Please, Lina Khan, don't make Hollywood's crisis worse

  • FTC chair Lina Khan said there seems to be something "deeply broken" about Hollywood.

  • She blamed the industry's market structure and suggested consolidation had weakened competition.

  • But Hollywood's problems aren't caused by consolidation, but rather a harrowing transition to streaming.

FTC chair Lina Khan made some recent comments that should trouble anyone in the TV and movie business.

In particular, when speaking on a recent podcast from The Ankler, Khan seemed to take the position that Hollywood was already being hurt by unfair market conditions caused by consolidation. She also suggested that her agency would look unfavorably on further concentration of power in the sector.

This, I believe, is a fundamental misinterpretation of the problems that Hollywood is facing — and fails to recognize that media companies may need to bulk up even further to compete with Netflix and the tech giants, so they can transition to a streaming model without destroying themselves in the process.

Khan said on the podcast that there seems to be something "deeply broken" about the dynamics of Hollywood in the age of streaming and suggested the culprit was "market structure."

She described the combination of consolidation and vertical integration as having seemingly created a "market structure where we hear about how writers and producers and showrunners are all making less, even as companies are charging customers more."

She continued on to say that "unless those market structure questions are addressed, it seems like potentially some of these power imbalances will persist."

Lightshed analysts Rich Greenfield, Brandon Ross, and Mark Kelley wrote an insightful post that lays out several criticisms of Khan's positions.

But I'd like to focus on one in particular: Consolidation isn't what's ailing Hollywood.

Hollywood is currently being walloped by two trends: People are abandoning both cable TV and movie theaters. In response, the major players like Disney, Comcast, Warner Bros. Discovery, and Paramount Global are burning billions of dollars to create their own streaming services. They are navigating a tech transition that would be painful under any conditions, but is made doubly so by the fact that they are chasing first-mover Netflix and facing competition from deep-pocketed tech companies like Apple and Amazon.

Oh, and they have to contend with a whole other wave of competitors for audiences' attention and time: creators on YouTube, TikTok, and more. Nearly 60% of Gen-Z adults in the US use TikTok every day, according to research earlier this year by Morning Consult.

In this environment, consolidation among media companies might be needed just to keep their heads above water. These companies are also, contrary to Khan's assertion, not charging consumers more, but rather charging them less compared to the old model. Sure, Disney recently announced a price hike for Disney+ and Hulu, but it came from an irrationally low starting point that was meant to spur subscriber growth as fast as possible.

Looking broadly at the market, I wrote this week that you could get a bundle of all the top streaming services for under $50. That's a far cry from the cable TV ecosystem (which, for that matter, was a better example of an unfair market). If they're being honest, consumers have nothing to complain about when it comes to the breadth and accessibility of filmed entertainment available to them now.

The TV and movie market feels like a roller coaster right now because it's in a state of flux. The question we should be asking is: What does a healthy market look like on the other side of this disruptive transition? Now, if Khan wants to try and block Apple or Amazon from buying a media company, great! I, for one, would be sad to see Hollywood become just another feather in Big Tech's cap. And it would likely be terrible for competition.

But if Comcast, WBD, Paramount Global, or even Disney try to consolidate to better compete with Netflix and the tech giants, antitrust action could just end up handing those Silicon Valley heavyweights more power.

And I worry that if Khan thinks the market structure in Hollywood is already broken, it suggests any significant media merger is likely to be challenged. That could be a big mistake.

Read the original article on Business Insider