merely the origin story in a long line of sequels? The second article will revisit this topic in December. It will explain the antitrust law precedents and update you on developments over the next two months. To be continued…

[1] “Rice reiterated that the deal is still on track to close sometime in the first half of 2019.” Daniel Holloway, Fox Will Be Ready to Close Disney Deal Jan. 1, Says Peter Rice (EXCLUSIVE), Variety (Oct. 10 2018), https://variety.com/2018/biz/news/disney-fox-deal-will-be-ready-to-close-jan-1-says-peter-rice-exclusive-1202976061/.

[2] The “Big Six” refers to the six biggest production studios in Hollywood, they account for roughly 80% of the box office market share every year. These studios are: Paramount Pictures, Warner Bros. Pictures, 20th Century Fox, Universal Pictures, Columbia Pictures, and Walt Disney Studios. Big Six, Maya Academy of Advanced Cinematics (Dec. 22, 2014), https://www.maacindia.com/blog/index.php/big-six/.

[3] Adam Schlesinger, Holy Economic History of the American Comic Book Industry, Batman!, Wesleyan University (April 1, 2010), https://wesscholar.wesleyan.edu/cgi/viewcontent.cgi?article=1428&context=etd_hon_theses.

[4] In re Marvel Entm’t Grp., 140 F.3d 463, 467 (3d Cir. 1998).

[5] Sean O’Reilly and Motley Fool Staff, “Deadpool” Shows How Complicated Character Rights Issues Are, [podcast] Industry Focus (Feb. 23, 2016), https://www.fool.com/investing/general/2016/02/26/deadpool-shows-how-complicated-character-rights-is.aspx.

[6] Id.

[7] Id.

[8] Twentieth Century Fox Film Corp. v. Marvel Enters., 155 F. Supp. 2d 1, 7 (S.D.N.Y. 2001),

[9] Rachel Abrams and Variety Staff, ‘Daredevil’ falling back to Marvel, Variety (Aug. 14, 2012), https://variety.com/2012/film/news/daredevil-falling-back-to-marvel-1118057848/.

[10] Ryan Faughnder, Inside the deal that brought Sony’s ‘Spider-man’ back to Marvel’s cinematic universe, Los Angeles Times (June 26, 2017), http://www.latimes.com/business/hollywood/la-fi-ct-sony-marvel-spider-man-20170626-story.html.

[11] Mergers, Federal Trade Commission (accessed Oct. 19, 2018), https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/mergers.

[12] Box Office by Studio, Box Office Mojo (Oct. 14 2018), https://www.boxofficemojo.com/studio/?debug=0&view=parent&p=.htm.

[13] Disney has created several restrictions for theatres, including: Disney will receive about 65% of the ticket revenue, the movie must be shown on the theatre’s largest screen during the duration of its showing, and more. Erich Schwartzel, Disney Lays Down the Law for Theatres on ‘Star Wars: The Last Jedi’, The Wall Street Journal (Nov. 1, 2017), https://www.wsj.com/articles/disney-lays-down-the-law-for-theaters-on-star-wars-the-last-jedi-1509528603.

[14] Ryan Waniata, How Netflix and Disney are fighting for the future of streaming: Kids, Digital Trends (Sep. 25, 2018), https://www.digitaltrends.com/movies/netflix-disney-dominate-streaming-kids-shows/.

[15] The Walt Disney Company Signs Amended Acquisition Agreement To Acquire Twenty-First Century Fix, Inc. For $71.3 Billion In Cash And Stock, The Walt Disney Company (June 20, 2018), https://www.thewaltdisneycompany.com/the-walt-disney-company-signs-amended-acquisition-agreement-to-acquire-twenty-first-century-fox-inc-for-71-3-billion-in-cash-and-stock/.

[16] See Press Release, U.S. Dep’t of Justice, The Walt Disney Company Required to Divest Twenty-Two Regional Sports Networks in Order to Complete Acquisition of Certain Assets From Twenty-First Century Fox (June 27, 2018), https://www.justice.gov/opa/pr/walt-disney-company-required-divest-twenty-two-regional-sports-networks-order-complete.

[17] CNBC Staff, US gives Disney-Fox deal antitrust approval, CNBC (June 27, 2018),  https://www.cnbc.com/2018/06/27/us-set-to-give-antitrust-approval-for-disney-fox-deal.html.

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