Silicon Valley’s increasing influence and growing takeover of the media, from Hollywood movies to sports and television, is raising major questions for professional sports leagues, entertainment companies, news organizations and Wall Street investors.
Corporate media conglomerates, which for decades controlled the way sports, news and entertainment in America are consumed, now face an existential threat to their business models and brand value, experts in the industry say.
“The bottom line for consumers is the way that all content is packaged, distributed, marketed, bundled and sold has completely changed forever,” said Dan Rayburn, a media consultant who specializes in streaming and new media.
The entry into sports and entertainment has already left powerhouses like Disney and Comcast more worried about their futures than ever.
Amazon owns a movie company in MGM, while media insiders and experts have long buzzed about the possibility of a megamerger between Apple and Disney, a prospect once unthinkable that the proliferation of streaming platforms has given more credibility to.
Capitalizing on an explosion in popularity of fantasy games and legalized gambling in recent years, pro sports leagues are also migrating faster than ever to tech platforms in lieu of linear broadcast channels.
More leagues each year are doing business with tech giants and moving away from partnerships with legacy media brands as they look to reach more fans and build a broader customer base for their already highly profitable franchises.
And news outlets, once key parts of the nation’s biggest broadcast networks, are suddenly under threat of becoming smaller pieces of larger entertainment conglomerates in the new era of paid subscriber and ad-supported streaming services.
The changes represent a shift in power that is likely to have big downstream affects on consumers.
William Kovacic, a former commissioner of the Federal Trade Commission (FTC), said during an interview with The Hill this summer that the likely result of Big Tech’s aggressive push into media will be fewer choices for consumers, giving “extraordinary power to a small number of private business actors to shape and influence the way people think about the world.”
“It’s not simply the quality and affordability of the products being offered, it’s about the outsized power being given to any single company,” Kovacic said.
There are some signs the federal government is looking to crack down on Silicon Valley titans working to firm their grasp on a media industry that is seen as more vulnerable than ever given quickening changes in consumer habits and dwindling revenue for their historically profitable assets.
In March, the Department of Justice (DOJ) announced it was suing Apple for what it alleges to be anticompetitive practices in connection with the iPhone and App Store. Apple has meanwhile invested billions in live sports, scripted entertainment offerings and its popular news aggregation service Apple News+.
Legacy media companies that have consolidated have faced similar scrutiny from the federal government.
A separate DOJ antitrust investigation into the Warner Bros. Discovery merger earlier this year sparked the resignation of two top members of its board.
And it is likely the recently agreed upon multibillion-dollar merger between Hollywood giant Paramount and movie maker SkyDance will also face hurdles from government regulators and legal challenges from shareholders.
The war between tech and media on streaming, and the quickening trend of consolidation in both sectors, raises burning questions for the federal government that many see the administration and Congress as uniquely ill-prepared to handle.
Current federal officials have sounded alarm bells over what they say is a unique threat posed by companies like Amazon and Apple that are growing too powerful in the media space.
Major media conglomerates buying one another up to strengthen their defense against tech’s full-court press could also result in a less competitive market, these officials say.
“Going all the way back to the founding, there was a recognition that in the same way you need the Constitution to create checks and balances in the political sphere, you also needed the antitrust and anti-monopoly laws to safeguard against concentration of economic power, because you don’t want an autocrat of trade in the same way you don’t want a monarch,” Lina Khan, the chair of the Federal Trade Commission, said during an April interview with comedian Jon Stewart.
David Zaslav, the chief executive of Warner Bros. Discovery, quipped at the annual Sun Valley Conference in July that he is less concerned about which political party is in control of the federal government come 2025 but said of the media business more generally that “we just need an opportunity for deregulation, so companies can consolidate and do what we need to be even better,” Variety reported.
Others agree consumers could ultimately benefit from a more hands-off approach from the federal government as tech companies move further into media with streaming and digital offerings in mind.
“What you’re going to see with the media companies is necessary innovation. Today’s customers want great content and great storytelling at lightning speeds,” said David Zaretsky, a professor of technology at Northwestern University. “It could present an opportunity for more indie media artists and producers, because all these big guys are kind of stuck and controlled by this [threat of government regulation] and what they can and can’t do.”
Those inside the world of entertainment specifically — television, movies and other scripted content — see tech’s growing takeover of their business as inevitable, if not necessary, given changes in consumer viewing habits.
The number of streaming service subscriptions around the world topped 1 billion for the first time in 2020, growth connected to a coronavirus pandemic that had people locked in their homes for much of the year. Subscriptions in the U.S. alone jumped by a third that year, according to the Motion Picture Association of America.
Today, streaming accounts for more than 40 percent of all TV viewership, according to recent data from Nielsen Media Research, with tech giants like YouTube, Netflix and Prime Video consistently taking the lion’s share of audience haul.
Some warn the fight between incumbent legacy media brands and tech giants could put both creative artists in a bind and drive rising costs for audiences.
“When the elephants fight the ground suffers,” said J.D. Connor, an associate professor at the University of Southern California’s School of Cinema and Media Studies. “The bundling we’re going to see in the next couple of years is probably going to return us to a model where general consumers content array costs probably 50 percent more than at peak cable.”
And while many on Wall Street remain skeptical of an often-rumored megamerger between tech and media behemoths Apple and Disney, some say smaller studios and production companies with less stable balance sheets could be in danger of being swallowed by Silicon Valley’s most ambitious players.
“You’d likely see major pushback by the Department of Justice and FTC if those size companies [like Apple and Disney] start to talk about merging,” said Bryan Sullivan, an attorney specializing in entertainment and media. “But some of the smaller studios … might be ripe for acquisition by an Apple or an Amazon.”
As the war on streaming and the fight for the future of the media business reaches a fever pitch, Wall Street is watching closely as the biggest brands in both industries become more aggressive in the fight for control of the way the average person views the world.
“The pie of profitability is just smaller ever since the streamers disrupted the old pay TV model,” said Doug Shapiro, a Wall Street analyst and adviser who ran investor relations at Time Warner for a decade. “What you’re seeing is part of the process where the incumbents in legacy media just get backed into a corner … and that’s what everyone is struggling with, in one way or another.”
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