Dec 19, 2017 - Economy

How consumers could get shafted by new media

Illustration: Rebecca Zisser / Axios

Proponents of major media mergers say that consumers will benefit if regulators approve the deals. But consumers, especially those who can least afford it, could get screwed by these deals.

Why it matters: Multi-billion-dollar deals — along with regulatory changes such as the repeal of net neutrality rules — are often justified as ways to spur innovation and increase consumer choice, but consumer advocates argue the actions could actually make access to some popular content more expensive. The real question: Is choice at the expense of price really giving consumers what they want?

  • It takes a very savvy consumer to distill which new services and packages will actually provide the most value, especially given the rapid pace of innovation.
  • Low-income consumers will be uniquely affected by some of the changes that could go into effect from these massive deals and regulations.
  • While new "skinny" packages may look cheaper, the total cost of broadband, bundles, and many smaller add-on packages could end up costing consumers more in the long run.

Disney/Fox: Disney says its $52.4 billion acquisition of 21st Century Fox's entertainment assets is a win for consumers, giving them more choice in entertainment streaming over Netflix. But BTIG media analyst Rich Greenfield says the merger will "certainly lead to higher consumer prices, bigger & fatter video bundles," and less competition from upstart video providers.

  • Greenfield argues that the new deal gives Disney more leverage to increase distribution fees that will get passed off to consumers. "Adding the regional sports networks, the FX Networks and Nat Geo to Disney's exciting broadcast and cable network channel portfolio would give Disney unprecedented leverage in negotiations" with cable and satellite providers Greenfield writes.
  • Sources say a major antitrust hurdle for Disney/Fox merger is Disney's increased market share in acquiring Fox's 22 regional sports networks.

Sinclair/Tribune: Consumers' Union, the policy division of Consumer Reports, has been among the many vocal groups against Sinclair Broadcasting Group's proposed acquisition of Tribune Media for similar reasons, arguing that a 72% reach to U.S. households gives the company unprecedented leverage to sway content distribution agreements with video distributors.

  • The merger could have outsized impact on how some lower-income communities stay informed. According to Pew Research, audiences with low incomes and low education levels disproportionately rely on local broadcast programming for news and information.

Net neutrality: FCC chairman Ajit Pai called last week's vote to repeal net neutrality rules a win for consumers, but many worry that the sweeping reform would mean more expensive internet bills and higher fees for access to some programming.

  • Per Axios' David McCabe: "FCC officials have argued that the net neutrality repeal is a win for consumers, but that claim has been heavily contested by consumer groups. While the FCC says the repeal may lead to more choice, opponents say it could create a Balkanized internet where full access to the web will be reserved for those who can afford it."

The irony: There is more good content available to consumers than ever before: More than 500 scripted TV series will be produced this year, experts estimate, up from around 200 scripted TV series in 2010. But consolidation and regulatory changes could make it more expensive to access, and too many choices can be difficult for consumers to sort through.

Sifting through the options: Consumers are having to become more savvy about managing an overwhelming amount of new content and content sources, according to a new PwC study:

  • 55% of cord trimmers "regularly" subscribe to a trial version of services.
  • 33% don't typically keep the subscription after the trial period is over.
  • 81% of focus group participants say they share passwords with friends and family.

What's next: Tech companies are watching the fight over net neutrality repeal, and how regulators respond to mergers "very closely," says David Sapin, U.S. advisory risk and regulatory leader at PwC. "These cases could completely change the game in how consolidation and size is viewed and how it's impacting consumers."

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