Tag Archives: Comcast

Net Neutrality Debate a Reminder that Content Was Never King

Media consumers are usually too busy paying attention to content to consider the channels through which it arrives. Yet the nature of those channels and the rules governing them have historically had a huge, unacknowledged role in creating and shaping what we read, watch and listen to.

The motion picture business was founded by people who owned tiny movie houses; the future moguls knew nothing about making films, but they owned the exhibition outlets, and needed content to sell tickets for. So they learned, and they shot, and they founded the studios. Channel preceded content, and gave birth to Hollywood.

Channel control has long prefigured media development. In the electronic age, wherever the creative artists went, the engineers had gotten there first.

Broadcasting started out as the late 1920s brainchild of people who made and sold radio sets. They wanted to give customers a reason to buy their receivers, so they then began making programs and transmitting them over the air. First came the distribution channels, content followed.

FM radio languished for 30 years until the 1960s, when regulators told station owners they could no longer fill the high-quality FM band with the same programs they were putting out on scratchy AM. Suddenly huge bandwidth opened up, perfect for audio engineered for clarity — and the revolution in alternative rock was born.

And the feds’ 1962 insistence that all TV sets be equipped to receive signals broadcast in the UHF range – another 60-some channels on top of the four or five that most consumers received — broke the network stranglehold on TV broadcasting and started the industry down the road to the multi-channel cable explosion.

That brief history lesson goes some way toward explaining why today’s controversy over so-called net neutrality matters.

Net neutrality is the policy that has barred the companies that furnish Internet connections from playing favorites. It means Internet

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Giant media poised for a growth spurt

Week of Nov. 23, 2009

“Big media today wants to own the faucet, pipeline, water, and the reservoir. The rain clouds come next.”

So wrote Ted Turner, the media entrepreneur who sold off CNN and the rest of Turner Broadcasting to Time Warner in 1996, in a remarkable Washington Monthly article five years ago that remains as compelling a case against media consolidation as you’ll find anywhere.

Turner was exaggerating a little when he described the unending, predatory longing of industry players to drag more and more media operations under a single roof. Exaggerating a little, but not much.

Vertical integration—owning the whole shebang, the entire media loop from script creation to program production, on to distribution channels, exhibition venues and syndicated re-runs, and nowadays on to DVDs, director’s cuts, re-releases and sequels, streaming video, cartoon spinoffs and action figures—has been the Holy Grail for as long as there has been a media business.

It’s why the great movie studios of the silver screen insisted on having their very own nationwide theater networks. (The government stopped that.)

It’s why the broadcast TV networks of the so-called golden age insisted on buying programs from companies they owned. (The government stopped that too for a while—and a fourth broadcast network, Fox, emerged thanks to the bumper crop of shows from newly emancipated producers.)

And vertical integration is why Comcast, the country’s biggest owner of cable systems, the company that decides which networks reach one of every four U.S. homes, is drooling over NBC Universal. The deal, if it happens, would be a staggering one.

NBCU, owned by General Electric (whoever decided that was a good idea?) is a powerhouse that comprises NBC—one of the storied Big Four broadcast networks—a major movie studio, theme parks, 13 cable networks—including USA, CNBC, Bravo, SyFy, MSNBC, CNBC, Oxygen, the Weather Channel—the No. 2 Spanish-language network, Telemundo, and 33 local TV stations.

NBCU, in short, is a mammoth content machine. And, Comcast, though chiefly an immensely rich operator of cable pipes, isn’t just the $34 billion-a-year utility whose bill you bellyache about every month. It too covets content. It tried to buy Disney in 2004, and it owns all or part of 20 cable networks, including E! Entertainment Television, Style, G-4, the Golf Channel and a bunch of national and regional sports channels.

And now it wants NBCU. One analyst estimated that combining the content arms of the two companies would bring roughly one-quarter of the country’s TV programming under a single owner. Another said the merged entity would control one of every five hours of programming. Who knows. Clearly, this would be big.

The usual objections to such deals have to do with the outsized economic clout the resulting colossus would wield. Scale emasculates market discipline. When you control access to 24 million homes, you aren’t ruled by prevailing prices, you set them. Recession? Comcast is squeezing $6 more per household now than it was a year ago, and its profits were up 22.5 percent last quarter.

Very nice, but when you own the programs too you can make sure your networks get delivered even when that means elbowing other producers aside. You can strong-arm your competitors—satellite companies, for instance—by threatening to withhold popular networks or forcing them to carry the dogs as well. You can cut deals with other distributors who want the shows they control flowing through your pipes. You get your way.

Naturally, you’ll resist innovation unless you control it. Comcast would get a 30 percent stake in Hulu, the upstart distributor of first-run Hollywood programming via the Internet—a huge potential threat to cable operators. Subscription cable is Comcast’s bread and butter, and a business that makes $944 million on quarterly revenue of $8.8 billion is some business. Comcast will make sure online’s future doesn’t endanger its own.

Sure, the government can demand conditions to keep some of the worst excesses from being realized. Comcast may agree to carry the programs of outsiders on roughly the same terms as its own, may have to shed some NBCU holdings.

But pigs don’t fly. The whole point of vertical integration is to secure unfair advantage, to unlevel the playing field. And besides, since when is avoiding the worst the best we can hope for? It has been longstanding public policy to encourage localism, diversity and competition in the media business. It’s time to dust off that policy and give it some teeth by blocking this ridiculous and dangerous deal.

Playing Monopoly with Mickey on the Internet

February 23, 2004

It’s remarkable in this election year how many of the issues that shape people’s lives are never raised: vanishing pensions, relaxed immigration controls, swollen numbers of working poor, soaring college fees.

Campaign logic steers politicians not necessarily to the issues that matter most, but to those where they smell electoral advantage. Others are shunted to the margins of public discourse. They become nonpolitical matters and are managed, invisibly, by bureaucracies or businesses.

Case in point: The continuing realignment of the country’s mass media, the latest instance being cable giant Comcast’s stunning plan to buy the Walt Disney Co. This would be the first true assertion of unitary corporate control across the full range of media available in the Internet age.

Already in the past nine months, we saw first a sweeping regulatory move to roll back safeguards against ownership concentration. Then Rupert Murdoch’s News Corp. – which owns Fox Network among many other media properties worldwide – would buy the top U.S. direct-to-home satellite broadcaster, DirecTV.

Now we’ve hit the trifecta with news that the country’s biggest cable owner, Comcast Corp., wants to acquire Disney. The deal would create the country’s largest media company, with $47 billion in annual revenues, well above Time Warner’s $40 billion.

What would go under one roof? First, the vast Disney-branded entertainment juggernaut and the media empire assembled under the nearly 20-year Michael Eisner reign – Miramax, Touchstone and Buena Vista films, the sprawling ESPN sports franchise, ABC television, big pieces of A&E, Lifetime and E!.

Then, add the Comcast side of the ledger: 21 million cable subscribers, the largest swath of households in the industry and, of perhaps greater importance, 5.3 million subscribers to high-speed Internet service, which make Comcast the country’s leading provider of broadband online access.

So this is a deal with even greater weight than the 2000 Time Warner AOL merger, which was supposed to have married the world of old media to the emerging universe of Internet comestibles. After all, AOL was not a player in high-speed Internet access, which is where all the action is, and Time Warner has neither a broadcast network nor a national delivery system.

With Comcast-Disney, it’s all there: Movies, TV production, top cable networks (the crown jewel is ESPN, which is pulling up to $2 a month out of your cable bill whether you watch sports or not), assured national distribution via broadcasting and cable, downstream syndication and a vast network of overseas affiliations.

And down the line is the advent of interactive TV, nationwide video on demand and all sorts of Internet applications – which is why the Mother of all Media Monopolies, Microsoft, spent $1 billion to buy a substantial 7.4 percent stake in Comcast in 1997.

Why does this matter? A single entity will be able to orchestrate the full range of media activity: originating content (from Finding Nemo to Nightline) or buying content on advantageous terms, deciding on its distribution, choosing the technology to exhibit it, setting a price for it – everything short of compelling an audience to watch it – without any effective competitive constraint.

(A slight exaggeration: You might be able to ditch the Comcast/Disney/Microsoft option in favor of Murdoch/Fox/DirecTV. Welcome to 21st Century consumer choice.)

Vertical integration on this scale – when one colossus controls the whole process, soup to nuts, by which something is made, distributed and sold – is breathtaking. It also eludes most antitrust scrutiny, which looks at unhealthy influence over a single market, not unhealthy sequential influence within a series of markets.

And what about the marketplace of ideas? The engineers of this deal will say they are interested in your money, not your mind. That’s a comfort.

But the things that make it a good deal economically – the many advantages of centralization – make it a bad deal for the life of culture and ideas. It could be that a diversity of ownership is the closest thing a privately-owned media industry can offer to duplicate the checks and balances built into this country’s political structure.

But that is not a question we’ll see debated this, or any, electoral season.