On November 11, 2015, Professor Adonis E. Hoffman, J.D., Adjunct Professor, Communication, Culture & Technology (CCT) spoke with Angela Hart, second-year graduate student, Communication, Culture & Technology (CCT), at Georgetown University, Washington, D.C., on the 2016 presidential election, social media, and the media industry.
In your article, “The Changing Media Landscape” you mentioned the merger-mania phenomenon. Can you elaborate on this?
I was thinking primarily about the communication sector. The telecommunication sector, which includes traditional telephones and wireless, Internet, broadband, and broadcasting – and we’ve seen over the last twenty-four months a number of large-scale mergers that have been proposed and are pending and one which has been approved. These are mergers between two or three very large companies where billions of dollars are at stake so these mergers are $60 billion dollars, $75 billion dollars, $40 billion dollars, a lot of money, huge economic impact in the marketplace, and so we’ve seen this uptake as the industry consolidates.
We started off with the ones that we know, I guess there are three big ones: Comcast, Time Warner Cable, that merger was proposed in late 2013; it was reviewed by the FCC in 2014, and it was seen as Comcast, the largest cable company, largest provider of broadband services across the country. Also, the owner of NBC Universal as the result of a merger in 2010, so Comcast-NBCU, it’s a company that provides broadband service, cable service, and also content. So, normally, you don’t have that kind of combination within one company and it was proposing to acquire Time Warner Cable which was, at that time, the number four broadband and cable provider, which would’ve made Comcast and Time Warner Cable just head-and-shoulders way above any other potential competitor. That merger was reviewed by the FCC, I was very much a part of that review in my previous capacity working with Commissioner Clyburn at the FCC as her Chief of Staff and Legal Advisor and we reviewed all of those documents and it was going to be a problem for a number of reasons: (1) because of competition (2) because of the public interest standard and Comcast decided at the very last stages when it appeared that it was going to be, maybe not blocked but sent out to administrative law judge for review, they decided to withdraw the merger application and the two companies did not go forward.
Do you think that was a way to save face?
Well, saving face, I think, probably in one sense; more significantly, it was to stop the damage, stop the bleeding, do damage control, make sure that their financials were intact in the capital markets. What happened right after that was the Charter Communications, now the number three cable company has proposed to acquire Time Warner Cable so Charter was going to be one of those parties in the Comcast merger, well, now, it’s going to be the acquirer of Time Warner Cable and that merger is under review, currently, at the FCC.
What’s fascinating about this is that it’s a $50-60 billion dollar merger depending on what numbers you look at, which will combine Charter Communications and Time Warner Cable; they have different geographic strengths and footprints in the market these days. But, if the merger is approved by the FCC, that will catapult Charter-Time Warner Cable into the number two slot behind Comcast.
When I refer to this in my article, and then now, of course, we have another merger that’s coming on the heels of these two, a company called Altice, which is a European company, probably the largest broadband provider in Europe and, increasingly, in the Caribbean and other parts of the world, proposing to buy a company called Cablevision, which is one of the largest providers in the City of New York, New Jersey. Cablevision also owns Madison Square Garden and very significant properties; one of the largest media markets in New York so that proposed merger is being reviewed by the FCC right now.
All of these things to me suggest convergence, consolidation, competition, and you sort of have to figure out how those elements are really interacting these days and, so, that’s one of the things I wrote about thinking that we don’t know yet where this is going to end. Now, that’s on the cable-broadband side. I haven’t even talked about the ones in the traditional broadcast space where we have large broadcasters, broadcasting groups: Sinclair Broadcast Group, Nexstar Broadcast Group, Media General, etc. There’s quite a bit of merger and activity there for the trading of television stations so if you follow this area, this industry or the sectors, closely, we’re seeing some things develop over the last twenty-four months, we haven’t seen in quite some time.
What do you think brought about these sudden changes because it seems to be happening with so many companies?
Well, I think it’s interesting, much of this is being driven by consumer demand by the fact that consumers are showing that they want more content; we’re just content devourers these days, just monsters. We want more and more and more, and we want it faster, we want it more conveniently.
I was on a flight, yesterday, from Florida to here and for the first time I tapped into the WiFi on the plane. You can pay for a limited amount of time, $10.00 or something like that for a few minutes, or you can pay for a day pass for the amount of time of your flight, or you can pay for a frequent-flyer type of access. My wife said, “Do you think I can send an email from here?” I said I think you can do it but I’ve never done it before.
But consumers are driving these things but the option there was you couldn’t get any of the streaming services so no Netflix, no Hulu, but the company that provides the WiFi for the airlines does provide their own content so you can tap into their content library and get news. I saw a lot of cartoons for kids so you can think of a family traveling, type in the WiFi and give to their kids and say, “Here, be quiet, enjoy the flight.”
It’s a smart idea so the consumers are driving these things so when big companies look at consumer behavior and they look at how people are spending their money, their disposable income, and their media dollars, those are the things they look at and say, “There’s a business there!” People in your generation, for example, and a little bit older, don’t take out cable, they’re not getting subscriptions to cable services; that’s just the way it is. You’ll probably go a la carte so you get a subscription to Netflix, maybe Amazon, maybe Hulu, maybe Apple, you know, who knows? All of these so-called over-the-top services are driving, which is consumer driven, driving business in the marketplace and the real key, the thing I look for, is how are the regulators or how are the regulations adapting to these changes in the market? Very interesting stuff, I think.
That’s really interesting that the Millennial generation seems to be doing things differently than previous generations. Do you think it’s due to the fact that they are digital natives or the way they were brought up?
I think the tip-of-the-spear, so to speak, are the digital natives who have not grown up with legacy media so media for them is something that you get right now and you take it with you wherever you want to go; it’s not something you go to and sit down and look at, at an appointed time and place, that’s my generation. We sat down and watched the TV and at a certain point in time programs came on at a time and if you got them, great; if you missed them, too bad. Different, so, yes, but that technology and that capability certainly has transcended over generations. So, yes, your generation is leading the charge but our generation is clearly taking advantage of those technologies, those capabilities, and companies recognize that, for example, now that the Baby Boomer generation is accustomed to having Tablets, I think they’re probably one of the largest users of Tablets even though Tablet sales and usage is going down, it probably has either plateau or maybe a slight uptake with the Baby Boomer generation because we discovered it, it’s so convenient, right? It’s not a laptop but you can get almost everything you want in a Tablet; you can email your kids and your grandkids, you can check on email, you can go online to search, and you can even watch a movie or something along those lines.
So, yes, I think all these consumer behaviors are driving the market and the question becomes in the Washington, D.C., context for the Federal regulators, “Are there different kinds of regulatory frameworks or regimes that will apply to these technologies and this behavior, and to the new companies so when a new company springs up, for example, to provide over-the-top service, is that company different than a cable company?” For example, if it’s providing linear broadcasting, linear video service, maybe not; and if it’s not, then can you call it a cable company? And if you call it a cable company under the law then it has certain responsibilities and certain obligations and has certain rights that all the other cable companies have to abide by and there’s hundreds of millions of dollars in investment capital sitting around waiting to figure out, to see, how the regulators are going to determine is that what we call a MVPD, is it a traditional cable kind of company or is it something different? If it’s something different, does it have a different regulatory mantle on it?
There are companies such as Netflix and Amazon Prime, who have their own shows, now. What do you think about these online companies producing content for themselves, exclusively?
Yeah, so I think for consumers, it’s great, right? So consumers, even if you don’t take the full lineup, you can take, Netflix it, go on for $9 a month or something like $7.95; you pay that in less than two lattes at Starbucks, and you’ve got wonderful content so it’s very empowering for consumers, I think. If you look at the broader media landscape, it’s a challenge for traditional companies so we used to get our movies from cable companies or DVDs, I’m certainly going way back. So, now, those companies who have invested tons of millions of dollars into their infrastructure, into their framework, they have to figure out now, “How do we handle this type of competition coming from the marketplace that’s empowering consumers?” because, again, the average person when faced with the possibility of or the option of buying or getting a $7.95 or even the premium monthly offering from Netflix or Amazon and paying an average cable price of $50, $60, $70 a month, you know, figure it out, yes, you can take that content with you, it’s a little cumbersome to do but you could do that but why not just go right into over-the-top online and get it whenever you want to.
I think that that’s a real challenge but now what we’re seeing in looking at the numbers coming from the financial analyst on Wall Street, and what they’re seeing is a modest decline in the number of cable subscribers quarter-over-quarter or month-over-month so I think the last numbers I saw was overall aggregates, a company lost 377,000 subscribers. Well, you know, that’s getting to the point where they may be concerned. Now, because companies are recognizing that this is such a popular trend with consumers, it’s such a viable option for them, these companies are now offering, traditional companies are now offering ‘skinny bundles’ right? So, you can be a cable company, you can be a cable subscriber or subscribe to just a little bit of stuff that you want; you don’t have to take the whole thing that’ll cost you $129 a month, you can take, maybe, an $18.99 offering and I think companies are beginning to adapt more and more so we see, essentially, again, consumer behavior, consumer tastes, consumer trends, driving marketplace behavior and affecting competition in a very interesting way.
Another point you made in your article, “The Changing Media Landscape” is that media is conforming in a sense. You wrote that media was converging onto a single platform, the Internet. Can you elaborate on this point a little bit more because that was really interesting to me.
We have digital technology now allows media or content producers of providers to essentially provide their content, whatever it is they produce, whether it’s music or video or data, mostly it’s video and music onto a single platform; think about it. If you are interested in film as you said, you’re a young film producer and you want to produce your own content, your own film and video – 15 years ago, 10 years ago, maybe 5 years ago, you know, you had to go through a lot of different mechanisms to even get to the point where you could get it distributed. Or even if you’re an aspiring young musician, whether it’s classical or rap, it doesn’t matter, you can take your content, go directly to consumers, and go directly to the marketplace. You don’t have to go through a record company, you don’t have to go through a distributor, you don’t have to go through anybody, you can just do whatever you do, put it up, and it goes out.
It’s a pure play market-driven economy and it’s wonderful in this way; it’s almost a really stripped down ‘the market prevails’ so that very development does present problems, though, for companies that have invested all these dollars into other things so when I said the Internet is now the platform, it is. And so, even broadcasters are having difficulty – most of the broadcasters provide services that nobody else can in terms of safety and, when there’s a natural disaster, we turn on our TV, we want to see the Channel 4 News and what happened with the hurricane or what happened, if there was a mudslide in California, “Where do I go?” “What do we do?” “What’s the latest?” We haven’t yet begun to go to the Internet for that but I think that that’s probably coming. We’ll go to the Internet for some news but maybe not long-form video news over the Internet but that’s probably coming.
Broadcasters are now faced with the challenge, traditional broadcasters like the TV stations and networks, in order to keep their audiences loyal and coming back to their platforms, they’ve got to find a way to not only take care of what happens on the broadcast platform, traditional TV platform, but also to take care or make sure that their content is put on the Internet platform as well.
I think you just kind of eluded to other phenomenons within that category because there is that rise of YouTube stars. People can become an online celebrity by producing content on their laptop using just their webcam. This also eludes to the fact that bloggers are not going to be the ones in the thick-of-things, whereas professional journalists will because that’s their profession and that’s what their newspapers are paying them to do.
So let’s take the second one first in terms of journalists because I was just, a couple of weeks ago, on a panel with the National Association of Broadcasters and the cable TV celebrated ‘Freedom of Speech Week’ and one of the issues is and has been around for awhile, “Who’s a Journalist?” Right, so, we know in the traditional legacy world, the journalist was someone who had a press credential from a news outlet whether it was a newspaper or radio, TV station, etc., okay, they’re journalists, they get the ‘Press Pass’ they get to go to news conferences, they get to ask questions, they report on it, they’re journalists, we all accept that. But, so enter today, is someone who follows the news maybe online or maybe follows the news and then publishes their reports online so now the question is, “Are they Journalists?” What about Bloggers? Are Bloggers Journalists? Let’s say they don’t put opinion, they just straight objective news-gathering and compared news in providing content that way, “Are they Journalists?” What about someone who just does photos, sort of video photo-journalism, “Are they Journalists?” and their platform is online. It gives rise to a lot of questions which have not yet been answered satisfactorily.
I think the Obama Administration was the first Administration to allow online journalists, if you will, online content producers to have press passes or press credentials for The White House but then it gets to when we evolve, move down this line, we have to make some decisions or someone has to make some decisions as to how clearly defined that will be. So if you are a Blogger and you’ve got a million followers, okay, maybe you have a claim to be a journalist because there are some journalists, I’m sure, regular journalists who don’t have that many people reading them; there are some newspapers who don’t have that much.
So, who determines that? Who sets the standards? I guess is the question if we leave it to the legacy media leaders, they’re probably going to determine those things in their own favor. If you leave it to the Bloggers and sort of the newer generation of journalists to determine who’s a journalist, and they could say anybody’s a journalist; you know, my kid brother, Johnny, who takes his camera out and films all the local football games, well, he’s a journalist.
So someone has to draw the line and I’m not sure what is the appropriate or even the most credible standard-granted agency to do so maybe it happens on sort of a rolling basis. For example, the National Press Club - the General speaking from Washington - do they hand out the credentials for journalists? We’ll see.
You made reference to how people can produce their own content and put it online and so that sums up the YouTube phenomenon in which people are becoming singers or producing makeup tutorials being watched by millions. People are becoming celebrities in their own right by producing content and posting it from their bedroom creating a new type of person in a way in conjunction with the typical Hollywood star.
Indeed so think about the young woman, I don’t know her name, a young woman who was a YouTube star, social media star, over five years she amassed millions of followers as an upstart at the age of sixteen as kind of a model type. I think she’s from Australia and, over the course of the years, she built up this huge following on social media where she has millions and millions of followers on YouTube and she would YouTube, Instagram, she had the whole spectrum of social media. She just went on YouTube, recently, last week or the week before, to say that social media was not all it was cracked up to be; it was consuming her – in the meantime, she made lots of money – 16-21, she made lots of money – she’s the highest grossing YouTube personality.
I thought it was great but her point was that for her, personally, it had just taken over her life, her young life, and she was encouraging – she used that to extrapolate how social media, if we’re not careful as a society, particularly younger people, it can take over your life. Her point, I think her lesson was, “I’m getting off now because I know how much it takes, in terms of my own life, and I wanted to encourage my viewers and my listeners, the people that watch me, to do other things; to do things other than social media. So I thought that was fascinating but to put it, that’s how we got Justin Bieber, right, a YouTube star or he was discovered there and I’m fascinated by, again, by the workings of the market.
So we have stay-at-home moms, you’ve got young families, you’ve got budding entrepreneurs, you’ve got raw talent from people from disadvantaged communities, who can just by the strength of their content, whether it’s good or not, they put it out there and then the market determines whether they like it. Sometimes it takes for a more established personality, for example, a celebrity, they take a little bit more; they may need a lot more support and promotion to get out there.
But I like those stories where, I just saw one, where there’s this family, I think the story was a family of five, a very young family and the dad had lost his job, and the mom was trying to figure out what to do, she had three young kids at home, and they just started videotaping their kids, and putting it on there, ‘the day in the life, here’s what happens’ that has grown into a franchise now; their goal was initially just to pay their bills and now they’re like making hundreds of thousands of dollars every month or something.
So this is the empowerment; so it’s the citizen empowerment, it’s the democratization of media – we saw that in the political context and I think we see it now in the economic context where media can empower individuals in a way that they have not been empowered up until now. But I’ve got to think, and this is going way back to the citizen journalist of Benjamin Franklin’s time, that this maybe if he were alive today that this would probably be what he had in mind.
Citizen journalism and the democratization of economic opportunity empowered by the Internet are two very interesting developments of phenomenon I think that, again, if someone like Ben Franklin were around with his Poor Richard’s Almanac, he would probably think ‘this is exactly what we had in mind’ to make sure that everyone, all citizens, have an opportunity to engage in the media. I think it’s pretty fascinating.
One of my other questions was, in your article, “Mergers, Media, and Unholy Alliances” you cited that a wave of mergers are testing the limits of antitrust. I wanted to ask if you could expand on this subject?
Well, I think that the whole question of the antitrust laws were implemented in the middle of the last century, early part of last century to curtail the combination of power within big companies. And here we have, again, as I mention the proposed combinations of companies that are allowing for power to be concentrated in the hands of these companies. I certainly believe that the marketplace is there and allowed to prevail but I think that what we have today are some scenarios whereby the analysis that regulators and policymakers use to look at whether a merger is going to be ultimately good for consumers or good for the marketplace; that those analyses have to change a little bit because big companies are not, just because they’re big, doesn’t necessarily mean that they’re bad and doesn’t mean that they’re going to do harm to our society. On the other side of the discussion, just because a company’s big doesn’t necessarily allow, should not allow the infinite right to get bigger and bigger. I think these decisions have to be made on a case-by-case basis.
So that’s what we see, that’s what the law is designed to operate. I think that we have, today, with telecom mergers or big mergers of the Internet space, we’ll see those, that the regulators have to look at ways in which they should analyze these combinations to see if new rules are necessary; that’s really the point I was trying to make in the article, “Do we need new rules to review these mergers today?” because the scale is big.
Now, thirty years ago, a $70 billion dollar merger, wow, that boggles the mind but, now, today, the scale is so large that Google itself is a multi-billion dollar industry or company. The whole communication landscape of each company, it has to be a multi-billion dollar enterprise to be competitive in the marketplace so if one multi-billion dollar company acquires another multi-billion dollar company, you can’t just look at the aggregate numbers, you’ve got to look at what is the impact and, so, therefore, the question I posed was, “Do we need new rules and, if so, what would those rules be?”
I went to the guest lecture you put on last year in which the guest spoke about the media industry. I wanted to ask, “Who actually makes money in the media business?” Now, it seems as if it is rather dispersed trying to put ads on YouTube that may or may not last, and now viewers have the option to ‘Skip Ahead.’ Depending on the On Demand network, sometimes you can Fast Forward and sometimes you can’t, so they’re trying to make you tune into the commercials. How does this contribute to the revenue stream?
Good question, interesting question, so, “Who makes money?” The media platforms, generally speaking, are the beneficiaries of the exchange, so they’re making the money. So whoever provides the media usually makes the money; that’s one, that’s sort of the baseline. In the advertising context – let’s take Basic Media 101 – so radio companies pay to put on an ad, a commercial; the radio station gives them 30 seconds or 15 seconds that costs x-amount of dollars, they take that, so that’s an exchange, same in television, commercials drive the media but, you know, the Internet and mobile, “Who’s making the money?”
So if you provide the platform or the pathway to get to people who can see my message or hear my message then that has value and that value is determined by a number of different factors by the market and also by the provider so, if I’m Google, and I’m providing, and I know that everybody comes to me to do Search then if you’re a company and you want to advertise on my platform, it’s going to cost you x-dollars; so, Google makes lots of money for providing that service. That allows Google to provide content and services for free so we all benefit, as consumers we all benefit, and businesses, too, will benefit from the fact that advertisers are paying for the services that we benefit from. I’ve been on Google, I know all of the anti-Google arguments; there are companies who are very focused and have very persuasive arguments about several disruptive policies and practices that Google has.
Is it more about anti-privacy and things of that nature or privacy issues?
Yes, so privacy, anti-competition that Google sometimes has been shown to move into certain categories and sectors, and then take over those categories, for all those things but it provides a valuable service for me, as an individual, that I cannot get elsewhere easily. So, whether it’s g-mail, Google Voice, YouTube, you name it, I mean there are a whole suite of things that as an individual or maybe even as a small business person, I can utilize that platform that is subsidized, essentially, by advertising, or provided by advertising.
So, short answer is, “Whoever has the media is making the money.” It just depends on how well they figure out how much they want to do, for example, this political season, if you’re a broadcaster or if you’re an Internet provider, maybe a mobile company, political advertising is coming your way; it hasn’t happened yet, it hasn’t started, but we’ll probably begin to see the ads come January, right, and they’ll be coming fast and furious because that would sort of be the stretch, the last lap, and so these companies will be – it’s kind of like a windfall – for even small television stations around the country, political advertising will provide a margin, a revenue stream for them that they don’t see every year, they see it sometimes every two years, but certainly every four years when there’s a big presidential election.
My final follow-up question would be in regards to applications. For instance, I have Pandora on my phone, which I download for free. I’ll have random ads interjected. I could end up paying a premium so that I don’t get the commercials. How do other revenue streams like this work in regards to media because I actually had a commercial reminding me to vote even though I’m not actually registered in Virginia but, for some reason, the zip codes identified me as a potential voter.
Yes, so someone paid for that, right? Someone paid Pandora to remind you to vote unless it was a Pandora ad, I doubt it. Somebody made a calculated bet that the viewers and listeners of that demographic would be potential voters in certain districts and so they said we want to make sure that they get out – it could’ve been one of the parties, it could’ve been one of the candidates of the parties, I imagine, given the fact that they’ve got all the data in terms of who you are and not individually but anonymized it and so they don’t have your personal identifiable information, maybe they do, but they’re not using it so they’ve anonymized you looking at you as a twenty-something, highly-educated, young woman, who lives in the Washington area. She, probably, is a Democrat so maybe the Democratic Party paid for that ad to reach people like you and that is how the advertising game works.
And, again, in this cycle, hundreds of millions of dollars will be spent from the advertising sector to go to political advertising so the companies who aggregate the data, aggregate the content, companies who develop it and put it out there and those that measure the effectiveness so in the advertising eco-system, you’ve got a certain number of consumers, descriptive, right, so you’ve got the producers, you’ve got the providers, you’ve got various agencies, you’ve got third party players and then you’ve got a number of different desperate kinds of organizations, entities in there that are playing a key role in this advertising thing and each one is being monetized by the company, the individual organization that’s paying to get their message out.
So let’s assume that there’s one company here that’s paying a hundred dollars to get their message to as many people as possible; out of that hundred dollars, a portion of that will go to the broadcaster, for example, for looking at television, some of it will go to the Internet provider, a portion will go to the radio station, maybe the newspapers, and then the services that revolve around getting it from message to distribution will also be part of that pipeline, part of that chain, and so that’s the eco-system. The eco-system is much more complex online in the online world than it is in the offline world because of the sheer volume of data that’s there and you’ve got companies that will take bits of information or bits of messages or ads and they will pull it together and sell it as a block, wholesale and exchanges, which could appear as a market, where you’ve got advertising volume or inventory that is there and looking for the best rates, the most effective time, and there are companies that are involved in that business that will say, “Okay, we’ve got all this advertising, all these messages, that need to go online somewhere. What’s going to be the best, most efficient place to put them, to put it?” And they determine, the companies can engage that process and say, “Well, we want to make sure that our message is seen in prime time and not, you know, in off time, not in day time” – you can certainly direct where it’s going to go and those, again, are all monetized by that one or two source that says, “I want my message out.”
So if you’re Hillary and you’ve got a pile of money to make sure your message gets out and about for employment, for immigration, or defense and you’ve got a hundred million here and a hundred million there and you put it out there then you can bet that there along the chain in that eco-system, there will be companies, entities that are profiting from that – not in a bad way, but just for providing a service, they get compensated, their compensation is quite big, quite considerable.