We’ve noted in detail how the AT&T/Time Warner/Discovery mergers have been an apocalyptic mess that aptly demonstrates the U.S. obsession with utterly pointless megadeals and the “growth for growth’s sake” mindset. Hundreds of billions of dollars later and the companies have produced a product that’s notably shittier than when they started, laying off thousands of people, cancelling popular shows, and leaving the company’s catalogs with new, weird gaps due to a refusal to pay residuals.
You’ll recall that this all began with AT&T’s disastrous $200 billion acquisition of Time Warner and DirecTV in a clumsy bid to dominate the video ad space. When that failed, AT&T spun off Time Warner, which was quickly merged with Discovery in yet another deal that’s been almost as bad for employees, consumers, and creators.
“Dropping HBO from the name is cementing that ‘we’re not just a home for premium programming,’” Ms. Alexander said. “‘We’re the home for anything you want to watch.’”
The HBO brand has been synonymous with quality for fifty years. But the shift away from quality to low quality mass consumable dreck began under AT&T in 2018 and continues here. Just a continuing array of strange branding and marketing from a team of executives that have, at absolutely no point, indicated that they have any idea what they’re doing or what users want. And it shows in the ratings:
According to Nielsen, 1.3 percent of the total minutes spent by Americans using television was with HBO Max in February, a fraction of what YouTube (7.9 percent), Netflix (7.3 percent), Hulu (3.3 percent) and Amazon Prime (3 percent) garnered. HBO Max instead finds itself in the same neighborhood as Comcast’s Peacock and the Fox Corporation’s free advertising-supported streaming service, Tubi.
Keep in mind, that under AT&T this company integrated so many different dumb streaming branding names that they confused even the company’s own support employees. Now, what’s left of the company is further distancing itself from the popular HBO brand, launching a $16 a month streaming service just called “Max” sometime in May or June. HBO will continue to exist as a cable channel, for however long cable channels continue to exist.
It can’t be repeated often enough that this entire megamerger saga, from AT&T to now, involved companies spending burning hundreds of billions of dollars to make a worse product, fire untold people, cancel numerous popular programs, and even kill Mad Magazine.
Now maybe this whole gambit works out, and offering lower-quality dreck (I think often about the “Ow, my balls” TV show in Idiocracy for some reason) really works out for them. But I still tend to think its a lovely demonstration of the idiocy of pointless megadeals, which routinely harm consumers and creators so some unremarkable MBAs can get a tax break and put “savvy dealmaker” on their resumes.
Look, we all knew that there was going to be a lot of fuss about the upcoming public domaining (finally!) of Mickey Mouse nine months from now on January 1, 2024. I mean, we’ve already been talking about what next year’s public domain game jam is going to look like with Mickey as one of the options.
If you somehow have been living under a rock and never read anything on Techdirt before, let’s get you up to speed. Mickey Mouse debuted as Steamboat Willie in 1928. The character was a blatant animated copy of Steamboat Bill, a Buster Keaton silent film that came out… the same year. Disney, of course, also built up much of its success by taking public domain stories and animating them.
But, of course, once Disney became the Walt Disney Corporation, it chose to lock up everything it could. Disney has been absolutely famous for its aggressive copyright lawyering for years, which included what we’ve referred to as the Mickey Mouse curve: every time Mickey Mouse started to get near the public domain, a purely coincidental thing happened where Congress would (totally unrelatedly) extend copyrights:
The last extension, the 1998 Sonny Bono Copyright Term Extension Act was quite frequently referred to as the Mickey Mouse Protection Act.
Over the last few years there remained concerns that Disney would try to extend copyrights once again, but I think once the public rose up against SOPA in 2012, Disney and most of the rest of the copyright legacy players realized that there was no chance they were going to extend terms again. Hell, even Maria Pallante, one of the more extreme copyright maximalists (currently trying to kill libraries) while she was head of the Copyright Office, suggested that maybe it was time to cut back on copyright terms, rather than extend them.
And so, everyone has more or less accepted as fact that the Steamboat Willie version of Mickey becomes public domain next year. Even leaving aside the weird series of articles that showed up in the middle of last summer whining about how awful it is that Disney will “lose” Mickey, there are still some concerns about Disney lawyer fuckery on the way.
Again, many of you know this already, but just to be clear: the only thing that’s going into the public domain is the 1928 version of Mickey, which you can see here:
It’s not quite the iconic version of Mickey from today, though it’s not that far off. But, Disney will still hold the trademark on Mickey, which could limit how it’s used in commerce (in theory, it should only limit uses where someone is confusing people into believing their Mickey-related product is from or endorsed by Disney, but theory doesn’t always match reality when these things go to court).
But, as we discussed earlier this month, Disney has already been quietly making some moves that suggest it’s going to try to use trademark law as ridiculously as it can:
In 2007, Walt Disney Animation Studios redesigned its logo to incorporate the “Steamboat Willie” mouse. It has appeared before every movie the unit has released since, including “Frozen” and “Encanto,” deepening the old character’s association with the company. (The logo is also protected by a trademark.) In addition, Disney sells “Steamboat Willie” merchandise, including socks, backpacks, mugs, stickers, shirts and collectibles.
Either way, we expected that there’d be some legal shenanigans worth paying attention to next year. I also thought that maybe some people or small companies without good lawyers might accidentally jump the gun a bit and do something in December.
But… what I did not expect was that John Oliver and the folks at Last Week Tonight, an HBO show currently owned by cost-cutting Warner Bros. Discovery would say “fuck it” and start using Mickey Mouse… now.
I mean, I shouldn’t be surprised. Half the time I think Oliver’s show is basically Techdirt-but-if-funny,-entertaining,-and-clever, with the way he seems to cover the same topics we’re always covering, but, you know, better (mostly). And, Oliver has become somewhat famous for poking the eye of his own corporate masters (quite gleefully).
It absolutely would not have taken me by surprise if Oliver had done this nine months from now once Mickey is officially in the public domain. But… jumping the gun like this? That still surprised me.
The bit is, as you’d expect, hilarious. It starts with a discussion of the horror film, Winnie the Pooh: Blood and Honey, which, as you know, is building on a work that entered the public domain last year. But then moves on to Mickey. He talks about Mickey going into the public domain next year, highlights the litigiousness of Disney over Mickey (including legal crackdowns on a gravestone and a daycare center using images of Mickey) before noting he’s not going to wait to use it himself.
On top of which Disney has registered trademarks related to Disney, which don’t expire. In fact, some have speculated that might be why Disney redesigned its animation studios opening logo to incorporate the Steamboat Willie Mickey Mouse.
And it does feel like a tactical legal move. Basically, they may argue that this early Mickey image is so closely associated with their company, that people will automatically assume that any image of him was produced or authorized by them, and still take legal action.
So the fact is, anyone wanting to use the Steamboat Willie Mickey Mouse, will probably still be taking a risk.
But… if you know anything about this show by now… you know, we do like to take a risk every now and then. And there’s a lot to be said for beating the rush to capitalize on Mickey that will be starting next year.
So, tonight, I’d like to preview for you, our brand new character on this show, Mickey Mouse
He introduces some new, um, catch phrases for Mickey including “where’s Shelly Miscavige?” (a running… sorta… joke on the show about the missing wife of Scientology leader David Miscavige), “Jeffrey Epstein didn’t kill himself,” and “I hope Henry Kissinger dies soon!”
As Oliver says:
You know, the nice thing about characters entering the public domain is that you can do new, interesting things with them.
This is true. It’s why we celebrate the public domain every chance we can (psst, have you checked out the entries in this year’s public domain game jam?)
Mickey then asks John about the fact that he’s not actually in the public domain yet, and John doesn’t seem too concerned:
Mickey Mouse: I thought I wasn’t public domain until next year!
John Oliver: That’s actually true, buddy, we are pushing the limit a bit here. Actually, come to think of it, is your voice public domain yet?
Mickey: I guess you’ll find out!
John: Yeah! I guess we will!
He then decides to provoke Disney even more.
And I know, Disney’s lawyers might take the trademark angle and argue that this Mickey is closely associated with their brand. Although they should know that he’s pretty closely associated with our brand now too. And not just because I have a general vibe that screams 95-year-old rat-faced idiot, but also, because the Steamboat Willie Mickey has actually been in our opening credits since the first show of this season…
And then… even more.
And I don’t doubt that Disney has some other legal arguments up their sleeve, but we’re only likely to find out what they are if, and when, then sue. So, you know what? Let’s take this up a notch. Come say ‘hi’ Mickey!
And… out comes a Steamboat Willie Mickey in a costume to say his catch phrases to Oliver:
And, from there, he promises that as of January 1st, this costume will be available for all sorts of events (“birthday parties, theme park openings, funerals, sex dungeons, whatever you want.”)
So… now the question… does Disney actually do anything? Do they call up Warner Bros. Discovery and say WTF? Or do they send in the lawyers? I guess we’ll find out!
Oh, and John, if they do send in the lawyers, your own lawyers might want to look more deeply into reports that turned up 15 years ago that Disney’s lawyers, way back in the early days, fucked up the registration and don’t actually hold any copyright on Mickey Mouse at all. That’ll be fun.
The AT&T Time Warner and DirecTV mergers were a monumental disasters. AT&T spent $200 billion to acquire both companies thinking it would dominate the video and internet ad space. Instead, the company lost 9 million subscribers in nine years, fired 50,000 employees, closed numerous popular brands (including Mad Magazine), and stumbled around incompetently for several years before giving up.
But that was just the start.
After its tactical retreat, AT&T spun off Time Warner into an entirely new company, Warner Media. Warner Media then immediately turned around and announced a blockbuster merger with Discovery, creating the creatively named Warner Brothers Discovery.
This new company has been a blistering mess as well. Executives there have been so cheap they’ve refused to pay residuals to creators, shuttered numerous popular programs they didn’t want to pay for, and engaged in round after round of additional layoffs to achieve promised “synergies.”
Throughout this whole mess, executives at the new media giant struggled to properly name what they had “created.” AT&T embraced so many different names for its streaming efforts, it even confused the company’s own employees. Three-plus years later and executives at Warner Brothers Discovery still can’t figure out what to name the effort, and are now keen on killing the only brand that means anything to its users:
Warner Bros. Discovery is pushing forward with a plan to drop “HBO” from the name of its flagship streaming service HBO Max.
That decision for the long-planned rebranding of the combined HBO Max and Discovery+ services was partially informed by the company’s belief that “the HBO name turns off many potential subscribers,” Bloomberg reported on Thursday and TheWrap independently confirmed.
Throughout this experiment, the executive brain trust have seemed keen on degrading the quality proposition of their streaming service, removing or burying much of HBO’s legacy content in menus while prioritizing garbage reality TV programming like “F-Boy Island.” At the same time, they’ve been keen to raise rates as quickly as possible to achieve hallucinated synergies of the deal.
Years later and not only are executives still debating what to call this hot mess, they continue to indicate they have no understanding of consistent branding, or that the HBO brand generally represented quality in a sea of homogenous crap.
All told, this series of pointless mergers only really illustrates the media industry’s mindless “growth for growth’s sake” mindset, in which multi-billion-dollar deals are made for no other reason than to reduce taxes, boost executive compensation, and delude wealthy media executives into believing they’re savvy deal makers. All while employees and customers alike get the very short end of the stick, and the end product winds up being decidedly worse than when these purportedly savvy dealmakers started.
If you recall, AT&T spent nearly $200 billion on megamergers thinking it was going to dominate the online video advertising space. But after spending a fortune on DirecTV and Time Warner, laying off 50,000 people, killing off popular properties like Mad Magazine and DC’s Vertigo imprint, it quickly became clear that AT&T executives had absolutely no idea what they were doing.
After stumbling around drunkenly for a while, AT&T returned to what it’s best at (running broadband networks and lobbying the government to crush broadband competition), and spun off Time Warner into an entirely new company, Warner Media. Warner Media immediately then turned around and announced a blockbuster merger with Discovery, creating the creatively named Warner Brothers Discovery.
If you’re a consumer or employee at any of these brands and companies, the last few years have proven to be a befuddling mess. Remember that the AT&T acquisition of HBO and Time Warner resulted in so many different brands it even confused employees at AT&T. Despite efforts to consolidate content, it’s somehow only gotten dumber since then.
Managers at the new company have taken a hatchet to HBO’s offerings in particular, culling a wide variety of popular content to cut costs. That includes roughly 200 episodes of popular shows like Sesame Street and dozens of films and shows overall. Why? In part because the new consolidated company doesn’t want to pay residuals in a bid to make deal financials make sense:
While HBO Max already paid for the production of these shows, it’s still on the hook for residuals, including so-called back-end payments to cast, crew and writers, based on long-term viewership metrics.
By removing these films and shows, especially the ones HBO Max created rather than licensed, executives can cut expenses immediately. Warner Bros. Discovery has promised at least $3 billion in synergies stemming from the merger of WarnerMedia and Discovery, announced in May.
Ah, megamerger synergies.
There’ve been several new additional casualties thanks to this latest series of mergers, including TBS’s Full Frontal With Samantha Bee (Turner and TBS merged with Warner Brothers way back in 1996). With the merger of HBO Max and Discovery+, they’re hoping to “declutter” what’s now just a discordant parade of content, much of which executives didn’t really even want. There’s also been just a steady parade of layoffs of employees they didn’t want either.
HBO employee John Oliver went so far as to call this final form version of HBO Max little more than a “series of tax write offs”:
Again, this is just another example of the U.S.’ harmful obsession with megamergers, consolidation, purposeless (outside of stock fluffing) deal making, and growth for growth’s sake. All of these deals make perfect sense to the executives, lawyers, and accounting magicians exploiting them for tax breaks and various financial benefits, but that doesn’t make this whole saga any less preposterously pointless.
Employees and consumers certainly didn’t benefit from this idiotic parade of events that began with AT&T wasting hundreds of billions of dollars to buy companies it was too incompetent to run. And somehow the saga has only gotten dumber since then.
We’ve noted more than a few times how the AT&T Time Warner and DirecTV mergers were a monumental, historical disaster. AT&T spent $200 billion to acquire both companies thinking it would dominate the video and internet ad space. Instead, the company lost 9 million subscribers in nine years, fired 50,000 employees, closed numerous popular brands (DC’s Vertigo imprint, Mad Magazine), and basically stumbled around incompetently for several years before recently spinning off the entire mess for a song.
In a new book slated to be released next week, Time Warner CEO Jeff Bewkes didn’t hold back when talking about AT&T’s absolute incompetence at running a media empire:
“The most disappointing thing to me about the AT&T merger,” Mr. Bewkes is quoted in the book as saying, is that he and his board thought AT&T “would basically leave our people alone.” That didn’t happen, he said. “We didn’t think they would go to such a level of malpractice as to not listen to anybody? even though they themselves had no experience in those areas.”
Granted Bewkes was the one that proposed the sale of Time Warner and HBO to AT&T in the first place as a way to fend off a Rupert Murdoch News Corporation acquisition attempt. But if you’ve paid even the slightest bit of attention to U.S. telecom over the past 30 years, you quickly come to understand that US telecom a sector dominated by hubris and yes men and women who live in reality-optional bubbles. Being a government pampered monopoly creates an executive culture that’s not great at listening to or playing with others, and AT&T is the poster child.
Whether it’s Verizon’s Go90 or AT&T’s megamerger spree, the end result is always fairly consistent any time a telecom giant wanders outside of its core competencies (running networks and lobbying to dismantle competition and regulatory oversight). 50,000 people lost their jobs as a result of AT&T incompetence and hubris, and AT&T executives are still out there acting as if they are the victims. That’s the message again sent in the book by AT&T CEO John Stankey, who blames everybody but himself for the implosion:
“If you are in an acquisition and somebody pays a premium for your stock, by definition it means something has to change,” Stankey is quoted as saying in Miller’s book, according to the WSJ. “If you paid a premium for an operation and you continue to operate it exactly the same way, you never pay back the premium.”
Stankey also said that “he still believes in the vision behind AT&T’s purchase” but that he made the spinoff deal with Discovery in part because investors “refused to give us credit for [the] progress” made with Time Warner. “One of the jobs I need to do in carrying AT&T forward is ensuring we come up with a strategy that the investor base will tolerate and work through and give us the right credit for,” Stankey said.
Anybody surprised that myopic telecom monopoly executives wouldn’t be good at running a new media venture in a functional, competitive new market either wasn’t paying attention — or was just blinded by giant number signs.
Among the dated and dumb business concepts exposed as folly during the pandemic is the traditional Hollywood film release window, which typically involves a 90 day gap between the time a move appears in theaters and its streaming or DVD release (in France this window is even more ridiculous at three years). The goal is usually to “protect the traditional film industry,” though it’s never been entirely clear why you’d protect traditional theaters at the cost of common sense, consumer demand, and a more efficient model. Just because?
While the industry has flirted with the idea of “day and date” releases for decades (releasing movies on home video at the same time as brick and mortar theaters), there’s long been a lot of hyperventilation on the part of movie theaters and traditionalists that this sort of shift wasn’t technically possible or would somehow destroy the traditional “movie experience,” driving theaters out of business.
The pandemic has changed everything. To the point where AT&T/HBO this week announced that the company’s entire lineup of 2021 films will be released on the company’s streaming platform (HBO Max) the same time it hits theaters. There are some caveats: it’s a one year trial, and movies will only appear on HBO Max for a month before they disappear (though they may return later). You’ll also probably pay far more to watch these movies than it’s worth. But it’s still a sensible shift given the circumstances, as Warner Brothers (AT&T) made clear it a statement:
“We’re living in unprecedented times which call for creative solutions, including this new initiative for the Warner Bros. Pictures Group,” said Warner Bros. CEO Ann Sarnoff. “No one wants films back on the big screen more than we do. We know new content is the lifeblood of theatrical exhibition, but we have to balance this with the reality that most theaters in the U.S. will likely operate at reduced capacity throughout 2021.”
Yes, it sucks for those whose livelihoods rely on traditional brick and mortar theaters. But these are the same theaters that saw the writing on this particular wall long before COVID came to town, and decided to spend much of their time pouting instead of adapting for the inevitable. Even then, traditional theaters will someday bounce back, buoyed by those who feel a trip out to the movies is an essential cornerstone of everyday life. It’s just not going to be until vaccines are commonplace and congregating indoors for prolonged periods is no longer a potential death sentence.
This isn’t exclusively about the pandemic, of course. AT&T has been losing traditional TV and streaming subscribers hand over fist after a bunch of expensive mergers, branding confusing, and other executive incompetence. They’re running behind giants like Netflix and others, and want the added attention. Scuttlebutt also suggests the company is hoping to use the announcement to pressure Roku into carrying HBO Max and ending their longstanding feud:
Either way, it’s another step in the right direction toward no longer embracing antiquated concepts like release windows that no longer make sense in the broadband era. This being AT&T there’s almost certainly going to be dumb caveats tied to these releases (ridiculous pricing probably being among them), but baby steps and all that.
This may be shocking to hear, but nearly all of the promises AT&T made in the lead up to its $86 billion merger with Time Warner wound up not being true.
The company’s promise that the deal wouldn’t result in price hikes for consumers? False. The company’s promise the deal wouldn’t result in higher prices for competitors needing access to essential AT&T content like HBO? False. AT&T’s promise they wouldn’t hide Time Warner content behind exclusivity paywalls? False. The “$15 TV service” the company repeatedly hyped as a byproduct of the deal? Already discontinued. The idea that the merger would somehow create more jobs at the company? False.
AT&T has laid off 41,000 employees just since it received its 2017, $42 billion tax cut from the Trump administration for doing absolutely nothing (technically, less than nothing, since it fired countless employees and trimmed 2020 CAPEX by around $3 billion). And this week, the company laid off another 600 employees across Time Warner, including employees at HBO and DC Comics:
“The moves are likely to cause anxiety at WarnerMedia, which has reorganized several areas of its business since being acquired by AT&T for about $85 billion in 2018. Since AT&T took over the company formerly known as Time Warner, top executives with years of oversight of distribution, programming and advertising sales have departed. Kilar?s ascension to the CEO role in May has only served to fuel more recalibration.”
Granted if you’ve watched the history of U.S. media and telecom consolidation, this should surprise nobody. The first year or two after such deals are usually filled with empty promises about how “nothing will change” (AT&T brass repeatedly promised Time Warner employees they would have ample resources and creative freedom), only to be followed up by everything changing, and, as is the case when a lumbering telecom monopoly jumps more fully into a creative business it doesn’t fully understand, often not for the better.
And while AT&T has hinted that much of this had to do with COVID-19, that’s not the case. Most of these moves were either planned for some time, or part of the company’s ongoing attempts to shed the massive debt accumulated from the company’s spending spree on DirecTV (2015) and Time Warner (2018). Both mergers were supposed to position AT&T as a dominant player in the online video and advertising space. Instead, AT&T has been losing paying TV customers hand over fist after a number of bungled decisions ranging from price hikes on price sensitive cord cutters to bungled streaming branding.
It was yet another example of the perils of a “growth for growth’s sake” mindset, blended with yet another example of how lumbering, government-pampered telecom monopolies like AT&T and Verizon just aren’t very good at this whole competition and innovation thing.
AT&T’s repeated missteps were bad enough that they resulted in an investor backlash, the “retirement” of former AT&T CEO Randall Stephenson, and a newfound focus on firing more people than ever to recover debt. As is often the case, lower and mid-level management has to pay the cost for years of higher level managerial dysfunction. As is also often the case, the majority of press outlets that were eager to parrot AT&T’s pre-merger promises are utterly absent when it comes time to tally the human cost of mindless merger mania.
Streaming video providers like HBO and Netflix have traditionally taken a lax approach to password sharing. Netflix CEO Reed Hastings has gone so far as to say he “loves” password sharing, and sees it as little more than free advertising. Execs at HBO have similarly viewed password sharing in such a fashion, saying it doesn’t hurt their business. If anything, it results in folks signing up for their own accounts after they get hooked on your product, something you’ll often see with kids who leave home, or leave college and college friends behind.
The traditional cable industry sees things quite differently. Executives at the nation’s second-largest cable company (Spectrum), for example, have called the lax attitudes toward password sharing “insane,” and have frequently (and falsely) claimed that the practice is akin to “piracy.” In response they’ve been trying to build a new coalition tasked with taking aim at what they see as a diabolical menace.
A new service being launched this week should provide some fuel for those endeavors. DoNotPay is a startup that revels in helping consumers take counter-advantage of US corporations’ automated customer service systems, offering users services like a fast-food receipt scanner that will automatically fill out surveys for free food, an automated system for securing refunds for crappy WiFi, or a service that lets you auto-contest parking tickets. Their latest offering is Chrome extension that lets users share their streaming service access without actually sharing your password:
“By installing the startup?s free Chrome extension, you can generate links that other people can use to access your subscriptions. Instead of sharing the actual password, DoNotPay uses cookies to transfer your browsing session to other users? computers, effectively fooling services such as Netflix and Hulu into thinking you?ve just logged in through another Chrome tab. I?ve tried it, and it works as advertised.”
One can already hear the hyperventilation and histrionics coming from the cable sector, who’ll be sure to be write a few legal nastygrams to the company for its latest end-around of automated systems. But the company is simply responding to a growing problem among streaming services we’ve highlighted repeatedly: as companies strive to lock down content into a growing array of exclusivity silos, consumers are finding it harder and harder to find all the content they’re looking for, and afford the number of services needed to do so. As such, they’re more likely than ever to revert to piracy or embrace a service like this one:
“Joshua Browder, DoNotPay?s founder and CEO, says the subscription sharing feature is a response to the proliferation of streaming services that each have their own exclusive content silos.
?It?s ridiculous,? Browder says. ?You shouldn?t have to pay $100 a month just to access what you could get before for much cheaper.?
So while the cable and streaming industry will freak out about this service, they probably won’t spend too much time realizing that they’re the ones responsible for it. To be clear, this isn’t some apocalypse, and, in many ways, streaming has fixed a lot of what’s wrong with the traditional cable sector, delivering greater flexibility at lower cost.
That said, endlessly confusing and ever-shifting licensing agreements, combined with the rise of more than two-dozen streaming exclusivity silos, is still a problem the industry should be paying attention to:
Right now, the industry’s just running to the streaming trough without thinking much of the impact. Eventually however they’ll have to do a better job building more centralized systems with a focus on cost and simplicity, without simply repeating the historical failures of the cable sector.
For years, streaming video operators like HBO and Netflix have taken a relatively-lax approach to password sharing. Netflix CEO Reed Hastings has gone so far as to say he “loves” the practice, and sees it as little more than free advertising. Execs at HBO (at least before the AT&T acquisition) have made similar arguments, arguing that young users in particular that share their parents’ password get hooked on a particular product via password sharing, then become full subscribers down the road. In short, they see it as added value for the consumer, and have repeatedly stated it doesn’t hurt them.
On the other side of the equation sits Charter CEO Tom Rutledge, one of the highest paid execs in media. He, in contrast, has long complained that he views password sharing as “piracy”, and has consistently promised to crack down on the practice. Rutledge and his fellow executives gave a particularly rousing “get off my lawn” lecture at a media event a few years back:
“There?s lots of extra streams, there?s lots of extra passwords, there?s lots of people who could get free service,? Rutledge said at an industry conference this month…?It?s piracy,? Connolly said. ?It?s people consuming something they haven?t paid for. The more the practice is viewed with a shrug, the more it creates a dynamic where people believe it?s acceptable. And it?s not.”
Except it is acceptable. For one, most of these services include password sharing as part of their business model; they include limits on the number of simultaneous streams that can be running under any one account to prevent sharing from undermining too many new sales. And the companies that have been embracing the practice say they’ve seen no negative impact from it. Again, it’s free advertising and a consumer-friendly practice that’s factored into the business model. It’s certainly not, as Rutledge has often suggested, synonymous with “piracy.”
Undaunted, Rutledge has been trying to build a coalition of industry allies focused on stomping out the nefarious practice of password sharing. And as the company strikes programming deals with partners, it’s ensuring that a ban on such sharing is part of the process. One big partner in this initiative is Disney, which is expected to put the kibosh on password sharing when it launches its new Disney+ streaming service this fall. All the while, Charter executives are running around calling the practice of password sharing “insane”:
“Ultimately our goal is that we can get an alliance of a large enough group of programmers and operators to protect the value of the content that people produce and the content that we distribute and we pay for,? Chris Winfrey, Charter?s chief financial officer, said last week at the Bank of America Merrill Lynch 2019 Media, Communications & Entertainment Conference in Beverly Hills.
Winfrey severely criticized programmers that turn a blind eye to the practice of password sharing, claiming such practices are ?insane.”
?To think that it doesn?t impact the way we get paid, it does,? Winfrey said. ?And it conditions the entire marketplace to think that content should be devalued, it should be free, and that?s the way it is and I shouldn?t have to pay for it. It?s our firm belief that we?d be growing and growing significantly [if it wasn?t for password sharing].”
Except it’s not “free,” for the reasons outline above. And while you might gain some additional revenue by banning password sharing, you might also lose subscribers to companies that actually value making consumers happy. Charter Spectrum is, if you’d forgotten, statistically one of the least liked companies in America for a long list of reasons, from mindlessly jacking up prices to providing some of the worst customer service of any company, in any industry in America (think about that accomplishment for a second). Blaming all of its problems on the fact people occasionally share streaming TV passwords reflects the entitlement mindset that’s pretty common in the too big to fail, government-pampered telecom and broadcast sector.
Last year AT&T defeated the DOJ’s challenge to the company’s $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his original 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality and neutered FCC oversight to dominate smaller competitors and tilt the entire internet ecosystem in its favor.
While the DOJ lost its original case, it was quick to appeal late last year, highlighting how within weeks of the deal AT&T had jacked up prices on consumers and competitors like Dish Network, which says it was forced to pull HBO from its lineup because it could no longer afford the higher rates.
Critics of the merger had also pointed out how AT&T would likely use the deal to increasingly make content exclusive to its own service, making it harder for competitors to access it. If you’ll recall, this was something AT&T CEO Randall Stephenson also insisted wouldn’t happen when addressing a Senate antitrust subcommittee pre-merger:
“Nor is there any reason to believe we could use Time Warner programming or AT&T networks to hurt related markets. Simply put, it would be irrational business behavior to do so. Time Warner’s programming is more valuable when distributed to as many eyes as possible. Moreover, in order to have great programming, it is imperative that we attract great creative talent to develop it. The best way to attract that talent is through widespread distribution of Time Warner content.”
Of course this week AT&T announced it would be taking content like Friends and making it exclusive to its own streaming platforms, including its new looming HBO Max service:
“AT&T will start restricting some Time Warner shows to its own streaming service, despite previously telling the government that it would distribute Time Warner content as widely as possible.
WarnerMedia, the division AT&T created when it bought Time Warner, today announced a new online streaming service called “HBO Max.” HBO Max will debut in the spring of 2020 and include exclusives that will no longer be available on other streaming platforms.”
On its surface this doesn’t seem like that big of a deal. After all, Friends is an old show, and most users probably won’t care. And it’s certainly not the only show getting this treatment (Comcast NBC Universal just made The Officeexclusive to its streaming platform, and Disney is also pulling Netflix content for exclusive use on its own looming Disney+ service). But more broadly, the more essential content AT&T makes exclusive to its own platform (especially and likely inevitably, HBO), the more difficult it will be to compete with AT&T. Knowing AT&T, there’s going to be far more exclusives where this came from.
This is all before you even get to net neutrality and AT&T’s domination in broadband, which has allowed it to behave anti-competitively in different, even more problematic ways (like only imposing arbitrary usage caps if you use a competitor’s service). Letting companies like Comcast NBC Universal and AT&T Time Warner dominate both the conduit and the content will ultimately result in a universe of headaches for competitors and consumers alike. And Judge Leon’s failure to see (or acknowledge) this will be a “gift” that keeps on giving for the next decade.
The other major problem these ongoing exclusives have is they increasingly force consumers to hunt and peck through a growing, cumbersome list of subscription services just to find the content they’re looking for. And if subscription price and ease of use isn’t managed carefully, it’s simply going to drive frustrated users back to piracy. And when that happens, history suggests these companies will blame everybody and everything (ban VPNS!) but themselves for it.
All of that said, I’m not sure banning exclusive content deals is the answer. What would be at least part the answer for maintaining healthier markets? Finally realizing that endless media consolidation and mindless mega-mergers are generally harmful to the media and telecom sector (as now AT&T owned HBO and DC comics employees are just starting to figure out post merger). And that the long list of promises made in the ramp up to such super unions are almost always uniformly empty. There are fifty years of data for clear supporting evidence, especially in telecom.