Inside the TV Wars: Mergers, Monoliths and Shady Backroom Deals
The real fight to watch isn’t on television -- Conan vs. Leno, Olbermann vs. O’Reilly. Rather, it’s about television, and the future of online video -- a fight that pits cable and content companies against consumers.
Instead of being glued to our favorite shows, we’d be wise to pay attention to the various battles, mergers and backroom deals happening between big media corporations who are trying desperately to cling to a sinking broadcast media model -- and pull the public down with them.
Cable and broadcast companies see the writing on the wall, and it no longer spells "media empire." Although a majority of Americans are still watching television -- clocking in an average of five hours of viewing a day (Nielsen Wire, 5/20/09) -- people are increasingly switching off the tube and using their computers and laptops to watch their favorite shows, as well as to find alternative programming. Options like TiVo and DVR have given us the blessed ability to skip over advertisements. And advertising companies are jumping ship, heading over to the Internet or simply not placing ads in a market that can no longer guarantee as many eyeballs.
Thanks to the Internet’s open platform, anyone can create and share video, meaning we’re no longer tethered to traditional media gatekeepers who decide what’s entertaining and who gets the spotlight. We’re also realizing that we can cancel our hefty cable subscriptions and still watch the Daily Show online -- for free. It’s a Pandora’s box that media corporations are trying to sit on top of while the public wrenches the lid up from below.
These new trends threaten the old media model, and cable and broadcast companies are hatching various plans to keep their stranglehold on content, control and profit -- all to the detriment of consumers. If they get their way, we’ll likely see higher prices, fewer choices, worse programming and a slow stifling of online video innovation.
Here are three developments worth paying attention to:
1. Time Warner Cable vs. Fox/News Corp.
The deal long accepted by the TV broadcasters and their affiliates was that they’d get free use of the public airwaves, and in return they’d give the public free programming -- making their money by interspersing the shows with ads. With overall ad spending down in a tight economy, the networks have been looking for a new profit model -- and enviously eyeing the cable companies’ ability to get audiences to pay money for the privilege of watching ad-filled TV (New York Times, 2/23/07).
Accordingly, News Corp’s Fox Broadcasting recently demanded that cable company Time Warner Cable (an independent company spun off by Time Warner in 2009) pay $1 per subscriber in exchange for delivering Fox programming to viewers. In response, TWC threatened to stop airing Fox altogether. The squabble erupted into a public showdown, with both sides creating ridiculous websites (KeepFoxOn.com, RollOverGetTough.com) hoping to pull consumers into their camps, and leaving those in TWC markets to wonder if they’d ever see American Idol again (New York Times, 12/29/09). In early January, the two companies came to a quiet agreement, not disclosing the details of the settlement (Boston Globe, 1/2/10).
What does this mean for consumers? Cable providers have long negotiated deals to carry cable channels like ESPN and MTV -- largely owned by the same companies that own the broadcast networks -- paying monthly fees that are passed on to subscribers in ever-increasing cable bills. As cable companies start to pay for over-the-air channels as well (programming that viewers could get for free just by turning off their cable and hooking up an antenna), don’t expect them to just eat those costs. The same day TWC announced its agreement with Fox, it also announced new rate increases (New York Times, 1/4/10).
With the consumer footing the bill, a natural question arises: Why can’t we just pay for the channels we want, rather than being subjected to these types of shenanigans? An a la carte cable system, where cable networks publish a per-channel rate card, would let subscribers pay only for the channels they choose, rather than being used as pawns in corporate negotiations. But both the networks and the cable companies enjoy the profits from having viewers as a captive audience with take-it-or-leave-it bundled cable packages.
An a la carte system, of course, would not necessarily prevent a similar situation from arising; cable operators would still have to pay broadcasters to carry their channels, and those costs would still get passed onto consumers. However, at least those extra costs would be for channels that consumers actually choose to purchase—not for ones they have had foisted on them whether they want them or not.
2. TV Everywhere
The unrelenting cable bill hikes, of course, only increase the attraction of online video. One way to keep consumers paying for TV content is to put barriers around it -- which is exactly what cable, satellite and phone companies are conspiring to do.
They’ve launched a sunny-sounding plan called TV Everywhere, playing up the idea that consumers will get to watch their favorite shows anywhere they choose -- that is, if they continue to pay for their expensive cable TV service. Companies like TWC and Comcast are making deals with content companies like TBS and TNT to Rapunzel their programming -- locking it behind a paywall that only cable TV subscribers can access. The idea is to force consumers to keep their cable subscriptions if they want to view popular TV programming online (Washington Post, 1/4/10).
This also means that third-party online video companies trying to compete with the cable, satellite and phone monoliths will be unable to provide popular programming. Not just goodbye Hulu -- goodbye to all the online video applications and original content we haven’t even imagined yet.
In January, on the heels of a report by the media reform organization I work for, Free Press (1/10), that examined TV Everywhere, consumer groups called on Congress and federal antitrust authorities to investigate the possibly illegal industry collusion happening to make the plan a reality.
Marvin Ammori, an assistant professor of law at the University of Nebraska, a senior adviser to Free Press and author of the report, said in a press statement (OC Watchdog, 1/7/10):
This is a textbook antitrust violation. The old media giants are working together to kill off innovative online competitors and carve up the market for themselves. TV Everywhere is designed to eliminate competition at a pivotal moment in the history of television. The antitrust authorities should not stand by and let the cable cartel crush Internet TV before it gets off the ground.
3. Comcast/NBCU merger
If you can’t beat them, take them over. That seems to be Comcast’s approach as it positions itself to take a controlling stake in NBC Universal, giving the cable company power over a major television network and film studio, while retaining its perch as the nation’s largest cable company and residential Internet service provider (L.A. Times, 1/29/10). NBCU owns NBC, MSNBC, CNBC, Universal Studios, 27 local television stations and a handful of other properties.
This mega media merger would have disastrous repercussions for the public (Consumers Union, 1/7/10), giving one company the ability to determine what we watch and how we watch it. With Comcast reigning supreme, we can expect higher prices for cable and Internet service, fewer program choices and far less innovation. The company will be able to prioritize its own shows, leaving local and independent programs to wither. And if TV Everywhere doesn’t kill online video, this merger sure will; Comcast can force subscribers to pay for cable in order to watch NBC shows online, and withhold popular content from other online video sources and innovators (Connected Planet, 12/4/09).
But before the companies could fully ink out a deal, Congress (Pittsburgh Tribune Review , 12/4/09) and the Justice Department (L.A. Times, 1/7/10) announced plans to investigate the proposed merger, and the Senate and House held initial hearings in early February. Sen. Herb Kohl (D-Wis.), who chairs the Senate antitrust committee that announced the hearing on the merger, told the press (Wrap, 1/20/10), “This acquisition will create waves throughout the media and entertainment marketplace, and we don’t know where the ripples will end.”
This is not to say that all online TV should be free. Or that cable and content companies shouldn’t be thinking about how to stay in business or change with the times. But all three of these recent developments show a disturbing trend toward stagnation and status quo. Forcing customers to retain their rising cable subscriptions in order to watch online TV, colluding to stifle video competition, and holding tight to old media models in which companies peck at each other for more profit (and pass costs down to consumers) means we’re being stuck with a dying dinosaur of a system, and paying a hefty price for it.
Throughout the 20th century, every democratizing revolution in media was co-opted by corporations that squelched its democratic potential in pursuit of profit. Will the same happen with online video and the Internet? Unfortunately, our media monoliths aren’t ready to evolve, and they’re prepared to sabotage content, creativity and innovation to avoid doing so.