Defanged regulations have big media licking their chops

The year 2017 ended with a flurry of news affecting all aspects of the media industry. A shift in net neutrality policy and Disney’s planned purchase of several Fox assets capped a year that also witnessed the pending merger between Sinclair Broadcast Group and Tribune Media.

As someone who teaches and writes about the media industry, I’ve been following these developments closely. Whether you’re simply concerned about your cable and internet bill, or you’re wondering how the elimination of net neutrality will influence access to your favorite websites, here are some key stories and developments you should tune into in 2018.

Buckle up for ‘fast lanes’

The repeal of net neutrality – the rules that prevent internet service providers from charging websites to secure preferential treatment – hasn’t gone into effect just yet, and legal challenges are in the works. But if the rollback goes through, as it’s expected to do, it will likely affect companies and consumers in a couple of ways.

First, the business models of internet-reliant services such as Netflix and Spotify have always assumed that they would have free, unfettered use of the internet. They are among the first places that ISPs could target with fees, and these sites would feel compelled to fork over the money in order to reach consumers at the fastest speeds. At the same time, to offset these new costs, these internet-reliant services will likely pass these costs on to their customers.

Federal Communications Commission Chairman Ajit Pai led the charge to eliminate net neutrality rules in December 2017. AP Photo/Jacquelyn Martin
Meanwhile, if paid “fast lanes” become standard practice, consumers will also notice that accessing sites that don’t or can’t pay – such as government, education, libraries and other non-commercial sites – might seem slower or more difficult to use.

Also, expect to see internet service companies leverage the content they’ve purchased to encourage more subscribers. Companies that own content – whether it’s TV channels or film franchises – will be able charge lower prices than those that license it. (This is at the heart of the AT&T-Time Warner merger discussed below.) For example, if AT&T succeeds in buying Time Warner – which includes HBO – it will likely offer HBO to AT&T subscribers at rates well below what their competitors like Comcast will charge, because these competitors must pay AT&T before they can offer HBO’s content.

Investments and mergers galore

Though we’re in the midst of an unpredictable regulatory environment, it seems likely that Disney’s purchase of Fox assets will proceed.

This won’t immediately bring big changes for consumers. As a content company, Disney’s primary goal is to maintain and accumulate content assets: television series, films and brands like Star Wars, Marvel and DC. The more it owns, the better positioned it is to negotiate with companies such as Comcast and AT&T that make most of their money from distributing content (via internet, phone, cable service), but are also increasingly purchasing content of their own.

Companies built on owning content don’t want to be left behind, so their goal is to be able to possess content so valuable that consumers demand that all distributors offer it. Just as Disney has long used used the popularity of ESPN to secure access for less popular channels like ESPN Classics or Disney XD, the more essential content Disney owns, the more leverage it has to charge high fees and ensure distribution for content that’s less in demand.