Antitrust and the Hollywood Strikes
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As I noted last week, the shift to streaming is intentional, because it affords the studios cheaper labor costs. That’s what the whole strike is about, and it’s a grim irony that the labor action is just heightening the incentives to rush into streaming. But even the streamers need fresh content to prevent viewers from hopping in and out of their platforms.
More important, the Writers Guild has connected this trend to how the dominant players in the industry are breaking the law. In a report released last week, “The New Gatekeepers: How Disney, Amazon, and Netflix Will Take Over Media,” the WGA peers into the future of the entertainment business model and finds just three companies likely to control “what content is made, what consumers can watch, and how they can watch it.”
The report was intended for the eyes of the Biden administration’s antitrust enforcers. It recommends that Disney, Netflix, and Amazon be prevented from any further consolidation, and investigated for anti-competitive practices in streaming. It was a call from inside the industry to break the industry up. And the administration got the message. That may be the primary reason why the studios are backtracking.
We have been here before, as the report points out. The government used the Financial Interest and Syndication (fin-syn) rules to separate production from distribution to the three major TV networks in the 1970s. This bolstered independent production companies and ensured prosperity in the industry, also enabling cable to eventually expand the possibilities for entertainment. The Paramount decrees in the 1940s similarly separated production and distribution in movie theaters.
Over the past decade, this anti-monopolization has gone into reverse, even as distribution channels expanded. Disney has used acquisitions to centralize control, beginning with its purchase of ABC in the 1990s. More recently, Disney’s purchases of Marvel, Pixar, and Lucasfilm, along with Fox assets, made it an unquestioned leader in production, which it used for its own distribution through streamers Disney+ and Hulu (where it is majority owner). “In the 2021-2022 season, every original scripted series made for Disney+ was self-produced, along with the vast majority of series on Hulu,” the report notes.
Time Warner, Paramount/Viacom, and NBCUniversal have followed Disney’s lead in streaming, but Disney is the unquestioned leader. By 2025, half of all streaming revenue in the U.S. is expected to flow to Disney. The company has also led in spiking consumer prices for streaming, even as actors and writers are paid less. Disney has forced creators to forsake future licensing revenue for a chance to work with them on projects; if you say no, a large chunk of the industry is closed off.
Amazon uses streaming as a perk for its e-commerce business. Through Amazon Studios and MGM, which it bought in 2022, it’s a producer, and though Amazon Prime and Freevee, it’s a distributor. But Amazon’s control of Fire TV, a streaming video device that’s tied for the biggest in the U.S., is a bigger factor. Through Fire TV, Amazon can control which streaming channels get to viewers. Much like it does in e-commerce, Amazon strikes deals with smaller streamers in exchange for a cut of the profits, which can be as high as 50 percent of monthly revenues. By keeping HBO Max off Fire TV when it launched in 2020, Amazon deliberately slowed its growth.
Netflix was initially a competitor to cable that offered good terms to independent producers. But now, 61 percent of original scripted series on Netflix in 2021-2022 were self-produced, and it never produces for other distributors (neither does Amazon). Netflix has said explicitly that they produce in-house to lower costs, but the result is control of the market, which it is using to buy film production, animation, and video game studios.
There are other streaming platforms, but the WGA reasonably predicts that if Disney, Amazon, and Netflix are allowed to continue their practices, those other platforms will wither away or be bought by one of the Big Three, which Wall Street analysts have already begun to demand.
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That’s why it’s so interesting that Federal Trade Commission chair Lina Khan went on the podcast of The Ankler, a popular website that covers the entertainment industry. Khan essentially affirmed the WGA’s concerns, saying that there appeared to be a “broken” market structure, and that the fin-syn rules, and the associated efforts to separate production and distribution in movies, “created a healthier ecosystem than a situation where you have a handful of gatekeepers.” Khan has also visited picket lines during the strikes.
Now, Khan’s attempts to reinvigorate antitrust have run straight up against extremely hostile courts that side with corporations, as they have for the past half-century. But the point isn’t per se to bring a case to the courts here. It’s to put the government’s thumb on scale and force the studios to heel and negotiate a fair deal with the unions. Let’s hope it works. There’s good reason for optimism as it has already had an impact.