Television Is the New Television

by Michael Wolff

  Naturally, governments everywhere decided to regulate, most of them keeping the lion’s share of television control for themselves, from direct autocratic rule to Britain’s bureaucratic collective, the BBC. In the United States, the effort was to turn it over to the free market—free, of course, only in the most peculiar kind of sense. Television became an ongoing war between competing government interests, new and changing technologies, private enterprise and investor whims, national and local concerns, do-gooders and ideologues. That is, the television industry is no more a free market than the health care industry. It simply represents the struggle of good intentions, moneyed interests, transformative moments of innovation, and panicky efforts to gain control of what heretofore was overlooked and unregulated.

  The structure and the spoils of digital media, on the other hand, have largely been established outside of or at arm’s length from government regulation. This does not mean that there isn’t an inherent regulatory structure, or that powerful interests do not exercise self-interest, or that in any way it is a more level playing field (although sometimes it might appear to be a more logical one) than the television industry. Digital media, beyond the mythology of garage start-ups, is largely a top-down business heavily influenced if not controlled by a relatively small set of investors. This group is mostly linked by a set of relationships and interests that have tended to sanction who competes with whom and even who will employ whom (e.g., the recent scandals over salary fixing and secret antipoaching agreements for tech talent).

  Television and digital are hardly that different, except that one collection of interests controls one and another collection of interests controls the other.

  But suddenly, at the intersection of Comcast’s national broadband network, these two parallel structures—one created out of regulatory and legislative struggles, the other created out of the keiretsu-like favoritism and logic of finance capital—collided in a climactic battle on the issue of “net neutrality.”

  Except that, for most everyone involved—other than press and paid PR representatives—it was hardly win or lose. Rather, it was a complex negotiation to determine the key terms on which both sides would merge, what advantages they might preserve, and hence with what wherewithal they might continue to do battle.

  The stakes are further confused by each side’s negotiating advantage in misrepresenting the nature of the battle, and by the black-and-white cast of what are in fact most everyone’s shaded views. But at heart, the issue had one constant: video had become the digital sine qua non. As much as 70 percent of Internet-distributed data was video, 50 percent of it from Netflix and YouTube.

  Net neutrality was the Netflix issue.

  But it wasn’t either/or. It was not that one side wanted the net to be neutral, whatever neutral might mean, and that the other wanted to control it. Rather, both sides wanted maximum control of the distribution channel at minimum cost or maximum remuneration.

  The best way to understand the Sturm und Drang of the fight was to see it not as a contest for the Internet, in itself a fairly low-bandwidth proposition, but really as a fight that had come to a high pitch because the Internet had provided a back door into the television business.

  But in the telling, at least in the digital telling, it remained an elemental standoff: On one side, you had cable interests suspiciously able to influence the federal government communications bureaucracy. On the other side, you had the continuing purity of a free Internet.

  But really, you had many sides not dissimilar from those that have always dogged and defined the essential muddle of communications and especially television policy:

  There was the strictly pro-business side, reflecting the interests of the companies that paid for the broadband—cable operators and telcos. They naturally wanted to be able to charge bigger users higher prices.

  Then there were the major Internet companies making the greatest use of the pipes. They opposed the broadband companies, both because they logically wanted to limit the leverage the pipe holders had over their own businesses, as well as to increase their leverage in their negotiations with broadband providers. Big data suppliers actually wanted better treatment, they just naturally wanted it as cheaply as they could possibly get it.

  There are the Internet purists, curiously, and contradictorily, calling for more government regulation—that is, the government should enforce an unregulated Internet! (In television policy debate, the government has always been called on to regulate openness.) Otherwise, broadband providers might slow the speeds of their content competitors or even their political opponents.

  There is, similarly, the opposite, pure free market position: imposing utility-like regulation, as in treating broadband like the telephone or even railroad tracks, inevitably creates a bureaucratic morass that in fact slows growth and innovation.

  Then there was the position of the federal courts (in opinions that generally have a left-right consensus), which ruled in 2010 and in early 2014 that precisely because broadband is not characterized like the telephone as a common carrier, the FCC does not have the authority to mandate equal access. For it to do so, broadband would need to be reclassified as, in essence, a telephone-like system.

  And recently, there’s the popular culture, or populist view, most forcefully promulgated in mid-2014 by the comedian John Oliver in one of his I’m-mad-as-hell sketches on his HBO show: cable operators, like Comcast, are bad, and out to screw whomever they can screw, and all Internet users ought right away to contact the FCC and tell it how mad as hell they are. This generated a groundswell of 3 million citizen comments, most of them, presumably, against the FCC’s approach, though how many of them are concerned about freedom of speech and how many of them just don’t want Netflix to ever buffer remains to be seen.

  And then there is the FCC itself, which, in its efforts to thread the needle in the controversy and maintain its own central position, first proposed a set of policies objectionable to pretty much everyone. While preserving various more arcane parts of net neutrality policy, it was also proposing to allow a two-tier system. While broadband providers would not be allowed to slow down traffic, they would be able to charge data providers extra to speed up their traffic. (The FCC’s rules do not cover wireless, so in a sense it is a three-tier system.) But unable to find a place for itself in this new ecosystem, it then voted to designate the Internet as a utility, meaning it might be subject to as much regulation as the telephone system—guaranteeing a generation of lawsuits and further negotiation.

  Arguably, we were no longer even in the Internet business, but actually in the television business, which changed the terms of the debate.

  This new video industry—growing exponentially and transforming the nature of entertainment—was getting a free ride on the cable and telcos investment in broadband. This was either a) the right of the new video industry’s core customers or b) unsustainable free distribution, overtaxing networks and slowing the Internet for everyone else.

  Equally, this new video industry, which had grown up on the basis of free distribution, in fact wants more speed and, as well, to erect economic barriers to other Internet television upstarts. That is, in typical television policy and negotiating terms, it wants to protect and enhance its own position by creating difficult barriers for everybody else, while at the same time maintaining the best terms possible for its own account.

  Nowhere was the negotiation as wily and as transparent as it was in Netflix’s moves:

  By the time the net neutrality debate is heatedly under way, with the Obama FCC trying to take the side of the tech community’s subtly shifting positions, and the courts striking it down, it’s awkwardly clear to Netflix’s Reed Hastings that Netflix’s great success makes it harder and harder to justify a pure net neutrality position. Netflix is consuming bandwidth at a monumental rate, vastly more than Google, even with YouTube, and for that matter everybody else.

&n
bsp; It is also not entirely clear that net neutrality—leveled access for all—is the best situation for Netflix.

  The best situation for Netflix is clearly to have as seamless a delivery as possible. Actually, the best situation is to have a more seamless delivery than its competitors. And, in a world where its most direct competitor, Amazon, is far richer and has far greater infrastructure clout, Netflix is always feeling some amount of peril.

  Then, too, the logical defensive business position is to want to use its success—no matter that it was attained on the basis of a neutral net—to gain just the kind of advantages that might make it harder for someone else to do what it did. Pulling the ladder up, in other words, after you’ve climbed it.

  Netflix commences a negotiation with Comcast that both tracks and helps establish the new FCC position. Comcast, according to prior net neutrality rules and agreements when it bought NBC, can’t slow third-party data speeds, but that is not to say it can’t speed them up. Hence, Comcast and Netflix develop the model for the two-speed Internet: the baseline Internet and then a faster Internet that can be bought.

  Other than the downside of additional cost, Netflix has guaranteed a substantially better experience for many of its customers and, as well, it has raised the cost basis of any new movie-television-original-video-programming service that might want to compete with it.

  Having established the principle of being able to buy this additional advantage, now the only ongoing issue will be the cost, a price that will be, as all things in television are, established in a negotiation wherein each side tries to establish what it has that the other wants and what it is prepared to trade in order to give it up.

  Comcast, having just this sort of negotiation with the myriad channels it carries, communities that grant it franchises, and regulators whose favor it seeks, surely ought not to be surprised when an adversary sees an opportunity for additional leverage.

  Netflix, filing a formal petition with the FCC, comes out against Comcast’s merger with Time Warner Cable—indeed, becomes the leading antagonist to the merger in Silicon Valley—rolling it into a broad indictment of any deviation from net neutrality and of exactly the kind of two-tier deal that it had sought and accepted to safeguard and enhance its vast burden on the Comcast system.

  Comcast, perhaps naively and yet reasonably, is stunned by the turnaround and betrayal, realizing quite too late that, in television fashion, Netflix not only has asserted its brand position in the television ecosystem, but could now trade back its favor and goodwill and de-escalation of righteousness, and even its ultimate acquiescence to the Comcast merger, for a better deal and, for both parties, a certain sort of television-business happiness and even “partnership” at the end of the tumult.

  It is quite easy to imagine in fact an outcome in which Comcast provides Netflix, a high-speed Netflix, in its broadband bundle.

  18

  WHEN YOUTUBE CHALLENGED TV—AND LOST

  The YouTube advance, an Internet watershed moment—circa 2005—was to turn video streaming into a one-click operation. Before YouTube, Web video was a world of conflicting and often incompatible video and video players; after YouTube it was . . . television.

  There was then a sea change in expectations and behavior. Internet users, emerging as though from the largely text- and photo-based Web Stone Age, expected video, and they began to behave in recognizable ways. Not only was video watched with relatively full attention (at any rate more focused attention than a fly-by Web page received), but a viewer was, mostly, forced back from the nonlinear world of the Web to having to watch from the beginning, to the middle, and even perhaps to the end. Attention, or a good piece of attention, was refocused. The Web had become, not intuitively, a narrative video medium—with sudden new entertainment format and advertising possibilities.

  Reinforcing this, it became, to the growing consternation of the traditional media business, a handy way to watch actual television. Vast quantities of movies, television shows, and assorted notable video bits began to become part of, and even dominate, the YouTube library and reason for being. YouTube was on its way to being both a mega classic television network as well as a collective DVR—all television available as soon as it had aired.

  Pirating, rather than cat videos, was the YouTube kick start.

  The horror, to every television executive, was manifest. By the time the potential of YouTube was clear (and it very quickly became clear), the video-focused part of the media business well knew what had happened to the music part of the media business.

  Music, in a shockingly short period, approximately between Napster’s launch in 1999 and iTunes’s launch in 2003, had escaped its owners. CD-ripping software, compressed MPEG files, and ubiquitous players liberated it. With almost no time to mount a counterattack—and, seemingly, no sentient beings in the industry to do it—the unit sales music business effectively died. The music industry sued Napster, the YouTube of music, and closed it down. But it was too late. The technology for easy ripping, compressions, and quick downloading was already widely distributed. (Briefly, the industry began to sue end users, kids in their bedrooms, deftly shifting public opinion against itself.)

  The only substantial difference between music and video was the size of the digital files. It was still a burdensome process to download video—what’s more, it required lots of storage space. This was a key difference, however. For one, it gave the television industry time enough to absorb the example of the music industry (in fact, television executives had always thought poorly of music executives), and to understand that the threat was existential. And, for another, it meant that YouTube became the primary and largely centralized solution for dealing with large video files—to stream rather than download.

  And then YouTube was bought by Google, immediately increasing the likelihood that YouTube would be able to legitimize piracy—“sharing”—of video. (Google’s practice had become to make ever more inroads into other people’s content without paying—surfacing greater bits of news and other content in search results, such that a Google search page supplied a good part of the first look that anybody needed.)

  Hence, YouTube became the target—a significantly more vulnerable one because Google could not, and surely would not, risk its own fortunes on a Napster-like to-the-death defense of its unprofitable YouTube division. Viacom, in the figure of octogenarian Sumner Redstone, sued it.

  Curiously, from the technology side this seemed querulous and tetchy and like a sure loser. Another nuisance suit.

  But it was an elemental match: YouTube was synonymous with free; Viacom makes content that needs to be paid for. And even more: digital was used to avoiding and evading direct conflict over the fundamental issues of ownership and fair use; Viacom was used to suing infringers and intellectual property adversaries.

  In the media manner, bringing giant law firms and legal overkill to the process (Viacom’s giant law firms and overkill necessarily matched by Google’s), such contretemps became an unavoidable aspect of doing business in the space—a material issue for a public company. Viacom had injected a note (or footnote) of uncertainty into Google’s future.

  What’s more, the suit challenged a central pillar of digital media behavior and of the digital media business: the Digital Millennium Copyright Act (DMCA).

  This 1998 piece of legislation, passed in the first flush of digital enthusiasm and soaring share prices (prior to the 2000–2002 dot-com crash), provided in some real sense safe harbor to infringers. If an infringer acts reasonably within a short period of time—that is, by expunging and taking down the copyrighted material—he stays in good order and faces no penalties (vastly different from the standards in traditional media, where any infringement can involve substantial damages and awards). In practice this afforded an infringer a very low bar. The burden was put on the copyright holder to monitor and police its material and then give notice to the offender, at no pe
ril, to take it down—in other words, a one-sided statute to the clear disadvantage of owners of premium content. By filing a big lawsuit, backed by bottomless legal resources (which no other media organization had yet the temerity or uncoolness to do), Viacom was issuing a very high-level warning that the DMCA and YouTube’s use of it to maintain an effective structure of piracy, one without penalties to itself, wouldn’t be tolerated without a fight.

  In a sense, too, it was a particular kind of litigation: an ever-present threat to its public company adversary. Lawsuits are not necessarily always about disposition, but frequently about the symbolic meaning of the threat of constant litigation, bad will, querulous and noisome press, and moral and political one-upmanship.

  The long and grinding suit was probably at best a draw, and involved a series of setbacks before the settlement for Viacom—allowing the digital side to wave it away as more ineffectuality on the part of the old in its competition with the new. But during the suit, and arguably—a strong argument—because of the suit, the weather entirely changed. Google and YouTube became an effective (if begrudging) self-policer and fundamentally shifted out of the piracy business into user-generated content and, more important, into a set of agreements with content makers. Instead of a common carrier they had become, in a major transformation, licensors.

  If video piracy was not defeated, it was—to a large degree the result of the Viacom suit—pushed back to the margins. Digital media wasn’t stealing television’s business; it was entering it.

  19

  YOUTUBE BECOMES NOT YOUTUBE

  YouTube was not conceived as television. It was conceived in one of those digital conceptual cones such that if it had been explained to you without its real-world demonstration and adoption—you’ll be able to instantly see random home videos that can be uploaded by anybody (but no porn)—you would have likely been stumped by the usefulness of it to anyone.