Tech Won't Save Us - What the History of TV Can Teach Us About Netflix w/ Tom Evens

Episode Date: August 13, 2020

Paris Marx is joined by Tom Evens to discuss how the history of the television industry can give us important insights into the state of streaming video services and how regulators might respond to ensure they serve the public good instead of just their private goals.Tom Evens is the co-author of “Platform Power and Policy in Transforming Television Markets” and a Professor of Media, Innovation and Communication Technologies at Ghent University. Follow Tom on Twitter as @EvensTom.Tech Won't Save Us offers a critical perspective on tech, its worldview, and wider society with the goal of inspiring people to demand better tech and a better world. Follow the podcast (@techwontsaveus) and host Paris Marx (@parismarx) on Twitter.Support the show

We got a lot of new channels with it, but I think it was Bruce Springsteen, it was already in the 90s, who sang there in 69 channels or something, and there's nothing on. Hello and welcome to Tech Won't Save Us, a podcast that isn't so sure about the long-term benefits of major tech companies being involved in film and television. I'm your host, Paris Marks, and today I'm joined by Tom Evans. Tom is a professor of media innovation and communication technologies at Ghent University in Belgium and the co-author of Platform Power and Policy in Transforming Television Markets with Karen Donders. Today, we talk about the history of the television industry in the United States and Europe, the recent development of streaming services, and what that history might

be able to teach us about how we understand what's happening with streaming and how we might respond to it from a regulatory perspective. If you like our conversation, please leave a five-star review on Apple Podcasts. Make sure to share the podcast with any friends or colleagues you think would be interested in it. If you want to support the work that I put into the podcast, you can go to patreon.com slash techwontsaveus and become a supporter. Thanks so much. Tom, welcome to Tech Won't Save Us. Hi, Paris. So I wanted to start by getting some insight into the history of the television industry, because I feel like that is really absent in a lot of the discussions about streaming platforms.

And so in the book, you talk about how when television emerged, the US approached it with a bit more of a laissez-faire approach, whereas Europe had more of an interventionist approach. So can you explain what the difference between those two approaches were? When you look at a laissez-faire approach, you look at media or technology or telecommunications or any industry, like an economic activity, where you can grow, where profits can be made, innovate, and so on. Whereas you look at the more social responsibility approach, you look at media also as an economic entity, but also as a driver of social change, as a cultural industry, as a cultural asset.

And the thing is that you need to combine both and don't look at media as just an economic thing or just a more social thing, which doesn't happen. You really have to find a balance. And if you look at what happened with the development of media industries in the United States and in Europe, we see that Europe has been approaching that much more from a social angle, whereas in the US there was much more emphasis on the economic activity of media. One of the most clear examples which still lives on today is, of course, the existence of a strong public service broadcaster. A public service broadcaster does exist in the United

States, but neither the remit or the size or the financing structure that is available in Europe is, of course, there. And this approach of looking at media, controlling media, taking media responsible and accountable is much more living in Europe than in the United States. It goes on today with regulation of technology firms, which are the new media companies, more or less. So that's a bit the difference between the United States and Europe in brief, I would say. Yeah. And how did that play out? Because in the United States, you had in the beginning, I guess, these three major private broadcasters, ABC, CBS and NBC that were regulated, but it was still a private industry. Whereas in Europe, you mainly

had these, as you say, public service broadcasters. So how did the focus of those media companies differ because Europe was in the public sector and the United States was in the private sector? Well, that was the choice from the beginning. There could have been a public service broadcast in the US as well. But the mindset was those days, and I can still do that these days, let's bring that to the market, let the market play. And we believe in the fact that different companies competing each other will make them stronger. And in Europe, there was, of course, the facts of the two world wars, where we've seen that media were a bit manipulated by those in power so there was a lot of fear that the media would be manipulated for political goals so that was

one of the main reasons why media became in public ownership especially all the visual media and then of course the 70s 80s became much more pressure on those public service monopolies, partly coming from the United States, especially, you know, the conservative way of dealing with it, with Margaret Thatcher, for example, who was very close with Ronald Reagan. So the neoliberal approach came in part from overseas and arrived in Europe. That ideology, let's say, started to erode public service monopolies, bring in new competition, and still lives on today, I would say. And some people fear that it's going the other way,

that public service institutions, not only in media, become under pressure and would be privatized. We've seen that with railways, with telephone companies, gas, energy, whatever. So media is one of the last man standing, let's say, in that neoliberal ideology. And of course, more competition has brought more choice and to some extent also more quality, where you have to make the distinction between the remit of a public institution and a private institution. And you cannot judge a public institution by the logic of a private institution and vice versa.

And that's what's actually happening today in a lot of European countries, where there's so much pressure on these public service institutions. We see that in Canada as well with the CBC. There's increasing pressure on them, and they're influenced more and more by what the private broadcasters are doing because the funding isn't as high for the public broadcaster as it is in the United States through the 80s and 90s, but I'm sure in Europe as well. And so when that deregulation happened, and at around the same time, the cable system was emerging as well. So it wasn't just these major broadcasters. How did that really change the television industry, the composition of the television industry, and what was happening with it? When cable came, especially in Europe, there are a lot of cable countries, let's say,

especially where I come from, Belgium. Well, many more channels were available, so there was a need to fill actually all the capacity. So that was a driver for deregulating the industry. But these cable companies, as well as satellite and also the other telephone companies, which came in the television industry later, they got a lot of public spectrum, just like you have these over-the-air waves. And spectrum is a public good. So actually, you should spend it well. And then soon, of course, when these companies, they were rewarded that spectrum. And after they had promised, yes, we will serve the public, we will serve the public good and think of the community.

Some not all, of course, lost that focus on the social role. And they started to focus on making profits. They had done a lot of investments. So these investments had to be recouped, of course. But still, you saw actually the balance that was there in the beginning between public and private began tilting towards the private interests. And then with deregulation and also with liberalization, we saw the privatization trend coming on. And a lot of these publicly owned cable and telephone networks, they were sold to venture capitalists and private investment

bankers. And from then on, of course, the focus on profits was there and wouldn't disappear, of course. And then later, we got a lot of consolidation. So we started with a public monopoly, let's say. It gradually went to more competition, public-private. The public was sold to the private and then the competition was reduced because a lot of companies bought over each other. And we ended up with, it's a bit exaggerated, but with a private monopoly. I think there is a possible problem for accountability for the social role these companies have to play, should play. And that's where regulation needs to come in. Because if you liberalize and deregulate a sector, you may say, well, there may be less

regulations. But on the other hand, when you let the market play, there needs to be kind of an arbiter, kind of a referee who controls that everything goes like it should be, that these companies respect the rules and are fair in competition. I found it really interesting in the book. I can't remember who you quoted, and I'm paraphrasing the quote, but you kind of said that cable was supposed to be the end of the television oligopoly, but it actually just ended up creating its own new oligopoly because of all of the consolidation that happened after deregulation, right?

Yeah, indeed. With the emergence of cable, as I said, there were a lot of investments needed. And although they had made promises, it soon turned out that all these companies were not profitable. So they put pressure on policymakers, hey, if you want us to survive, we need to limit competition because otherwise we will all go bankrupt. And where are you then with all your cable, which would bring social prosperity and drive change? That's kind of a trend you often see with new technologies, which are put in the market with a very techno-optimistic approach. This will change this or this will bring a revolution to that. And we really need that revolution. That was the case with cable. It would bring much more channels, connect families that were unconnected at that time.

And I would say many of these families still are not connected these days. We got a lot of new channels with it, but I think it was Bruce Springsteen. It was already in the 90s who sang there in 69 channels, something, and there's nothing on. So there's a lot of similarity on these channels. So my question is, what change did they bring? And all these cable services, they were able to bring up new service like telephony and tools to connect the people, but they didn't do that in the 90s. So much promises were broken. Translating that to the situation today, that's also something you see with the new tech monopolies. We say we will take over that company and do that and that and that.

And we respect that. But anyway, it does not always happen that way. So there are always similarities that you can draw. And that was one of the reasons why we wanted to bring a more historical approach as well, because you cannot project history to future. Every history is there within its own context, but you can learn from history. And we should not make the same mistakes every time again. We have to learn if we don't act or react, then what are the possible consequences of that? I completely agree. And I also found it really interesting reading about that history of cable and the emergence of cable because I did see so many similarities between cable and streaming,

like how it was promoted to serve niche audiences, because that's one of the things that's promoted about Netflix all the time, and that it was bringing like this new competition that was really needed, but also how it spurred a lot of consolidation in the industry. And also the necessity of financing a lot of new content in order to fill these channels or now these streaming platforms, right? Yes, you're right. And especially where HBO really emerges with cable, right? And HBO has kind of served as a model for a lot of these streaming platforms. Like they really try to model themselves on HBO and say like, look, we have this amazing, really high quality content. Yeah, HBO is very innovative

with introducing far distance connections. They actually invented those satellite connections more or less to transmit their content. They did a lot of sports in the beginning. They don't do that anymore, but they were the first one to bring up live sports. And then the original series and movies and commissions they have. So if you look at Netflix, they are doing new things, of course,

but a lot of the things they do is having looked at how other companies in the past did it, and they just copied their success recipes, and they are very successful in doing that as well. But I think the importance of HBO cannot be neglected. And it still is there today. It's still part of one of the biggest media conglomerates in the world. So one of the things that I found interesting when you are kind of looking broadly at this history and now with what is happening in the present with these streaming platforms, in the book, you wrote that distribution has always been this really important point of

power within the television industry, I guess, within the media industries more generally. And as you mentioned before, the tech optimists now say that the power of distributors is being eroded because there's so many streaming platforms available. Who are the distributors and are the tech optimists accurate or are we still seeing a lot of power for the distributors in the television industry? On the one hand side, they always said that distribution is kind of a liquor license. You need that license to be there and only a few of them can have it because there are high entry barriers to deploy a full network. It costs you billions to dig in the ground and to lay all these cables.

So it has always been oligopolistic, if not monopolistic in some way. So there were only a few companies that were able to be there. And if there were more, they were not profitable because it's really a scale issue. So they merged in the end. And there were always more channels of content producers available than you had distribution companies. So there was already an asymmetry in terms of negotiating power. There were two on the one hand side and 50 or even more on the other side. On top of that, if you wanted to reach an audience, you need to have access to distribution. So they were really in between the content and the viewers. So a lot of the power they have was there and is there, of course.

Other people say these are more techno-optimists, especially when the internet came. And with digitization, there were more options in terms of distribution. Cable got digitized, telephone companies or telephone networks got digitized. And of course, the internet, well, there is an opportunity for everyone having kind of content to bring it direct to the consumer without any interference of a pay TV operator. Of course, they're still using their networks. They still have to use their internet because it's not our internet. The internet cables are owned by a kind of company who controls it. So they're still kind of gatekeeper. They're not really gatekeeper to the consumer, but more gatekeeper to especially

the streaming services who put a lot of burden in terms of bandwidth and capacity. So they need to have access to the network to be distributed. And there's also kind of a negotiation taking place over there that's still dealing with that power position. And then, yeah, you have those new distribution companies, which come on top of them is, of course, data centers. Netflix is not only using the network of AT&T, it's also in need of hosting, of storage. And there is a customer of Amazon, AWS. So the fun part is, of course, that Amazon is partly using money it earns with AWS to subsidize its own Amazon Prime Video service, which is direct competitor to Netflix. So there are even more gatekeepers in the entire

field. So there's still these gatekeepers. And yes, you don't need to rely on cable, you don't need to rely on the telephony network or satellites, you can use the open internet to bring your content. But then there are other players having emerged as a gatekeeper. Yeah, and I think that's a great point. So not only do the companies that kind of own the internet infrastructure have this important power, but the platforms themselves also play an important gatekeeping role, right? And so how does that play out with the power that the platforms have vis-a-vis like content creators and the users themselves? One good example is Apple and its App Store, which you could consider kind of a

platform, a gatekeeping position to other producers of apps, more or less, and the way they force these app developers to play by the rules. Google is a bit more relaxed with that. But also on Facebook, if you post content which does not meet their own requirements. And who knows how these requirements were made. They kick you out of their platform. These are the new gatekeepers and they decide if you come in or not. You just have to more or less obey to their rules, which is fair. But these rules need to be made based on a fair consideration of what is good and bad. For example, in Belgium there was

kind of a big thing a couple of years ago, I think it was two years ago, a museum with a lot of Rubens paintings, so with a lot of naked ladies on these paintings, and they were making promotion on Facebook and they were banned on Facebook because they were posting naked ladies, which is not in line with the Facebook policy. You can think of many examples of this power, formal or informal, being played by new gatekeepers. And these are software platforms which come on top of the physical infrastructure. And how does that play out with the streaming platforms specifically? How would that change from, say, the cable or the broadcasting model because you know there are stories now about how content is becoming more expensive to produce and like

budgets are being bid up because there's so many well-financed interests trying to add content to their platforms and they also need that in order to draw in the audiences right there's so much competition between all these platforms, not only the internet platforms, but also then the traditional paid TV operators who haven't lost the battle, of course. They also want the content that is most attractive and that boosts a lot of customers.

So it's kind of a bidding war going on in terms of winning the best talent and winning the best possible content. We've seen that from the 80s on with sports. It still is one of the most popular things on earth to look at and to pull subscribers, especially with Rupert Murdoch. Then actually the entire game began to be played and that led to an immense increase in the price that were paid for sports, right?

And now this is happening as well with series, especially series movies to a lesser extent, because everybody has seen the importance of series and to have the most interesting series on your platform. We come back to HBO and Netflix copying that strategy. So it is important to have these series because your subscribers demand for it and they require you to have them.

Otherwise, they just run away to the other platform who will be able to secure the deal with this director or actor. So, yeah, prices for content are going up. Not always so rational as well. There's much more money available on the production side, so they can improve the productions there, making it really Hollywood standard-like. And then it happens that in Hollywood, the power balance has shifted as well, whereas movies were always so popular in series.

Well, that was second class. And now we see that a lot of directors, because they all also got paid by these main platforms, but a lot of actors and directors become associated to productions to series and not really movies so you see the power balance i would say has has tilted but is changing there as well and might change within 10 10 15 years as well so that game of power being very fluid not being constant that is something which i find very interesting to see how is the environment changing and how do these old

players and new players try to pull the power to their chests and there you see that the old television world if i'm allowed to say so to the paid television world the at&ts and hbo they are really trying to not necessarily survive but really they don't want to lose their main position as the main service or the main platform for accessing television content and throughout the entire history of the media industries, if there is anything constant, it's not the allocation of power, but that there is kind of a fight of power. But that's really interesting to see. And yes, indeed, it's now circulating a bit in favor of the streaming platforms, but nobody

really knows how things will go within 15 years. And on top of that, nobody really knows that the leading platforms will be as successful within five years or 10 years, which is still so long actually in this environment. And I think one of the really interesting pieces of that is like we do have a lot of platforms right now. There are platforms still being launched from big media companies or big tech companies that are still to come, right? But you're right that the platform market

is a winner-takes-all market. And we're still seeing that some of these platforms are still unprofitable, and we don't know if they'll achieve profitability. So do you think that we might see a greater consolidation of these platforms in the future or more shutting down so there are fewer platform options? And how does, I guess, the tech company's ability to cross-subsidize their platforms with their other services, at least in the case of like Amazon and Apple, not so much Netflix, kind of affect what's going on there with the economics of platforms? What we see is indeed, as you said, a lot of companies just trying their best. It's a moment

to do that. You don't have to wait five years to launch your own platform because then you're probably too late. So there's kind of a platform mania. I'd also say there's kind of FOMO, fear of missing out. If it's not profitable, well, at least we tried it. And if we're lucky, we can sell it to someone else. So there are many, many platforms and they're not all gratifying the same need. You know, if you look at Netflix, that's certainly something else than TikTok. Well, we'll see how long that lasts. Not the lucky one.

Or YouTube, you know, there's a big difference between Netflix, YouTube, and Twitch. So it's, of course, not said that if Netflix continues to grow, that that will be at the expense of YouTube and Twitch. Disney, on the other hand, might be more or less a direct competitor to Netflix. Of course, it's differentiated as well. But still, it's about long-form professionally produced content premium content so there might be a time where as a consumer that you say well look i have a subscription to netflix to disney whatever amazon and a fault one possibly operated by at t who knows but i only have 24 hours in a day so So then you start to consider, should I really pay for all these four services? Because it's not worth it.

I can hardly watch two of them. So I will ditch two of them. So that will happen. And if a lot of people do that, then that company becomes unprofitable. It loses cash and cannot compete the race for content anymore. I really expect that,

especially with those platforms that are competing really head to head, that we might expect consolidation within five years. So new initiatives, yes, of course, but they cannot all be successful. That's sheerly impossible. We also have the platforms

of the broadcast networks of the pay TV, also the producers themselves like Disney. So they will all compete for our attention and of course our money. When that competition starts to turn into consolidation and grow into kind of a legal play with only a few players left, who will that be? We will see. It's useless to try to predict that. Of course, there are a few things

that will help you in that global race. And that's, of course, having an infrastructure, which is still important, either a physical network, because you need to transport your content, but also the more software driven platforms below it in the data center. So that's also kind of the infrastructure you have or the possibility to have an app store. It's also kind of infrastructure. Good content that remains key, of course. And cash, cash is also very critical, let's say,

because money, well, the Beatles sang, money can buy you love, but money can buy you great content. And that's where the tech companies try to make a difference. They have kind of an infinite amount of money at their disposal. If you look at all the money that is parked at one other exotic island, Apple has, it can start its own streaming service and just spend so much money to it rather than just buying Netflix. The same with Amazon, the same with Microsoft, the same with Google and Facebook. And that's not the case with Netflix, which is a perfect model, but which has created kind of a perfect storm for itself.

It has bet so much on original creations. I think it's 20 billion this year. But if you look at the revenues, well, they're not high enough to make a profit. The concern I have with regard to Netflix, they have 150 or 160 million customers. And yes, streaming is a scale business. But if even 160 million subscribers is not enough to make your business profitable, yeah, then streaming is really about having big scale and thinking of 600, 700 million subscribers. So that's my reservation with Netflix.

But of course, they have a great model, have done so many great things. Also in terms of their user interface is great, the recommendation and data-driven stuff. They're really pioneering that, but they're now coming into a new era of competition. The streaming business has just entered the second phase, let's say. They're clearly the winner of phase number one, but the streaming business won't stop with phase two and phase three. If we also kind of circle back to what we talked about originally, how, you know, there were originally public broadcasters, Europe still has its public

broadcasters, but they are slightly changing. And there used to be more regulation on the sector to try to direct their energies at least a bit more toward the public good or to ensure there was more competition because it was believed that more competition would kind of serve the public good in some way, right? And so if we were thinking about what regulations or actions to make the streaming serve the public good instead of just this kind of competition between these major players, what might that look like? Well, there are two main areas where you can regulate. The first one, which is the most easiest one and the least controversial, is regulating the content you supply in terms of protection of minors. Very recently, a European directive was voted that requires streaming platforms and individual media services to have at least 30% of their catalog being

original from Europe, so European productions. There's always a way out to circumvent rules or to buy old content which doesn't cost anything but which is European. So put it in your catalog and you're fine. Of course they anticipated that and they also require these streaming services to put European content prominent in their user interface. So for example, when you open up Netflix, that the first thing you see recommendations for you and that a certain percentage is reserved for European content or local content.

So these are the kind of regulations you can take. Of course, you can also invite these streaming platforms to take part of your local subsidy schemes to produce local content. That happens in Europe as well. And as long as there is European content being made, that's fine. It doesn't matter where it is shown. Is it on a broadcast or on a streaming platform? That is not the case. The case is that it is important that there is content made locally and produced locally with your own language and these things. So these are a couple of interventions you can make.

The thing that is more controversial and more difficult to do is intervening in that infrastructural thing, be it the physical or the immaterial dimension. Yeah, public ownership is something you can consider, but I don't think it's really possible to demand as European regulated to impose Netflix to become a European company. Although if you look at what is happening in the United States today, that is what has happened. The US president imposes a Chinese company to become an American company. Of course, it's not a publicly owned, but not publicly in the form of owned by public instances. It remains a private company. It does not become in the hands of a government. But that will be very controversial to impose public ownership of these platforms.

And I don't think it will really solve the problem. You know, we have to look what is the problem. The problem is that if we go on like this situation for a couple of years, we will turn into kind of an oligopoly situation. We're very powerful, yes, American companies, but that's what it is. A lot of our American companies do great things in Europe.

So that's not the case. The case is that in that situation, you would end up with limited competition and your prices may go up and they don't feel they have to obey to privacy rules and all these things. So that would be a genuine problem for Europe and also elsewhere, of course. So having a company in public ownership does not solve that issue of competition. So you need to tackle the way they behave, not really how they are structured. And that's also why I'm a bit reluctant

to breaking up these tech companies because with network effects, suppose you would break up a company in three parts. Well, one of those three parts will grow into a monopoly again because of this network effect. So it does not really help the situation. Possibly on the short term, it does, but not really on the longer term. So you have to look at how they behave. And that's, of course, data-wise.

How do they organize and control the data? Is that transparent enough? Is that in line with privacy rules? And again, Europe has been making great steps with the overall GDPR regulation, which is not perfect, but which is a first step, I think. Holding these companies accountable for what they do with the data. Because a lot of these platforms, they're data-driven. So that's their oil, let's say.

So take away the data from these platforms and they lose a lot of their power as well. But the most interesting way of looking at these, especially the tech platforms, remains a bit difficult to see how you could do that with Netflix, is regulate them as utilities. In the industrial revolution, well, then companies were relying on railways. Now we're relying on digital infrastructure. I think in these COVID-19 days, we see what the importance of a good network and a good digital infrastructure is for working from home, from ordering food. So we should find a way to deal with the power of this infrastructure and treat them as utility like we have done with telecom companies, like we have done with banks or credit card companies and ask transparency in the way they behave, require that they don't commit

or be involved with discriminatory behavior, that everyone has access to it. And I think that would be a way to deal with streaming platforms. Yes. You know, the black box of algorithms. Yes. Could be interesting to see whether Netflix is taking its own shows and series, you know, putting them at a better place than others. Possibly yes, but we don't know.

You can impose kind of a transparency in the way they make decisions and in the way they deploy their algorithms. You can do the same with Apple, with Facebook, with Amazon in their different business units they have. It is a way we deal with them in Europe, with telecommunication companies in Europe and actually also in the US. But, and that brings us back to the beginning of our talk, we've seen gradual deregulation there. We've seen that, yeah, the rules, okay, we have to relax them because these companies

have to make a profit. It's not easy for them. And the way telcos are being treated with regard to online platforms is uneven. So there is kind of an asymmetry there. So you have two options. Either you increase the barriers for online platforms to the same level as those of telcos, or you decrease the barriers for telcos. And the most easiest way to deal with it as a regulator is to decrease the barriers to telcos because you

don't have to create new rules and whatever and you know the end situation for a regulator is the same that the rules are the same for all players which is perfectly defendable you know the level playing field system everybody's equal okay i'm fine with that but you can be more ambitious as well and and you can impose rules the same or similar rules to to online players like you have imposed to to telcos and that would be much more ambitious and that's i think the way we should go forward but that of course also implies a lot of control costs administrative costs to control actually, whether these companies are following these rules. Yeah, it's a very complex discussion. And there are many elements to it that need to be understood, both to see, you know, how these companies work, but also how we can try to ensure that they're better serving the public good and kind of the public goals that we want them to write. Tom, it's been really fantastic speaking with you and getting your perspective. I really appreciate it. Thanks so much. You're welcome.

Tom Evans is a professor of media innovation and communication technologies at Ghent University in Belgium, and the co-author of Platform Power and Policy in Transforming Television Markets with Karen Donders. It was published by Palgrave Macmillan, and hopefully you can find it at your local library, or if you can find it at your local library, or if you have access to an academic library, you should be able to get it through there. You can follow Tom on Twitter at Evanstom. You can also follow the show at at TechWon'tSaveUs, and you can follow me, Paris Marks, at at Paris Marks. If you liked our conversation, please leave a five-star review on Apple Podcasts. TechWon'tSaveUs is part of

the Ricochet Podcast Network, a group of left-wing podcasts that are made in Canada.