Can Hollywood screenwriters defeat streaming giants?
On August 16, the Writers Guild of America West (WGA), already on strike for more than 100 days against the practices of the studios of cinema, published an "antitrust report" through which the syndicate of Hollywood screenwriters urged the American authorities of the competition to intervene against streaming players whom the association accuses of abuse of a dominant position.
Specifically, the WGA is not targeting all streaming players, but three companies in particular who alone control four dominant platforms in the USA : Netflix, Amazon (Amazon Prime Video) and The Walt Disney Company (Disney+ and Hulu).
According to the WGA, the domination of these three companies over the most essential links of the value chain – production, distribution, job market – would make them de facto "gatekeepers", i.e.like GAFAM, these companies would be able to impose the technical and pricing conditions for access to these markets.
The problem would be, still according to the association, twofold. On the one hand, these conditions of access would be unfavorable to the interests of the consumer and of the workers in the sector, in the forefront of which are of course the screenwriters. On the other hand, past the phase of euphoria where each major player in the entertainment industry imagined launching its own streaming platform, the sector is entering a particularly aggressive consolidation which, in addition to reducing consumers' freedom of choice as well as outlets for independent workers and studios, seriously unbalances the balance of power in the industry.
While there are strategic differences, particularly in terms of their positioning, the three companies have in common that they lead a vertical integration at different levels. All are producers - publishers - distributors who tend to reserve their productions exclusively, and to acquire a maximum of strong cultural licenses to densify a proprietary offer (like the takeovers of Star Wars, Marvel or Indiana Jones by Disney, or James Bond and The Lord of the Rings by Amazon). Amazon, which also has a dominant position in the highly strategic segment of OTT equipment with its Amazon Fire TV (a position it shares with Roku, with 36% market share each in the United States), pushed further its vertical integration further, and would benefit its video platform to the detriment of competing offers.
Increasingly expensive subscriptions
This consolidation is both the result of "siloed" strategies aimed at winning and retaining subscribers via mostly exclusive content, but also the desire of the financial markets in search of performance. Consolidation is likely to dry up competition enough to allow price increases, but also lower costs by reducing production volumes or the need for creativity (Disney's film supply fell by 65% in 2017 ). Another cost-saving factor: by reducing the number of possible outlets for stakeholders in the creative ecosystem, employees and independent studios and screenwriters in the lead, streaming platforms are in a strong position to negotiate salaries, royalties and rights. to their advantage.
This is essentially what the WGA tells us through its report. In a consolidating market, the surviving players end up having such market power that they can impose their conditions on the entire ecosystem, particularly with a view to drastically reducing costs and trending up prices.
In fact, the financialization of strategy, in this highly competitive and extremely capital-intensive industry, has created its own paradox. Indeed, to fuel such a strategy, you have to get your hands on very expensive production capacities and licenses. These acquisitions, in a context of auctions between competitors following the same strategy, ended up massively indebting the conglomerates. Like The Walt Disney Company, which has a lot of trouble digesting its merger with Fox.
However, this indebtedness, all the more so as the industry's growth potential is drying up and competition between giants is setting in, makes it imperative to quickly seek cash, massive cuts in costs and price increases. being the result. But to gain enough market power to resolve this equation, it is necessary to go even further in consolidation and seek new prey.
Until the day when this game even becomes too capital intensive for those who initiated it. Apple would thus be in ambush to take advantage of a potential failure of Disney or Netflix. In this context, how long will companies such as Paramount, Warner Bros Discovery or Sony Pictures, major players in their industry, but become small fish in this ultra-financialized capitalism, still be able to remain "independent"?
A precedent in the 1970s
With this report, the screenwriters therefore consider it essential to strengthen regulation on the streaming market. The idea is not only to limit the ability of the three giants to further increase their market power, but also to restrict their ability to (ab)use it.
As to whether this can succeed, it is not up to us to say the law instead of a competition judge. Nevertheless, three elements seem favorable to the WGA in this case. The first is a return to the forefront of antitrust in the United States, under the impetus of the Biden administration.
The second concerns the signals returned by the market. The ability of players to regularly increase prices without having to deplore a massive flight of subscribers seems to draw the contours of an industry where customers are relatively captive. Moreover, silo strategies make the three streaming giants more complementary than competitors: many households are multi-subscribers so as to have access to content present exclusively on one or other of the platforms.
Finally, the third favorable element lies in the fact that a precedent exists in this industry. In the 1970s, American TV was then controlled by three vertically integrated majors in production and distribution: NBC, ABC and CBS. The Federal Communication Commission then intervened through the regulation Financial Interest and Syndication Rules (Fin-Syn) to drastically limit the market power of the three leaders. The competition that was able to set up, both on the production segment, but also on the TV and cable distribution segment, had allowed the emergence of many players and diversified content from which consumers and workers in this industry.
Although this regulation may have been suspended in 1993, the sector has since remained under the close scrutiny of regulatory and antitrust authorities. It is also strange to note that under the "dual network rule", a group like Disney is not authorized to own two of the four main TV networks (it is in this capacity that it had to give up recovering that of Fox during the merger of 2019), but that nothing analogue is foreseen on the market for streaming, which has become unavoidable. Be that as it may, the two situations have troubling similarities. It remains to be seen whether the same causes will produce the same effects.
Julien Pillot, Teacher-Researcher in Economics (Inseec) / Associate Professor (U. Paris Saclay) / Associate Researcher (CNRS), INSEEC Grande Ecole
This article is republished from The Conversation under Creative Commons license. Read theoriginal article.
