Regulatory intervention in the TV ecosystem “is a bull in the...
Regulatory intervention in the TV ecosystem “is a bull in the proverbial china shop with unintended consequences likely to destabilize the delicate work of the invisible hand” in the market, a report from Needham & Co. said. The TV ecosystem…
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hasn’t suffered the same fate as music or newspapers in the digital age because: (1) Consumers pay only about 30 cents for every hour of TV they watch. (2) The industry “has always embraced technology to improve its product.” (3) The entire “slate” must be funded ahead of time for “hit” shows to be developed. (4) The “fierce rivalries” between about two dozen “enormous” companies, who engage in “vicious negotiations” every five to seven years, “eventually” add more value to the system. (5) Unlike “dominant Internet platforms” that quickly fizzled out like AOL and MySpace, “large companies pursuing independent strategies maximizes the economics and stability” of the TV ecosystem. (6) Players like YouTube, Netflix and Hulu are creating a “parallel high-quality video business” that can “unseat” the TV ecosystem. Regulatory efforts to give an edge to the new entrants in TV, such as two Justice Department investigations launched recently, would help “a tiny number of employees, most of whom have graduate degrees and live in large cities,” such as Hulu’s 420 employees and Netflix’s 2,348 employees, the report said. Even Facebook only has 3,500 employees despite its 900 million users, it said. “These types of employees do not need government protection: There are many job alternatives for them.” In contrast, about a million employees are “dependent” on the TV industry, “typically middle-class folks, some with college degrees, who live in rural America” and answer phones, service trucks and install wires, the report said. Flattening numbers of Internet video viewing show the need for new content, it said: The figure has been stuck around 180 million viewers for more than two years, and the number of videos watched online has only risen 8 percent in that time. If unbundling the TV ecosystem were mandated, Needham & Co. estimates only five to 10 hit channels would be profitable on a standalone basis, “implying that 125 TV channels [on the typical cable package] would become uneconomic to produce,” and public companies in TV would lose $300 billion of market capitalization.