The Writers’ Strike, Time Warner, and IAC: In Media, Distribution is the Big Dog

(This short piece is a detour from our story of media development in the United States. It illustrates how and why media operate in this country, and suggests that media history is the best context in which we can understand developments in the industry.)

Monday, November 5, 2007, was one of those days in which we were given a glimpse of media development and the movement toward new forms of industry consolidation. Despite the hype that we’re in a “new information age”, old patterns remain constant. Here’s what happened:

Dateline - West Hollywood: The Writers Guild of America begins a strike against motion picture and television studios over fair pay. According to David Young, the Writers’ chief negotiator, the major issue is compensation for film and television programs streamed and downloaded over the internet. The last Writers’ strike in 1988 was fought over VHS and DVD payments, two older forms of distribution.

Dateline - New York: Richard Parsons, CEO of Time Warner Inc., announces his resignation at the end of the year and introduces his successor, Jeffrey Bewkes. Parsons’ departure is expected to push the sales of AOL, a former internet portal and current advertising site, Time Warner Cable, the #2 cable TV operator in the country, and Time, Inc., the company’s magazine and publishing unit. Bewkes is expected to focus Time Warner on an internet business model.

Dateline - New York: Barry Diller, CEO of InterActive Corporation, an internet conglomerate, announces a plan to split the company into five independent units: Home Shopping Network, a television based shopping channel; Interval, a vacation travel company; Learning Tree, a home mortgage company; Ticketmaster, a ticket distribution and entertainment promoter; and IAC, which Diller will retain, controlling such web companies as Ask.com, a search engine, and social networking sites, including Match.com, CitiSearch, College Humor, and Evite.

What does each event mean ? These three seemingly unrelated announcements suggest a distinct pattern. Old media platforms and the businesses associated with them, in the form of TV, Cable, Publishing, Shopping channels, and Home loans, are being replaced by new business models and media platforms, specifically the internet and wireless connectivity.

Why is this important ? The focus of each announcement was not over control of writers’ scripts or screenplays, nor any other programming content, service, or product that was created in the past. The key and unifying element was the way content is to be delivered to audiences: its distribution by new media.

Older forms of distribution, like VHS tapes, DVDs, TV, Film, Radio, and even Cable, are being pushed to the margins. Newer forms of media, like the internet, wireless handhelds, cell phones, and other connected devices like game consoles, PDA’s and I-Pods, are being pushed to the front of the line.

Here’s my point: Controlling distribution is a constant in the history of media development, and the key variable from wireless telegraphy in the 19th century to the internet in the 21st century. While content is the attraction, the way content is delivered to audiences is the determining factor in many industry moves. That’s why it is important to “read”, and hopefully interpret, media events like the Writers’ strike, the changes at Time Warner, and the IAC split, through the lens of media history. Most of that history is how individuals and organizations competed to control different media technologies to determine what was presented (and sold) to audiences. (To get started, read the entries beginning in October 2007.)

There is another important element. The way media is distributed and how that distribution is controlled on various platforms often leads to consolidation through mergers and acquisitions by large companies. It also motivates content providers (like producers, screen writers, and game developers), as well as consolidating companies, to search for newer media platforms, like the internet. The reasons they move are starkly different, of course, but the movement away from old media toward new media is inevitable, as is the attempt to go around monopolies.

The best way to illustrate this last point is to conclude with a recent quote from movie and television producer Marshall Herskovitz, the current president of the Producers Guild of America. Writing in an editorial in the Los Angeles Times, he observed:

“Because the business of television has become an exclusive club, closed to new members, some producers are turning to the Internet to have a voice. And, of course, the Big Six (NBC Universal, Disney, Time Warner, Viacom/Paramount, Sony, and News Corp.) are doing everything they can to own and control that as well. …Producing for the Internet,… costs as little as $30,000 an hour, and “broadcasting” costs much less. Virtually anyone can do it.”

Herskovitz notes that he and his business partner have already begun producing a series for MySpace (ironically, owned by News Corp.) and founded their own social networking site. He estimates it will take five years before TV and Broadband to become synonymous. I’m betting it will happen sooner. Any takers ?

Next Time: A return to the story of Cable TV

Copyright © 2007 R.E. Xavier