Inside the TV Wars

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."

Demanding change
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.

TAKE ACTION

Get more information on these issues and learn how you can take action:

www.freepress.net
www.consumersunion.org

www.mediaaccess.org