Evergreen University media monopoly chart
If competition has a public benefit when an ordinary commodity or service is involved, isn’t competition that much more important in a sector like the media, which has enormous public influence?
Doesn’t less competition mean fewer voices, less diversity and more chance for dangerous influences to take hold? And do we now actually have less media competition with the internet, or more?
This is part of the debate about media mergers, media concentration and anti-trust law.
The mass media have been treated differently under US antitrust laws for reasons that, theoretically, promote a more diverse marketplace of ideas. One example of a law that exempted news media from antitrust rules was the Newspaper Preservation Act of 1970, allowing competing newspapers to enter into joint operating agreements to keep them from bankruptcy. But in other cases, the court held the media up to the same standards that are applied to other companies; these included NBC v US, Associated Press v US , and Microsoft v US.
As noted on the previous page, this litigation is driven by two different theories about public interest and the objectives of American communications policy. One is market-oriented and sees deregulation as promoting competition to serve consumer preferences. The other sees a need for government regulation of media industry structure in order to promote a diversity of voices.
Historical Anti-Trust Media cases
Thomas Edison, c. 1915
Motion Picture Patents Co. v. Universal Film, 1915, broke up Thomas Edison’s monopoly on film equipment which Edison was using to try to control the movie business. Edison and MPPC lost the lawsuit, and the film industry moved away from New York to Los Angeles.
Associated Press v. International News Service, 1918 — William Randolph Hearst’s International News Service had been barred during World War I from using British-owned telegraph lines since Hearst had been openly sympathetic with the Germans. INS then began re-writing Associated Press dispatches. The court partly agreed with INS when it said that the copyright section of the Constitution was not intended to confer ownership of facts. But it supported the AP’s contention that INS was violating its copyright. One underlying issue in this suit was the longstanding problem of the Associated Press monopoly, established after the Civil War with the help of Western Union telegraph service, and not challenged until 1945 in AP v US.
Associated Press v. National Labor Relations Board, 1937, established that like any other business, the AP could not fire employees for organizing unions. AP had attempted to hide behind the First Amendment. The Newspaper Guild, the union which AP tried to ban, is still active today.
Associated Press v. U.S. 1945 — When the Chicago Sun newspaper applied for AP membership, the Chicago Tribune newspaper, already an AP member, objected. According to the AP rules at the time, new members had to pay exorbitant dues to join. The Justice Dept. challenged the Associated Press, and the Supreme Court said that the fact that AP handles news while other companies handle goods “does not afford the publisher a peculiar Constitutional sanctuary… Freedom to publish means freedom for all and not for some … Freedom of the press from government interference doesnt sanction repression of freedom by private interests.”
U.S. v. Paramount Pictures, Inc.1948 — The Supreme Court decision to force movie studios like Warner Bros., United Artists, and Paramount Pictures. to divest vertically integrated holdings in theater chains is sometimes seen as the end of the Golden Age of Hollywood, but it led to an increase in independent movie producers and more competition in the film industry.
Lorain Journal Co. v. US 1951 — An Ohio newspaper refused to accept advertising from anyone who bought ads on a new radio station. This is a classic “refusal to deal” case, and is illegal. Note that this is one of the primary issues in the US v. Microsoft case of 1998.
BMI v CBS, 1979 — Did Broadcast Music Inc (a copyright clearinghouse for music) engage in illegal price-fixing? The courts said no in this case, which represented a retreat from the “per se” rule to the “rule of reason.”
Newspaper Joint operating agreements
Newspapers were one area where the shift to a neoconservative “rule of reason” approach to antitrust law in the 1970s had an impact. Newspaper readerships were declining, and in the 1950s and ’60s competing newspapers combined into joint operating agreements (JOAs), where the newsrooms were separate but advertising, business and production were combined. So the content was produced independently, but the structures were combined.
U.S. v. Citizen Publishing Co., 1969, was a case involving a joint operating agreement between two Tucson, AZ newspapers. Their JOA was held to be in violation of anti-trust law. Justice William O Douglas said the only defense against anti trust was the “failing company doctrine.” Many JOAs were begun in cases where neither newspaper was actually failing. After a debate about competition from radio and TV, publishers pushed Congress into passing:
The Newspaper Preservation Act of 1970 legalized existing joint operations and cleared the way for new ones, in effect overriding the Supreme Courts Constitutional interpretation.The Justice Dept. opposed other kinds of mergers, blocking them in cases where the two papers were in an adjacent market. It was legal for chains to own many newspapers in various places, but not in close proximity.
According to the Brookings Institution the number of newspapers per hundred million population fell from 1,200 (in 1945) to 400 in 2014. Over that same period, circulation per capita declined from 35 percent in the mid-1940s to under 15 percent. The number of newspaper journalists has decreased from 43,000 in 1978 to 33,000 in 2015. Other traditional news media have also suffered. Since 1980, the television networks have lost half their audience for evening newscasts; the audience for radio news has shrunk by 40%.
The question (in the 21st century) is whether it would not have been better to force competition in the newspaper industry back then, rather than to allow the dominance of one newspaper in each city which, through lack of competition and vision, ended up in failure anyway.
Media Mergers
The concentration of media ownership is controversial in most countries around the world. In the US, media ownership is highly concentrated in about six major corporations.
Wikipedia on Media Concentration:
Robert W. McChesney argues that the concentration of media ownership is caused by a shift to neoliberal deregulation policies, which is a market-driven approach. Deregulation effectively removes governmental barriers to allow for the commercial exploitation of media. Motivation for media firms to merge includes increased profit-margins, reduced risk and maintaining a competitive edge. In contrast to this, those who support deregulation have argued that cultural trade barriers and regulations harm consumers and domestic support in the form of subsidies hinders countries to develop their own strong media firms. The opening of borders is more beneficial to countries than maintaining protectionist regulations.
Critics of media deregulation and the resulting concentration of ownership fear that such trends will only continue to reduce the diversity of information provided, as well as to reduce the accountability of information providers to the public. The ultimate consequence of consolidation, critics argue, is a poorly informed public, restricted to a reduced array of media options that offer only information that does not harm the media oligopoly’s growing range of interests.
Recent media mergers
- Penguin Random House merger with Simon & Schuster proposed & litigated fall 2022.
- Warner Media and Discovery – Feb., 2022, $43 billion, combines HBO, Warner Bros. television and film studios and the sports-heavy TNT and TBS networks with Discovery’s library of nonfiction programming, which includes Oprah Winfrey’s OWN, HGTV, the Food Network and Animal Planet.
- AT&T Inc. acquires Time Warner Inc. Oct. 22, 2016, $101 billion (including debt)
- Charter Communications Inc. acquires Time Warner Cable Inc., May 26, 2015, $87.4 billion (including debt)
- AT&T Inc. acquires DirecTV. May 18, 2014, $66.5 billion.
In March, 2022, Democrats proposed an antitrust bill that would prohibit acquisitions larger than $5 billion, allow the Senate to block mergers that give companies market shares larger than 33%, and even retroactively prevent deals that resulted in a market share of 50% or more. If passed, the Prohibiting Anticompetitive Mergers Act could reverse some of the largest media mergers of the last few years and significantly step up US antitrust efforts, which have struggled to achieve liftoff. (Emarketer.com, March 22, 2022) As of August, 2022, the bill was in committee and had little chance of passage.
Telecommunications & Anti-Trust
The IBM case: In 1969, the US Justice Dept. began an antitrust investigation into IBM’s dominance in the market for computers. These were the large mainframe units that were used by banks, insurance companies and government for complex calculations. The idea was to break the company up into smaller companies competing against each other. However, as the case dragged on into the 1970s, competition emerged through technology as a smaller “personal” computer was introduced. By 1982, IBM agreed to limit anti-competitive practices and the Justice Dept. dropped the case. (See NYT, Feb. 15, 1981; and CNet, Jan 2, 2002).
One issue that emerged from the IBM case is whether anti-trust law could keep up with changes in the competitive environment.
But in many cases, huge barriers that prevented competition had to be taken down by government order. The AT&T case was one example.
AT&T – Bell Telephone: Alexander Graham Bell patented the telephone in 1874, and the Bell system emerged as a powerful monopoly by the early 1900s. In an unprecedented public relations campaign, Bell argued that telephones were a “natural monopoly.” The strategy worked, and rather than being broken up by the courts, Bell entered into the 1913 Kingsbury Commitment, and agreed to have its rates and services regulated.
The Bell – AT&T monopoly continued through 1982, when a court-ordered breakup took place. Most of the current telephone and telecommunications services were once part of the Bell System. Verizon, for example, was once Bell Atlantic.
Cable TV & ISP Monopolies
In the mid-2010s, the old cable TV market began collapsing as consumers “cut the cord” and switched to internet delivered content (aka OTT or “Over The Top”). From a peak of about 110 million US households in 2010, traditional cable is expected to decline to around 50 million overall in the early 2020s — about half its previous market. Comcast (with 18.9 million subscribers), AT&T (16.5), Charter (15.6) and an assortment of smaller companies seem to be competing against each other, but that is not really true. In the past 25 years, cable TV companies carved up municipal service contracts and refused to bid outside their established zones. Cities and counties often asked for — but rarely received — competitive bids when service contracts came up for renewal every five years or so.
No wonder cable TV is in decline. High prices (cable in Europe costs about half compared to the US), poor service and archaic technology are among the main reasons, but the lack of streaming technology is probably most important. According to Variety Magazine: “They’re managing their decline, but make no mistake about it, it’s a decline. It feels irreversible.”
ISPs that make the streaming services possible are also a monopoly. In many areas, the only choice is between the old phone company (such as Verizon) and the old cable company’s new cable modems. While city-owned broadband services could replace or compete with the old monopolies, at least 18 states have legal roadblocks against that competition