Walt Disney - oligopoly of media industry
Paula Stöckelle, 04th March 2021
When deciding what movie to watch, do you ever look at the companies that produce them? Well, if you do, you will see that there are very little well-known companies that make very many well-known movies.
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First up a little insight on what oligopoly is. In an oligopoly at least two companies lead in their market field and outplay other, probably smaller businesses immensely. Among those few leaders reigns a very big competition and everyone wants to be the best. It is also important to say, that there can’t be an endless number of oligopolists since at some point they wouldn’t be dominating on the world’s market and there would be a variety of companies where none of them stands out specifically.
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Now if we have a look on the media industry, we rather quickly can find the five executive brands which are very well known all over the world: The Walt Disney Company, News Corporation, Time Warner, Dreamworks
Animation SKG and Viacom. They all worked their way up to the top. In this blog we will examine the oldest and some may also say the grandest of these oligopolists in the industry of media: The Walt Disney Company
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To begin with, Disney wasn’t always on the top. Actually, when Walt Disney
founded the company in 1923 it was just a small animated-cartoons business
which slowly but surely started to grow. In the 1990’s the company’s market
share already owned more than 20% of the world market and in the last few
years it even climbed up to over 40%. This means that Disney is pushing away
or buying up it’s competition and more and more aims towards being the
monopolist in the media industry. This would mean that it it pretty much owns
the market alone and is the one and only “king” if one can say so.
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Now what does this mean for the market? As already mentioned, it is very heard for other, smaller media producers to compete with Disney what leads to them going under and very rarely publishing something well known.
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The fact that Walt Disney owns numerous of patents for all kinds of things doesn’t make this any easier. There is, for example a special “system and method for providing landscape and portrait-oriented images of a common scene on separate feeds with independent image controls” or a patent for “optimizing 3D printed large-scale structures under worst-case loads”. If you are interested in finding out more about those and looking through all the company's patents, follow this link.
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Furthermore, Disney and the four other oligopolists in the industry of media have the power to determine the pricing for their products. Now, because there are only so few of them, an agreement can be found rather easily. What can also be said is that in an oligopoly, prices change less frequently and when they change all the firms normally move into the same direction. To find these prices there are three models that can be applied:
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First, there is the “Kinked-Demand Theory” which says that if one company rises the prices, no one would follow because of the advantage of selling more products because of more affordable prices than others, but if one firm lowers them everyone follows to not end up as the most expensive one.
Next is the “Contestable Market Model”. If the oligopolist of an industry set very high barriers for newcomers like low sales prices and low manufacturing costs, it is nearly impossible to be able to controvert it. On the other hand, if prices are high and production costs rather low for firms that are just starting in the business, it will be much more easy for them to climb up the lather of success.
Last but not least, we have the “Cartel Model” in which the dominating companies form a kind of bond and agree on fix prices or divide the market among themselves in order to keep away other competition. One could nearly say that they form a kind of monopoly by collaborating.
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In conclusion, The Walt Disney Company has a very big influence and share in the media industry and this can not only be seen in the area of movies. There are thousands of merchandise products like dresses, toys as well as cities or countries (Disney Land) built in the style of certain film sets and landscapes.
I hope, by reading this, you were able to learn something new and now know more about oligopolies and what role Disney plays in the industry of media.
