TERMS OF TRADE
Keeping Copyright
In the country of the blind, the one-eyed man is king.
In an arena with no new ideas, any idea should be considered.
TERMS OF TRADE
(Loosely quoted from Matt Stoller’s Substack Newsletter – Big)
“Early this century, the historic balance between visual media creatives and distributors was upended. Governments changed the laws. In the United Kingdom, independent producers gained bargaining leverage. In the United States, they lost it, both events were due to a change in ownership or Copyright law.
In the early 2000s the British government embarked on a strategy to grow its independent production industry and facilitated “terms of trade”, a broadcaster code of conduct to remedy the bargaining asymmetry between dominant broadcasters and independent producers.
The pact required big public channels in the UK - BBC One, ITV, Channel 4, and Channel 5 to commission 25% of their production from independent producers, and to allow those producers to retain the copyright for their work product so they could license (their shows) abroad.
This was a soft break-up of the industry along vertical lines, and it made the UK a great place to do business. As the CEO of the firm that makes “American Idol”, “The X Factor” and “Britain's Got Talent” said, "There is no other country where you have these “terms of trade”. In the UK it's brilliant.”
By 2010, independent producers in England held 50% of the market, surpassing in-house network programming. Exports exploded.
Meanwhile, in the U.S. changes to federal law over the past 30 years have stripped independent producers of their bargaining power with distributors, diminishing opportunities, incentives, and, thus, the industry’s ability to generate quality content.
In the 1980s, antitrust enforcers, influenced by economists from the Chicago School of Economics, became far more tolerant of the concentration economy’. This was a legal revolution and had serious consequences for the business of making movies.
In 1993, the Clinton administration ended the “fin-syn rules” that prohibited networks from maintaining a financial interest in anything they didn’t own outright.
In 2020, a New York federal judge approved a motion from the U.S. Department of Justice to end the Paramount Consent Decrees that have dictated the movie industry's licensing rules for over 70 years.
This wasn't very important at first. Prior to 2010, major studios sold movies to theaters and TV shows to cable and TV networks. The prevailing view was Netflix was just another distributor.
Then, in 2010, the Obama administration approved the merger of NBC and Comcast, further eroding the vertical separation at the heart of the Paramount Decrees and the fin-syn rules, landmark decisions that severed the relationship between the business of creating content and the business of distributing content since 1948.
Now, after more than half a century of a hard won industry standards, the business has devolved back to its beginnings It is completely vertically integrated. Because of the way the streaming business came about - a distributor of film and television suddenly morphing into a content provider - , and the speed of that evolution, vertical integration was built in,
Netflix began buying movies and TV shows. They combined distribution and production and became the first studio/streamer. Studios realized that Wall Street valued Netflix more highly because it was a tech company. However, with Netflix there was no access to ratings or box office takes. Netflix held its data without third-party auditors. They were overpaying for content and losing money to acquire market share, a technique known as predatory pricing. It used to be illegal until it was de facto legalized by the U.S. Supreme Court in 1993. The Netflix model was an attack on the long-established bargain between creators and studios, a bargain at the heart of the industry; that whoever makes movies or shows splits the profits from any individual piece of content.
The Streamers slipped into the business of Hollywood from behind the curtain. This allowed them to subvert the hard won rules that, until recently, allowed the creators of content to share in the wealth of that content.
The UK’s Terms of Trade are not legally binding, but they have been widely adopted by the British television industry. They have helped to promote a much more balanced and transparent relationship between broadcasters and independent producers, and encouraged creativity, innovation, and diversity in television programming. Since 2000 the relationship between independent producers and broadcasters in the UK has continued to evolve, with subsequent revisions and negotiations shaping the specific rights and obligations of both parties. These developments have played a vital role in fostering a thriving independent production sector in the UK.
…excerpted from “BIG” by Matt Stoller
The Solution
The Federal Communications Commission regulates broadcasters in the US. The Federal Trade Commission regulates streaming over the Internet. Its principal mission is the enforcement of civil antitrust law and the promotion of consumer protection.
The AMPTP negotiates for all major streamers. The streamers own the copyrights of the shows they produce and distribute. This complete vertical integration makes the AMPTP a monopoly and gives them complete control over one of America’s most valuable and culturally important industries. That is exactly what antitrust laws are intended to regulate.
The Biden Administration and Congress could task the FTC with creating an American Terms of Trade whereby a minimum of 25% of the copyrights to streaming shows would be retained by the creators.
Hollywood based Congressmen, Adam Schiff and Ted Lieu could lead the charge, along with Nancy Pelosi, Eric Swallwell, Ro Khanna, Zoe Lofgren, Brad Sherman, Pete Aguilar, Maxine Waters, Katie Porter, and Senators Feinstein and Padilla.
The forced separation of the business of production and the business of distribution achieved by the 1948 Paramount Decrees has been undone by monopolistic entities that came into being outside the normal parameters that have ruled Hollywood for decades. With streaming companies in control of production and distribution, Hollywood has reverted to a system that was outlawed over half a century ago. It must be outlawed again. A New Deal is called for, an American Terms of Trade.