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Ronald Coase Assignment UvA Essay Principles of Business and Economics
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Ronald Coase Assignment UvA Essay Principles of Business and Economics
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Ronald Coase’s theory on Disney’s recent acquisition of 21st Century FoxBy Thijs Jagtenberg 12893722
Words: 731
The nature of the firm is essentially one that is guided by two forces of which one external
and internal the other. With firm Coase describes the term as of the following, ‘the system of
relationships which comes into existence when the direction of resources is dependent on the
entrepreneur’. Coase’s theory concludes that between the firms in the economic environment,
the price mechanism guides the relationship between them, however, within each firm it’s the
entrepreneurial coordination that guides the resources within the firm, not the price
mechanism (Coase 1937, The Nature of the Firm). In this essay, the occurrence of recent
acquisitions will be discussed and explained along the lines of Coase’s theory on takeovers,
which is according to Coase for the reason that companies may be able to have lower
marginal costs than if it were to do the activity of the other company itself. In this essay I will
try my best to answer the following question sincerely, were there any other motives behind
the takeover of 21st Century Fox by Disney other than the lower costs for Disney following
the acquisition?
Firms that are not using their assets most profitably are generally interesting to
compete for firms for takeovers, a good example of this is the acquisition of 21st Century Fox
by The Walt Disney Company that took place on March 20, 2019. As the media business is
since the 21st century slowly moving towards a more online approach in the form of
streaming services, media companies will have to sell their libraries differently. To answer to
this recent change in the market, Disney acquired BAMtech to launch it’s own streaming
services which they rebranded as Disney+. This takeover was the main reason for Disney to
acquire 21st Century Fox, CNBC wrote that ‘Disney chief Bob Iger says that the company’s
bid for 21st Century Fox assets would never have happened if it weren’t for Disney+, its new
streaming service.’ By adding the 21st Century Fox movies and series to its library, Disney
would significantly increase the profitability of these media by selling them on the Disney+
platform. This is a typical case where a takeover is occurring because of the one company
that considers the other companies assets to be put to better use.
However, there may be an opposing argument for the purchase of 21st Century Fox,
which is the precedent takeover of BAMtech. As Disney acquired BAMtech, it’s now
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