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Weaponizing TV Everywhere

One of my grad school professors, the late Dr. Thomas Muth, told us that he was far less interested in analysis, whereby you grind ideas down to a smaller form, than synthesis, in which you combine parts of different ideas together to build something new. I’m bringing this up because the whole Comcast / Time Warner Cable merger has me thinking about the antitrust law I learned from another grad school prof, Dr. Barry Litman, and I’m smashing a few of those ideas together.

Actually, this starts with my previous blog post, where I mentioned in passing that Microsoft used to be very active in video codec development, getting WMV9 adopted as part of the Blu-Ray spec. You know what else Microsoft used to be? A convicted monopolist. It’s almost forgotten today, but the initial ruling in United States v. Microsoft was that the company had illegally used its market power and should be broken up. This was later partially overturned on appeal, and the DOJ effectively walked away from the case under the Bush administration.

Still, it’s remarkable to think that in barely over a decade, we’ve gone from contemplating the break-up of Microsoft, to the widely-held perception that the Comcast / Time Warner Cable merger will easily win approval. Regulatory capture, FTL.

You know what else once happened? The FTC prevented Proctor and Gamble from buying Clorox. This is one of those things I learned about in Dr. Litman’s telecom policy and law classes. I couldn’t find a Wikipedia article about the case (or anything else sufficiently human-readable), but as I remember, what makes the case interesting is that while the merger didn’t change the competitive scene on store shelves — P&G didn’t make bleach, so there was no removal of a competitor — the FTC basically invented entirely new markets within Clorox’s production chain, and claimed that these were monopolized. And it worked: P&G had to spin off Clorox.

That’s important for stopping Comcast / Time Warner Cable, because while they don’t in fact compete for television customers, there are many existing markets in which consolidation would be genuinely harmful. Ars Technica discusses some of these in How the US could block the Comcast/Time Warner Cable merger.

But here’s a good one I think they missed. Remember my blog about going to the Streaming Media West conference, and how panelists talked about ensuring an “orderly transition to IP-based distrbution”? Let’s change some words here. It’s not “IP-based distribution”; there is an “IP-based media market”, one that already exists, distinct from the existing television market. Meaning that anything you watch on an iPad, a Roku, or other internet connected device is inherently different than cable and satellite television, just as cable and satellite are different from broadcast.

As a user, this is obvious, right? IP distribution gives us a totally different experience than cable/satellite. It’s mostly on-demand (whereas the old stuff is mostly linear feeds), the breadth and depth of content is immense and potentially limitless (not constrained by DirecTV transponders or cable MSO head-end capacity), the revenue models are substantially different (purchasing episodes a la carte is possible, as is tip-jar style patronage, along with traditional models like advertising and subscription), etc.

The IP media market already exists as its own thing. I’m counting any form of media distribution that is primarily- or exclusively IP-based: on-demand services like Netflix, Hulu, and Crunchyroll; download-to-own stores like iTunes, Google Play, and Amazon Instant; and livestreaming services like Twitch, Bambuser, and UStream. All of podcasting fits in this market as well, as does web radio. Many participants in the market have nothing to do with the existing television market.

IP media is a very big market, and it is growing very fast.

So let’s talk about that “orderly transition”? A key element of this is the idea of “TV Everywhere”, the various schemes by which you can get content from a broadcast/cable/satellite provider by entering your credentials on an IP-based device like a tablet, OTT box, or PC. Stuff like HBO Go, NBC’s Olympics Live Extra, etc. It’s a rear-guard action — even if you don’t want to use cable/satellite technology, and prefer to watch on your iPad or Roku, you’re still going to have to buy a cable or satellite television package, invariably sold as a subscription to an set number of linear-feed television channels, in order to get that content via an IP device. Comcast, which owns NBC Sports, will not sell you the Winter Olympics any other way.

And if we see IP video as a separate market from broadcast/cable/satellite, then we’ve got to be able to make the case that this is tying:

Tying (informally, product tying) is the practice of selling one product or service as a mandatory addition to the purchase of a different product or service. In legal terms, a tying sale makes the sale of one good (the tying good) to the de facto customer (or de jure customer) conditional on the purchase of a second distinctive good (the tied good). Tying is often illegal when the products are not naturally related. It relates to freebie marketing as a common (and legal) method of giving away (or selling at a substantial discount) one item to ensure a continual flow of sales of another related item.

The cord-cutters already know that TV Everywhere is BS — they want the content, not the old technology (nor the old business / pricing models) that supported them. But they’re not able to buy just the content they want without it being tied to something they don’t. From the cablers’ point of view, access via IP is the “freebie”, but the more we come to see IP Media as a distinct form of media (and a distinct media market), the more hollow the TV Everywhere claim feels.

So if the US government could at one point claim that there were captive markets within Clorox’s own production and distribution chain that were threatened by a merger, it should be possible now to show that the existing, growing market for content in IP media is clearly harmed by having a dominant internet provider (and owner of all that NBC Universal material) tying it to the unwanted cable TV subscription. You could make this case now, even before the merger gives them control of 30% of US cable subscribers.

Then again, you know what else we could do to fight this merger? Stop watching crappy cable TV anyways. With so much stuff to watch, sooner or later making it harder or more expensive to watch one thing just naturally makes us choose something else. There’s a whole generation growing up that doesn’t watch traditional TV at all (my kids mostly watch YouTube and Netflix). Even if Comcast wins today, they’re on the wrong side of history, and they may be as screwed 10 years from now as the once-dominant Microsoft is today. We can hope so, anyways.

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