Happy New Year to all. To kick off 2021, I’ve provided quick takes below on some of the bigger stories we’ll be watching
WME v. WGA
Just before Christmas, CAA closed a deal with the Writers Guild regarding phasing out of package commissions and partial divestiture of its ownership of production entities. That left WME as the last agency without a deal. The parties were reportedly negotiating but without resolution.
Meanwhile, WME’s attempt to gain an advantage on the litigation front suffered a setback in District Court. The WGA’s long campaign against the agencies succeeded because its members refused to be represented by agents who did not accede to a code of conduct renouncing packing and producing. WME asserted that this constituted an illegal boycott outside the protection of labor law and sought an injunction. Judge André Birotte, Jr. denied WME’s motion on January 4, holding that the WGA boycott falls squarely within the area protected by the Norris-La Guardia Act.
The judge also took the opportunity to urge the parties to get back to the bargaining table.
WARNER BROS. v. HOLLYWOOD
Hollywood is still buzzing over Warner Bros’ surprise announcement in early December that all of its theatrical releases in 2021 would be released concurrently on its HBO Max subscription service. The reasons for the move are not totally clear. If this were simply a hedge during the COVID pandemic, there would be no reason to commit to SVOD release for the entirety of 2021. Another proposed motivation is that the studio’s parent AT&T has decided to sacrifice 2021 theatrical revenues to jump start HBO Max, which had a disappointing launch.
Whatever the reason, the action has angered more than just theater owners. Warner Bros. co-financiers stand to see reduced returns. Performers, directors and writers, not to mention their representatives, receive substantial compensation based on theatrical box office revenues, revenues that are now being cannibalized by HBO Max. It is widely expected that Warner Bros. will be making substantial payments to compensate for these lost revenues.
Stepping back, this move by Warner Bros. may have been handled awkwardly, but is only part of a larger trend. We are seeing a shift away from theatrical exhibition toward streaming as the favored means of delivery of premium content. The market pressure was building even before last year, but the pandemic let it loose. Just at the start of the lockdown, in April 2020, Universal pulled its scheduled theatrical release of Trolls World Tour to play on pay-per-view only to great success. Disney repeated the same gambit for its live action Mulan. Universal raised a stir later in the summer by making a deal with AMC Theaters to reduce the exclusive theatrical window for its features from 90 days to three weekends in exchange for a share of pay-per-view revenues.
HAWLEY v. SECTION 230
Section 230 of the Communications Decency Act was enacted in 1996. It shields “interactive computer services” from liability for content posted on their sites by third parties. In the early days of the internet, this allowed for the expansion of social media networks and other fledgling websites by relieving moderators of the daunting burden of reviewing every individual piece of user-generated content at the risk of liability for libel or copyright infringement.
Sen. Josh Hawley (R-Mo.) is convinced that Facebook, Twitter and YouTube are tweaking their algorithms or manually moderating content to disfavor the circulation of conservative opinion. He introduced legislation in 2019 under which tech companies would lose Section 230 protection unless they can prove to the FTC that their algorithms and content-removal policies are politically neutral, and has since made this a signature issue. Mark Zuckerberg and other Silicon Valley executives were called before Congress to be raked over the coals. The idea of censorship by social media companies has become sufficiently widespread on the right as to prompt President Trump’s recent unsuccessful veto of the Defense Authorization Bill over its failure to repeal Section 230.
Section 230 has been in for its share of attacks from Democrats as well for its failure to regulate false and incendiary posts from the President on down. Even before the dramatic events of last week, Facebook and Twitter were self-regulating in an attempt to head off more aggressive federal action, culminating in the permanent suspensions of Trump’s account on both of those platforms.
US v. FACEBOOK & GOOGLE
The Justice Department brought an antitrust lawsuit against Google in October, 2020, followed by two antitrust actions in December by coalitions of states. Separately, the Federal Trade Commission, joined by a number of states have brought an antitrust action against Facebook. These have the potential to shake up the media landscape and also reflect a rethinking of antitrust law.
Since at least the Regan administration, antitrust enforcers have looked solely to consumer harm as measured by market efficency. If an alleged monopolist was not increasing prices or reducing quantity, then the law was not violated. The current suits instead allege that by using their market power to stifle competition, the two tech giants are preventing the emergence of new, potentially higher-quality services.
The FTC action points to Facebook’s acquisition of Instagram and What’s App. These companies both developed novel social platforms. Rather than develop its own feature set in response, it bought them out. The Google lawsuits accuse it of entering into exclusionary relationships (including with Facebook and Apple) to monopolize online search. They also claim that it rigs its search advertising business to block competitors from gaining a foothold.
FCC v. PROMETHEUS RADIO PROJECT
The FCC has been pursuing a deregulatory path for some time. Some of its actions, like the repeal of net neutrality, have received a great deal of attention. Others may not have received the attention they deserve. Local broadcast station ownership rules are not terribly sexy, but they address a conflict of basic policy issues that will soon be decided by the Supreme Court.
In 2017, the Federal Communications Commission, supported by the broadcast industry, agreed to relax certain ownership rules on local television stations, including those covering common ownership of newspapers and stations and radio and television stations in the same markets. These changes were challenged by Prometheus Radio Project and other plaintiffs, who have so far prevailed in the Third Circuit.
The FCC’s reasoning has been that local stations need to consolidate in order to have the economic strength to complete with unregulated online platforms. Without deregulation, they say, local television news could go the way of so many local newspapers. Prometheus’s argument to retain the cross-ownership rules is that this will limit opportunities for women and minority ownership of broadcast outlets.