Regulatory Risks in Media and Entertainment: The FCC's Deregulatory Agenda and Its Implications for Disney

The Federal Communications Commission (FCC) has long been a pivotal arbiter of the media and entertainment landscape, but its current trajectory under the new administration signals a seismic shift. With Chairman Brendan Carr at the helm, the FCC is pursuing a deregulatory agenda that could fundamentally reshape the industry. For large-cap entertainment firms like Disney, the implications are profound, touching on everything from streaming economics to content moderation and legal liability.

The Net Neutrality Repeal and Streaming Economics

The FCC's recent reclassification of broadband services under Title I, coupled with the invalidation of its regulatory authority in the Loper Bright case, has rendered net neutrality protections obsolete Net Neutrality Rules Struck Down by Appeals Court^[1]. This development allows internet service providers (ISPs) to implement tiered service models, including paid prioritization and zero-rating agreements. For streaming platforms like Disney+, this creates a dual-edged sword. On one hand, larger platforms with financial clout—such as Disney, which already engages in prioritization agreements with ISPs like AT&T—may secure faster delivery of content, enhancing user experience Shocking Net Neutrality 2025: Status and Impact on Consumers^[2]. On the other, smaller competitors could face insurmountable barriers, leading to a fragmented market where streaming quality is dictated by commercial negotiations rather than technical efficiency.

According to a report by Newscyberwave, the absence of federal net neutrality rules could drive up operational costs for streaming services, as platforms may need to pay ISPs for guaranteed bandwidth Net Neutrality 2025: How FCC Rules Impact Streaming Costs^[3]. For Disney, which relies on high-quality streaming performance to retain subscribers, this could translate into higher subscription fees or reduced margins. The situation is further complicated by a patchwork of state-level net neutrality laws, such as those in California and New York, which could force Disney to navigate conflicting compliance requirements The Latest on Net Neutrality – Where Are We In 2025^[4].

Section 230 Revisions and Content Moderation Risks

The Communications Decency Act's Section 230 has long shielded platforms from liability for user-generated content, but this legal armor is now under siege. The FCC, alongside the FTC and DOJ, is advocating for a reinterpretation of Section 230 that would strip platforms of liability protections when they actively curate or remove content Is Section 230 Going to Change? The FTC, DOJ and FCC Signal Significant Change for Online Businesses^[5]. This shift is already evident in judicial rulings, such as the Third Circuit's Anderson v. TikTok decision, which held that algorithmic recommendations could expose platforms to liability for harmful content Section 230 Under Fire: Recent Cases, Legal Workarounds, and …^[6].

For Disney, which operates platforms like YouTube and Disney+ that host vast amounts of user-generated content, the stakes are high. If courts or Congress narrow Section 230's scope, Disney could face increased litigation risks, particularly if its recommendation algorithms are deemed to amplify objectionable material. A bipartisan proposal to sunset Section 230 by 2027 adds further uncertainty, compelling platforms to adopt more cautious moderation practices What Has Congress Been Doing on Section 230^[7]. This could lead to either over-censorship, which might alienate users, or under-censorship, which could invite legal challenges.

Media Consolidation and Ownership Reforms

The FCC's Project 2025 initiative aims to relax media ownership regulations, potentially enabling greater consolidation in the industry Understanding Project 2025’s implications for the^[8]. For Disney, which has already expanded through acquisitions like 21st Century Fox, a deregulated environment could facilitate further mergers or partnerships. However, this trend also raises concerns about reduced competition and the homogenization of content. Smaller players may struggle to compete with conglomerates that can leverage economies of scale, a dynamic that could stifle innovation and diversity in programming.

Strategic Implications for Investors

The FCC's agenda introduces significant regulatory risks for media firms, but it also presents opportunities for those that adapt swiftly. For Disney, the key challenges lie in managing streaming costs, navigating legal uncertainties around content moderation, and balancing consolidation with competitive integrity. Investors should monitor three critical areas:
1. Cost Structures: Rising expenses from net neutrality repeal could pressure Disney's margins, necessitating price hikes or efficiency gains.
2. Legal Exposure: Evolving interpretations of Section 230 may force Disney to overhaul its content moderation strategies, with potential trade-offs between user experience and liability.
3. Regulatory Advocacy: Disney's ability to influence policy outcomes—through lobbying or public campaigns—will be crucial in shaping a favorable regulatory environment.

Conclusion

The FCC's deregulatory push underlines the fragility of the current media ecosystem. For Disney, the path forward requires a delicate balancing act: leveraging regulatory shifts to enhance operational efficiency while mitigating legal and reputational risks. As the regulatory landscape continues to evolve, investors must remain vigilant, recognizing that the intersection of politics and policy will increasingly define the fortunes of media giants.