When the plot pushes product
The 30-second ad's reign is clearly on the wane. Today, merchandise drives stories, finances
shows upfront or simply slips into the scene.
By Lynn Smith
Times Staff Writer
February 12, 2006
The nation's future was at stake and Jack Bauer, as usual, was racing against the clock on last
month's season premiere of "24." Stuck in an airport crawl space, he could only watch helplessly
as the enemy terrorized hostages and made demands of the president.
Fortunately, the writers made sure the maverick agent had a fully charged camera phone. The
sponsors made sure it was a Sprint Treo 650.
Bauer even offered a testimonial to his colleagues at headquarters: "I'm going to send you photos
of the hostages. They should be clear enough for you to identify them."
Welcome to the world of product integration. More subtle than product placement — the time-
honored practice of having "American Idol" judges drinking from Coca-Cola cups, say — the
rising alternative to commercials actually weaves products into plots and dialogue of some of
television's top prime-time scripted shows.
According to Nielsen Media Research, which has been tracking product placements the last three
years, the number of placements, including the new integration, jumped 30% to 108,261 last
year. NBC ranked highest with 7,470 instances of a product being shown on its reality show
"The Contender" alone and an additional 3,009 placement shots on "The Apprentice."
Product integration efforts can be as obvious as Eva Longoria taking work as a spokesmodel for
Buick on "Desperate Housewives," or as subversive as the cast of "Arrested Development"
making fun of Burger King at a Burger King.
Television, of course, has historically served as a vehicle for advertising. But knowing that
sponsors are paying for the boss of "The Office" (Steve Carell) to frequent Chili's and order his
"awesome blossom" "extra awesome" might shock some viewers who have grown used to
believing scripted programs are pure creative efforts separated by 30-second commercials.
On one episode of "The Office," Carell's character broke into the restaurant's catchy "baby back
ribs" jingle while entertaining a potential client there. Stars of "Veronica Mars" and "The O.C."
are frequently shown using their T-Mobile Sidekicks to solve mysteries or thicken the plot.
"We're living in a crazy new world," said Gary Newman, president of 20th Century Fox
Television, which produces "24." "The old formulas don't necessarily work. We have to be smart
and find new ways to monetize the value of our programs," he said.
Networks have joined companies and producers in the scramble to offset the anticipated decline
of the 30-second commercial, threatened by the avalanche of technological novelties that allow
consumers to control their entertainment on iPods, cellphones or the Internet.
There is no standard model for placements; in some cases, story lines involving a specific
product are pitched to a relevant company that can then buy its product's way into the scene; in
other cases, companies suggest their products for a show. One Los Angeles broker has set up a
matchmaking website so potential partners can find one another. Another company has
specialized in digitally inserting brands into films and shows, allowing entertainment companies
to sell the same space several times: On one film, for instance, one advertiser appeared in
theaters, another on network television, another on basic cable and still another on DVD.
TV's grave new world
The glut of reality TV isn't being driven solely by the writers strike, but by a desire by networks
to overhaul the cost structure of programming.
By Scott Collins
Los Angeles Times Staff Writer
February 4, 2008
REMEMBER when they used to gobble horse innards and other delicacies on "Fear Factor"?
Ah, 'twas prime time's golden age.
Blame it on the writers strike, but network TV is rushing to embrace cheap and sponsor-friendly
unscripted programming that makes gross-out contests look like "St. Elsewhere." And leading
the way is NBC, the network that for two decades staked its reputation on upscale, high-quality
shows such as "ER" and "Law & Order."
As that halcyon era fades away, it's being replaced by a tin age of high-concept, lowest-common-
denominator stuff: "American Gladiators," "Deal or No Deal," "Celebrity Apprentice," "My Dad
Is Better Than Your Dad" and the game show "Amnesia." These shows are typically rife with
product tie-ins and placements, a trend that gleeful advertisers say is sure to grow. During the
May sweep, NBC will air a reality special, "America's Favorite Mom," that was actually created
and will be overseen by Los Angeles-based flower purveyor Teleflora.
Is it a show? An infomercial? A "content wrap"? Tune in and find out!
Ben Silverman, co-chairman of NBC Entertainment, insists there's no cause for concern. "We are
not putting more reality on" permanently, Silverman wrote me in an e-mail. "It's just a strike-
informed reality." He emphasized that the network continues to pursue scripted projects, such as
"Kath and Kim," with Molly Shannon and Selma Blair, an adaptation of the scabrous Australian
Others are not so sure of NBC's direction. Shari Anne Brill, analyst at ad firm Carat, dubs what's
happening at NBC a "descent from class to crass." And it's hard to argue when much of the
programming looks more fit for a second-tier cable network than the onetime No. 1 broadcast
In fairness, NBC is hardly the only network chasing cheapo reality TV these days. As strike
doldrums seized the industry last month, CBS executives grew either bored or anxious enough to
order up something called "America's Top Dog." Given that it's CBS, maybe they're angling for a
spinoff starring crime-solving canines.
NBC still has plenty of critically acclaimed, upscale shows. In fact, "The Office," "30 Rock,"
"Friday Night Lights" and "Scrubs" are the top 4 network shows with the highest proportion of
young viewers in households with more than $100,000 in annual income, according to figures
from Nielsen Media Research.
But those series -- all of them scripted, in case anyone failed to notice, and all except "Scrubs"
developed and put on the air by former top programmer Kevin Reilly, whom NBC fired last year
-- account for just 2 1/2 hours a week, or about 11% of NBC's schedule. Not quite enough to
cover for down-market shows such as "Deal or No Deal," "Gladiators" and "1 vs. 100."
Nor does recent history give much cause for hope that quality will reign again once the writers
trot back to work. "Gladiators" and "My Dad" were ordered more than a month before the strike
started in November, and both bear the imprimatur of Reveille, Silverman's production company,
which he's in the midst of selling. (NBC's "The Biggest Loser" and "The Office" are also
Silverman argues that it's misleading to look just at the demographics of shows such as
"Gladiators." Because such programs deliver much larger audiences than, say, "Friday Night
Lights," an advertiser will still end up getting the desired number of high-income viewers, at
least in absolute terms.
ABC combines TV network, production units
The cost-cutting move follows in the footsteps of NBC. Layoffs could begin as soon as next
By Meg James and Dawn Chmielewski
January 23, 2009
ABC on Thursday became the second major broadcaster to combine its television network and
production studio into a single unit, an acknowledgment of troubled economic times and
changing viewer preferences.
Walt Disney Co.'s ABC, like all television companies, is scaling back amid a deepening
recession. Networks are particularly vulnerable now because their audiences are shrinking and
their advertising revenues are falling but production costs for dramas and comedies are
continuing to climb.
"The broadcast television model is not working the way it used to, and it needs to be fixed," said
Jason Maltby, a top buyer with the influential ad agency Mindshare. The current economic
climate is simply putting more pressure on networks to produce shows more efficiently, he said.
Last month, NBC Universal merged its NBC network with its production studio and laid off
dozens of executives who shepherded shows onto the air.
ABC said its reorganization would not immediately result in job cuts among the people who
develop shows, but Disney is expected to begin layoffs at ABC as soon as next week. ABC
executives declined to discuss the potential reductions.
The big winner in ABC's makeover is Stephen McPherson. He will now be president of the
newly formed ABC Entertainment Group, responsible for both the network's programming and
ABC's prime-time ratings are down this season. It is currently tied with NBC for third place
among the big four networks in the 18- to 49-year-old demographic that advertisers pay a
premium to reach.
As part of the reorganization, Mark Pedowitz, the head of soon-to-be-gone ABC Studios, has
been assigned a new role as senior advisor to Anne Sweeney, head of Disney-ABC Television
Group. Sweeney, McPherson and Pedowitz declined interview requests.
"By operating these units in a coordinated fashion we'll be able to present the industry with a
unified, cohesive vision for ABC programming," Sweeney said in a statement.
McPherson and Pedowitz frequently clashed. McPherson's focus has been to build ABC's prime-
time schedule while Pedowitz aggressively shopped the studio's shows to the network as well as
rival broadcasters and cable channels. The TV studio produces two hits for CBS: "Criminal
Minds" and "Ghost Whisperer."
Hollywood's uneasy embrace of Apple's 99-cent TV rental offer
September 1, 2010 | 5:48 pm
Only two major Hollywood television studios agreed to allow Apple Inc. to offer 99-cent rentals
of TV shows -- a price that the device-maker hopes will spark sales of a new generation of its
Walt Disney Co's Disney/ABC Television Group and News Corp.'s 20th Century Fox joined in
Apple's long-anticipated announcement that it would begin renting episodes of such popular
shows as "Desperate Housewives," "Grey's Anatomy" and "Glee." The offering was announced
in concert with the re-envisoned Apple TV, a smaller and less expensive version of the device
that brings iTunes video content to the television, which now costs $99.
Fox issued a carefully worded statement indicating that its participation was a limited trial,
lasting "several months," reflecting the deep divisions within the company over the wisdom of
dramatically dropping the price to watch TV shows on Apple devices from as much as $2.99 an
Most major television producers, including CBS, NBC, ABC, Warner Bros, and Sony Pictures,
aren't part of the 99-cent rental deal. Nor are powerhouse cable networks Showtime and HBO.
Each has a vested interest in protecting their existing businesses, which brings billions of dollars
into the TV industry through cable and satellite subscriptions and advertising revenue.
Alan Gould, an analyst with Evercore Partners, a Wall Street brokerage firm, wrote in a report
that studios know they need to provide a reasonably priced, online version of their content or
illegal downloads will become pervasive.
"However, that does not mean the studios have to provide the product at a long-term money-
losing price," Gould wrote. "We recognize there will be some incremental revenue from
downloads, but assume most viewership will be a substitution for traditional TV viewing and
hurt the long-term TV business model."
Particularly worrisome to some major TV producers is the idea that offering commercial-free
versions of a TV episode for just 99 cents will gut sales of DVDs. That's because renting an
entire season of a popular show "CSI: Miami" through iTunes would cost less than $24 -- a
fraction of the $50 or more consumers now pay for the DVD (or a season's pass on iTunes).
In addition to television shows, Apple TV also lets users rent movies at prices ranging from
$2.99 for standard-definition library titles to $4.99 for high-definition new releases. At
his newsconference, Jobs emphasized HD video, a strategy the company has followed in the
iTunes Store as well, where buttons to buy or rent content in hi-def are front and center, while
standard-definition options are tougher to find. That's a concession to studio demands that Apple
push the more profitable versions of their content, according to people familiar with the matter.
Despite the concerns of many in Hollywood about Apple's clout and its emphasis on low prices,
content creators will benefit if Jobs' firm is able to expand the nascent business for distribution of
legitimate, nonpirated, digital content in the home.
"The studios or content owners know they get more revenue through DVD rentals," said Paul
Verna, a media analyst with researcher EMarketer. "On the other hand, the DVD business is
dwindling. i think this is a recognition of that."
-- Dawn C. Chmielewski and Ben Fritz
Hollywood sounds alarm as streaming video websites enable a new wave of piracy
The sites offer a vast unauthorized selection of movies and TV shows that can be watched with
the click of a mouse. They demand none of the time or technical sophistication required to
download a video via file-sharing technology.
By Dawn C. Chmielewski, Los Angeles Times
September 21, 2010
USC student Elizabeth watched the season finale of HBO's lusty vampire drama "True Blood"
along with about 5.4 million television viewers.
But the 19-year-old junior didn't see it in a way that would yield ratings points for Time Warner
Inc.'s premium cable channel. She caught the final episode on her laptop using Megavideo, one
of a growing number of websites in the vanguard of a new wave of Internet piracy. At least 1.25
million others did the same thing, according to estimates from one firm that monitors online
Megavideo and other sites like it offer a vast unauthorized selection of popular television shows
and movies that can be watched with the click of a mouse, using the same streaming technology
found on mainstream sites like CNN or Hulu. It demands none of the time or technical
sophistication required to download a video file via BitTorrent or other file-sharing technology.
Streaming video is the most visible sign of how Internet piracy has evolved since the days of
Napster and its imitators. The new digital black market combines "cyberlockers," such as
Megaupload and Hotfile, which piracy experts say hold stores of pilfered content, with linking
sites such as TVDuck and TVShack.cc, which act like an underground version of TV Guide,
helping people locate bootlegged TV shows and movies. Some of these linking sites even
contain reviews and recommendations that lend a patina of legitimacy.
The growth of streaming pirate sites has been nothing short of arresting. One independent
measurement service documented a 42% jump in the number of infringing sites with streaming
capability from July to August, sounding alarms throughout Hollywood.
"Accessing stolen content by streaming has become increasingly widespread," said Rick Cotton,
general counsel for NBC Universal. "So the challenge of reducing digital theft online now has a
second major focal point."
Technological leaps in the living room are heightening anxiety further, with manufacturers
expected to ship 27.7 million televisions and 55.7 million media players with Internet
connections this year alone, according to global projections from researcher iSuppli. Software
including Google TV makes it possible for viewers to search for and find video on the Web —
including unauthorized streams (a Google spokesman said the company provides tools for rights
holders to remove links to infringing content). "As we see more and more Internet-connected
TVs, we'll see more and more streaming piracy," said Brian Baker, president and chief executive
of Widevine, a company that makes the Internet streaming technology used by Netflix,
Blockbuster, CinemaNow and Wal-Mart.
File-sharing remains the primary source for pirated digital copies of songs, movies, TV episodes
and video games. But use has stagnated as media companies have enjoyed greater success in
crippling or shutting down popular sites such as Mininova and Isohunt, said Eric Garland, chief
executive of BigChampagne, a media tracking firm. Streaming and downloading from so-called
cyberlockers are on track to surpass peer-to-peer use by 2013, according to the Motion Picture
Assn. of America, Hollywood's lobbying arm.
"It's not larger than peer-to-peer, but it's growing faster," said Lawrence Low, a vice president of
strategy with BayTSP, a technology company that works on behalf of entertainment industry
clients in identifying unauthorized content online. "Live streaming, in particular, is doubling in
the last two years."
The financial damage to the industry is hard to quantify. The federal Government Accountability
Office threw up its hands in April, writing that it couldn't accurately estimate the losses because
of all the assumptions required to make up for the lack of data — such as estimating how many
consumers would have purchased something they pirated.
The fear is nonetheless palpable throughout the entertainment industry. Executives worry that
improvements in Internet speeds and in the software that compresses movie files into easy-to-
distribute packages are making matters worse.
"It's made streaming a lot less clunky than it was even three years ago," said Darcy Antonellis,
president of Warner Bros. Technical Operations.
Some of the sites that provide links to pilfered digital content lack any whiff of the illicit.
"It may be the case, in some instances, that people are viewing content from these sites believing
they're legitimate sites," said Daniel Mandil, the MPAA's general counsel. "That's obviously part
of the business model that these sites want to create the impression of legitimacy."
Take, for example, Sidereel, which offers users the ability to watch "every show on the Web."
The site includes ads from Macy's department store, the National Football League and even from
the NBC broadcast network, which is using the site to promote Jimmy Smits' new fall series
"Outlaw." It contains features common to entertainment sites, including Top 10 rankings,
recommendations and a fall TV preview with descriptions of upcoming shows.
Anti-piracy experts describe Sidereel as a linking site that directs viewers looking to watch
popular shows that aren't available free online — such as HBO's "True Blood" or Showtime's
"Dexter" — to cyberlockers such as Megavideo, which hosts streaming video files.
Chief Executive Roman Arzhintar said Sidereel was nothing more than a specialized search
engine. It points people to relevant content, including such legitimate sources as Amazon.com,
iTunes and Hulu, and it immediately removes links whenever it receives notice that it is directing
people to infringing content, he said.
"From my standpoint, Sidereel's main goal is to help people find the content they're looking for
and to track the content so they can keep watching," Arzhintar said. "I can't stop the consumer
from searching for stuff."
Technology exists to solve the problem it enabled.
Richard Atkinson, an media piracy expert who created and ran Walt Disney Studio's anti-piracy
operations team, said companies such as Vobile make identification technology that can quickly
recognize a movie or TV show from its digital fingerprint, giving website operators the tools to
block unauthorized uploads of copyrighted works. But some sites prefer the procedure spelled
out in copyright law, which requires them to remove infringing content within a reasonable
period of time after being notified by the rights holder.
But time is of the essence.
"If something is really in high demand, you've got the whole world connected via social media,
blogging, Twitter," Atkinson said. "Almost in real time, I can post something to a site and do a
worldwide shout-out about my posting.... If it takes anywhere from hours to 12 hours to get
something down, that can mean the difference between a hundred views, which is fairly good
containment, and hundreds of thousands of views."
To strengthen the government's hand against online piracy, Senate Judiciary Committee
Chairman Patrick J. Leahy (D-Vt.) and senior Republican member Orrin Hatch (R-Utah) on
Monday introduced a bill that would give the Justice Department more tools to track and shut
down websites devoted to providing access to unauthorized downloads, streaming and sale of
No more skipping ads? Networks will look to video-on-demand to replace DVRs
October 11, 2010 | 1:30 pm
With penetration at almost 40%, the digital video recorder is starting to change the way people
watch television and, more important, don't watch advertising.
For the television industry, TiVos and DVRs are a mixed blessing. On the one hand, the devices
allow viewers to catch shows they might have otherwise missed. On the other hand, often when
viewers use the machines to watch shows, they skip over commercials, much to the chagrin of
the advertisers, which pay big bucks for those spots, and the networks, which need the money to
The networks are wary of this and ultimately are looking to video-on-demand to replace the
DVR. In other words, picture a day when instead of recording that episode of "Two and a Half
Men" on your DVR, you order it on video-on-demand. The only difference would be that on
VOD the ads would be there and you wouldn't be able to skip them.
"I call DVRs a transitional technology," said David Poltrack, the chief research officer of CBS.
In an interview, Poltrack said the DVR will be supplanted by streaming and VOD that will "give
the consumer the ability to watch shows any way they want to and to do so in a way that is much
Will the consumer feel that way? Poltrack notes that as VOD becomes more widespread, it could
allow cable subscribers to drop their DVRs and knock $10 bucks or so a month off their cable
bills. He said CBS has done research that showed 90% of the several thousand people the
network surveyed would accept watching commercials in return for not shelling out money for a
DVR. Of course, some people might be willing to shell out the $10 a month to not watch
What about the cable and satellite companies that make money off of DVR subscribers? It would
seem natural for them to be resistant to this. Poltrack said the bigger VOD becomes, the easier it
will be for distributors to sell high-end digital cable packages as well as possibly sell advertising
in or around video-on-demand offerings.
Those who would prefer to keep their DVRs won't escape ads either. Sooner or later the
distributors will just make it impossible to skip commercials on shows recorded with DVRs.
Don't shoot me, I'm just the messenger.
-- Joe Flint
More TV viewers may be cutting the cord this year
New mobile devices and Internet-connected televisions that could let viewers cancel their pay-
TV subscriptions are expected to be among the hottest items at the Consumer Electronics Show.
By Dawn C. Chmielewski and David Sarno, Los Angeles Times
5:28 PM PST, January 3, 2011
It's about to get a lot harder to turn off the TV.
A torrent of television-ready gadgets will hit the store shelves this year, including dozens of
phones and tablet computers that will allow viewers to watch movies and TV shows from just
The proliferation of viewing devices — including a new generation of TV sets that connect to the
Internet — could boost the chances that viewers will do what cable and satellite companies fear
most: cancel their $70-a-month subscriptions in favor of cheaper Web options.
"2010 was the year that people started wondering, questioning if cord-cutting is real," said Phil
Wiser, co-founder and president of Sezmi, a service that allows users to watch TV from both
local stations and online sources. "In 2011, it's going to become obvious."
Many of the TVs will be unveiled at this week's Consumer Electronics Show, the annual
conference in Las Vegas that attracts more than 100,000 tech devotees searching for technology's
next big thing.
This year the buzz is centered on Internet-connected TV and whether it will take off. Internet TV
would allow viewers to watch Web videos alongside traditional television shows and movies.
Nearly every manufacturer is expected to unveil a Web-capable television at the electronics
"It's going to be a fundamentally big transition," said Jason Kilar, chief executive of the Hulu
online video service. "You'll see unparalleled choice, from the standpoint of the consumer, when
you open up the Web through that screen."
Manufacturers are also sure to trot out a parade of new tablet computers, each hoping to compete
with Apple Inc.'s dominant iPad, which has sold more than 7.5 million units since it launched in
The cast of iPad rivals is expected to include devices from Hewlett Packard Inc., BlackBerry-
maker Research in Motion Ltd. and perhaps Microsoft Corp. New tablets — like their cousin, the
Web-connected TV — will also be video-friendly, with high-resolution screens that will let users
watch movies and shows they can download from the Internet.
The next generation of smart phones is also likely to grab a share of the spotlight. The newer 4G
phones — that's fourth generation — operate close to 10 times faster than current smart phones,
allowing users to watch movies and television via a cellular connection. Verizon Wireless Inc. is
widely expected to unveil its first 4G phone to take advantage of the high-speed network the
company is rolling out.
"People more and more want to take all the stuff they're doing on a computer or a TV and start
putting it in their pocket," said Scott McGregor, chief executive of Irvine-based Broadcom Corp.,
which makes microchips for popular consumer devices including the iPhone and iPad, as well as
TVs and Blu-ray players.
Automakers will also jump on the Internet bandwagon, rolling out cars that will let drivers send
one another real-time road conditions or allow passengers to watch YouTube on in-car displays.
Whether Web-connected TVs will be this year's Holy Grail of gadgetry is uncertain. Last year
the Consumer Electronics Show's "it" gadget was 3-D television, but 3-D TV has yet to gain
traction with consumers. Before that it was HD DVD, which was touted as offering extra-sharp
high-definition home video. But HD DVD succumbed to rival format Blu-ray.
But much-hyped gadgets in other years, such as the high-definition TV, have become ubiquitous.
More than 80% of Sony's Bravia TVs will be able to connect to the Internet this year, compared
with 50% in 2010, said Greg Belloni, a spokesman for the company's TV business. In addition,
all of Sony's Blu-ray players and Blu-ray home theater systems will have the ability to connect to
the Internet to pipe in additional content.
Internet-TV services like Boxee are expected to join TV makers in a flurry of technology
partnerships to be touted at the trade show.
"There will be a bunch of content-related announcements — content that has not before been on
TV," said Avner Ronen, Boxee's chief executive and co-founder. "This is a huge market that's
getting disrupted: the living room. The giants of the tech world — Apple, Google, Microsoft —
are trying to claw their way in. We're one of the little guys trying to establish ourselves."
For entertainment industry executives, Internet video's migration from the PC to the TV presents
opportunities as well as fresh headaches. It opens the market to a new crop of distributors willing
to pay top dollar for licensing rights to TV shows and movies. But it also causes friction with
cable, satellite and telecommunications carriers, which pay $30 billion annually to deliver video
into the home.
"You'll start to see a lot of conflict between the ambitions of the connected-device manufacturers
and the ambitions of the cable operators," said Arash Amel, digital media analyst for researcher
IHS Screen Digest. "Connected TV is a direct threat to [pay TV distributors like] Comcast.
You'll see a lot of movement to prevent that from happening."
The tension was brought sharply into focus when search giant Google Inc. announced its first
foray into the connected living room with Google TV software, which marries the Web and
traditional TV. Fears that the technology would disrupt traditional television viewing habits
caused broadcasters to block access to Web streams of their shows. Meanwhile, tepid reviews of
the product prompted Google to ask TV manufacturers to delay any announcements at the
Consumer Electronics Show until the software could be further refined, according to published
Comcast-NBC merger does nothing to enhance the public interest
With his proposed conditions on the deal, FCC Chairman Julius Genachowski is trying to
sugarcoat a terrible regulatory decision that underscores the derelict condition of government
regulation in our age.
January 1, 2011
Federal Communications Commission Chairman Julius Genachowski is poised to greenlight the
proposed merger of the big cable company Comcast Corp. with the huge entertainment
Genachowski wants to impose several conditions on the deal to ensure that the resulting
entertainment behemoth can't use its dominating power to shut down competition, jack up rates
for customers, and generally undermine the public interest.
The likely result of those conditions? Comcast will be as free as it wishes to shut down
competition, jack up rates for customers and generally undermine the public interest.
That the FCC chairman is trying to sugarcoat a terrible regulatory decision underscores the
derelict condition of government regulation in our age.
Here's the basic truth about this deal, no sugarcoating: Nothing about it enhances the public
interest, which is the standard that must be met for the FCC to approve the license transfers that
are essential to the deal.
Neither Comcast nor NBC needs this merger for its survival. It won't improve cable TV or
Internet technology. It won't by itself lead to more innovative or even more popular television
programming. It won't result in more efficient entertainment production.
In fact, by concentrating economic power in fewer hands, it may lead to less of all that. Claims
similar to those being made by Comcast and NBC — that the merger will be great for customers
— were made for all the media mega-mergers of the last 15 years, involving Walt Disney Co.,
ABC, Viacom, CBS, Time, Warner Bros., CNN and AOL, among other companies.
These deals didn't create a golden age of filmed or video entertainment, or engender a surge of
trenchant news reporting or analysis (quite the contrary), or deliver lower costs for the audience.
Cable and Internet technology advanced, but that would have happened anyway.
One irony of the Comcast-NBC deal is that it's barreling through in the name of media
deregulation just as we've lost perhaps the smartest deregulator we've ever had: Alfred E. Kahn,
who died two days after Christmas, oversaw the deregulation of the airline industry in the late
1970s, a policy that has saved Americans billions of dollars in fares.
Kahn understood that deregulation comes in many flavors, and some of them leave a bad taste in
the public's mouth. In 2002, he observed that the airline mergers that followed his deregulation
of that industry reflected an "abdication" by government.
Unhappy that the airline industry had already become more concentrated than it had been before
deregulation, Kahn wrote, "That is why we have antitrust laws." He blamed the reconcentration
of the air carriers on "the failure of the Department of Transportation to disallow even one
merger of direct competitors."
The media landscape isn't much different. The last big media merger to be rejected by the FCC
was the proposed DirecTV- EchoStar deal in 2002, which would have given the combined
company 90% of the satellite TV market.
If Comcast-NBC goes ahead as planned, former FCC Commissioner Tyrone Brown has
predicted, it will be the first big deal of many. "Three megacompanies — at most four — will
effectively control every aspect of the product chain, from creation to distribution to the
customer." (Brown said this in testimony to the FCC as president of the Media Access Project, a
Washington nonprofit advocacy group.)
The Comcast-NBC deal will create novel opportunities to undermine competition and diversity
in the cable and Internet industries. Comcast's self-interest as the owner of major broadcast and
cable channels will give it an incentive to keep new, independent channels off its cable grid. Its
leverage as owner of the NBC networks will allow it to shoulder other channels out of prime
spots on other cable systems.
Comcast will have an incentive to hamper the growth of non-cable video distribution services,
such as the Internet-based instant-viewing option offered by Netflix or the rental service of
Amazon.com, whether by denying them NBC programs or interfering with their transmission to
Comcast Internet subscribers.
Surprise: Comcast already is jacking up its fee to carry the Netflix video stream "as a tool to
impede competition," according to a complaint filed with the FCC by Level 3, the company
Netflix hired to deliver its digital bits to customers. Level 3 says it shouldn't pay anything extra
to deliver the Netflix service to Comcast's subscribers. Comcast says its dispute with Level 3 is a
plain-vanilla disagreement over Internet traffic, not an effort to stifle a rival.
Who will pay if these fees stand? The customer. Netflix will raise its rates to cover its
transmission costs, and I bet Comcast will find a way to charge its customers more for the higher
Internet speeds and usage limits they need for high-quality Netflix video.
Genachowski's proposed conditions, which have been circulated to the other four FCC
commissioners, include barring Comcast from discriminating against services like those of
Netflix and Amazon. But enforcing the rules will almost certainly depend on complaints from
aggrieved parties such as Level 3.
That's a weak system. Given the complexity of Internet and cable service, establishing that an
action is discriminatory is an incredibly time-consuming and costly process. That's why the
incumbent almost always gets its way and why "conditions" imposed by regulators seldom
present real obstacles to underhanded behavior.