I think you have to examine vertical integration in copyright affected industries differently than you would in, say, the vertical integration of steel production with a company that consumes steel.
The interaction with copyright invariably creates issues for the end-consumer, which is why consumers in the media ecosystem are often better off when distributors and producers are separate.
As a hypothetical example, imagine if Apple had sourced the M1 chip from a third party which it now proposed to buy. There would be intellectual property at stake there too. This case is no different.
And indeed, in the Apple hypothetical you could well expect consumers to be better off and for exactly the same reason: if Apple purchases an input (the M1 chip) from a monopoly supplier (the hypothetical non-Apple-producer), vertical integration removes one monopoly markup.
I do not know exactly what will happen in this case, but it seems like Amazon's proposing to buy a single studio is very unlikely to result in harm to consumers.
The copyright issues do not make the case relevantly different.
I didn't say Intellectual Property, I said Copyright. Copyright—much more than other forms of IP—has a significant impact on our shared culture and cultural transmission. Yes, there may be other factors with IP that we should consider when dealing with mergers, but end-users and everyday people are harmed much much more often due to copyright issues than they ever are due to patent and trademark issues.
> I do not know exactly what will happen in this case, but it seems like Amazon's proposing to buy a single studio is very unlikely to result in harm to consumers.
Sure, and I do not know exactly what will happen when we place a straw on a camel's back. But in each case it seems like it's very unlikely that the camel's back will break. It's a sorities paradox in reverse: Which individual acquisition is the point at which network effects start creating problems. Each individual M&A is unlikely to be the one that causes the problem, and yet if you allow each one because it is unlikely, eventually the system stops functioning correctly.
Based on this line of reasoning, literally any acquisition that increases the power of copyright holders has downsides.
I'm not saying acquisitions can't also have have upsides. I'm not saying that the net benefit can't be positive for the end-consumer.
I agree with huitzitziltzin that it's possible that this acquisition is net welfare-improving. I think we probably mostly disagree in:
- the extent of the downsides to increasing the power of copyright holders, AND
- the probability that this particular acquisition is net welfare-increasing
I would argue yes and the government has argued it, too, when they forced movie studios to divest their stakes in movie theaters.
The central argument is whether Amazon specifically is a monopoly in any of the industries in which it operates, so as to be able to charge higher prices you speak of — that's not what's happening.
In fact, the GP comment laid out exactly why vertical acquisitions often improve consumer welfare, in the case that the company being sold is itself a monopoly:
> And indeed, in the Apple hypothetical you could well expect consumers to be better off and for exactly the same reason: if Apple purchases an input (the M1 chip) from a monopoly supplier (the hypothetical non-Apple-producer), vertical integration removes one monopoly markup.
I think it's hard to avoid the conclusion that increasingly strong copyright holders (given all of the media mergers) implies increasingly strong copyright law.
Add that to the expanding ability of parsing for copyright violations and I can imagine the Disney Police parachuting in to arrest you for that counterfeit Micky Mouse watch 150 years after Steamboat Willie.
No human consumes enough TV media to warrant subscribing to every single streaming service at the same time, and there's certainly a lot that can be improved to make the "a la carte" experience of selectively subscribing/unsubscribing to services on demand more seamless — but the way the industry operates across the entire supply chain is dramatically different today.
Now we have subscriptions. It would be as crazy as it sounds, we are almost at the point where a preference of Picard over Kirk could have an effect on which toilet paper you end up buying.
But I agree in so far as that it is far from as bad as it could be if they tightened down on unsubscribe/resubscribe (which I think will inevitably happen one day). Still, I've been to that party that end with one room full of "Amazons", one room full of "Neflixers" and those left over wondering what they all talk about.
I really like what you said here. A familiar analogy that I like to use is cable TV: Netflix and Amazon are just "channels", each with different shows. When one half of the room is full of "Amazons", that's just the half of the room that's interested in some subset of shows not too dissimilar from what it might have been like to be a regular viewer of a serial television series in the days of yore.
However, whereas before, you had to subscribe to all of the channels in bulk. Today, you have the option to pick and choose the "channels" you want to pay for on any given month given the TV shows you care about. I think we agree that the experience to do this can be improved, but I think we also agree that it will inevitably happen one day.
The average human being consumes 2-3 TV shows at most on any given month. In the absolute worst case, that extends to 2-3 separate streaming subscriptions. The only thing that changes over the course of the year is which 3 TV shows one is watching (and therefore which underlying streaming service they care about).
The future isn't a $200 bundle of every streaming service available on-demand; the future is an LRU cache that automatically unsubscribes you from a streaming service if you haven't watched a show on it in the last month, and then re-subscribes you the moment you do. Given the current price of streaming services, it probably works out closer to (at most) $45/month, on average.
The future is rolling window two years subscription or something along those lines, because someone will inevitably build that LRU and it will be quite poplar for all seven weeks of operation.
And addressing it via enforcing separate distributors and producers allows the copyright issue (the real issue) to go unchecked, since politically, it’s harder to attack it as a problem.
It might even be politically necessary for people to feel the pain before we can get back to decent copyright lengths.
So, from my perspective, any system that allows those powerful entities to continue to accumulate more power and wealth is always going to harm efforts to change copyright law.
We need to weaken the power that companies wield over copyright law, and that's harder the more powerful those companies are.
I fully agree w/ this criticism of copyright law. I do not think that has a substantial intersection w/ the competitive effects of this proposed acquisition.
My understanding is that MGM has a large holding of copyrighted media, and therefore substantial interests in protecting and extending the rights and terms afforded by copyright law. For example, they have led consortiums of large entertainment companies in the past to bring copyright lawsuits to the Supreme Court (MGM Studios, Inc. v. Grokster, Ltd).
My other understanding is that Amazon is a very powerful corporation, that has complex interactions with copyright law already (they are a distributor of both physical and electronic media through Amazon Video and Amazon Music; they are a content producer through Amazon Games studios and Amazon Original Series [also already built on the back of other acquisitions]). This acquisition gives another significant interest in copyright protection to an entity that is already extremely powerful.
We're going to M&A our way to another Mouse on the copyright front (which was also built largely on the back of "mostly-harmless-at-the-time-but-problematic-in-aggregate" acquisitions), until massive swaths of our cultural expression are owned by a very small handful of organizations.
I suppose maybe a disconnect we have is there is a non-financial "consumer welfare" question that I don't see being asked. Consumer welfare is generally only approached from the financial perspective of: "what will the financial cost to a consumer be to obtain the rights to consume media"; I don't see anyone attempting to defend consumer welfare from a _cultural_ perspective of: "Which entities do we have to ask permission from in order to interact with important elements of our culture and society?"
The idea that media is "consumed" is an artifice. When you consume a media product, it actually still exists and nothing is meaningfully physically depleted.
Intellectual property is an artificial law construct meant to "promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries" according to the Constitution.
Sitting on your ass and collecting rent every time someone watches a movie from the 1940's for the next 150+ years--which is an action on a copy of a work and not really equivalent to anything involving real property--is not promoting the progress of anything but the wealth and power of media conglomerates. Combine this with the ability of money to buy laws and you are looking at establishment of permanent legacies through copyright.
This isn't some kind of new idea, in the 1930s the US government forced movie studios to be separate companies from movie theaters on antitrust grounds.
On the other hand, it is their content.
I find this to be sort of self-contradictory. On the one hand, monopolies are bad, but on the other, having 5+ platforms is bad. Which is it?
My (perhaps unpopular) opinion is that having more and more streaming platforms ("balkanized", to use your term) is extremely good for consumers. The low barriers to entry and the near-zero marginal distribution costs make this the perfect industry for competition (and as a result, consumer welfare).
It's a common misconception that having N streaming platforms necessarily means that consumers spend N * subscription cost dollars per month, but that's not a sensible user pattern. Nobody consumes from every single streaming service at the same time. Instead, we have a sort of TDMA style consumption of media that allows us to constantly subscribe/unsubscribe/resubscribe from services as we chew threw our respective TV show backlogs. Savvy consumers have benefited the most from this reality, and it's only a matter of time until we see subscription management products that extend this benefit to un-savvy consumers in seamless ways.
One day, streaming services will look to consolidate so as to be able to extract monopoly rents. These are horizontal acquisitions that would be terrible for consumer welfare, and those are the kinds of acquisitions the US FTC would likely police.
The problem isn't that there are 5 platforms; it's that they don't have the same content.
Having multiple platforms have different content is not all that different from having multiple TV channels have different content, except now I'm not forced to subscribe to a giant bundle of channels when I only realistically use 2-3 at any given time.
It’s their content and they can do what they want; but you can’t stop piracy
And Amazon Prime Video is quite good. Certainly HBO stuff was never available elsewhere (except for purchase or physical rental). Yes, Disney siphoned some stuff off the other services, but again much of that wasn't available for subscription streaming pre-Disney+ (which at current pricing is actually a pretty good deal).
I really can't be bothered with piracy unless I really want to see something and just can't find it elsewhere.
I said we shouldn't uncritically allow massive copyright holders to both produce and distribute their media.
https://en.wikipedia.org/wiki/United_States_v._Paramount_Pic....
As can be horizontal mergers given economies of scale and/or network effects.
It's an interesting area of the law (anti-trust) as it strikes me as one of the few really excellent uses for the heavy hand of the government. Lots of cooks in the kitchen of legislation.
It does grate my ears to hear the word 'consumer' rather than 'citizen' but I suppose it's a natural side effect of a country that is made up of decreasingly self-sufficient individuals.
Other than competition, easily bought out when you're working with a $600 billion valuation of Amazon, or loss of consumer interest, what incentive does a for profit company have to shift any gains from economies of scale/etc to consumers? Why not make your product for 10% less, charge the same, and pass on the difference to shareholders?
Apple is a great example. If they buy out the group making the M1 to reduce cost and improve supply chain efficiency, what incentive is there to lower prices especially for a company whose marketed image is all about premium? That money is going right into ongoing costs or to recoup the initial merger costs.
Any improvement to consumers are either hypothetical, relate directly to fending off competition, listed as bullets on a PowerPoint slide between VPs, or carefully constructed to pass regulatory questions, not to help their customers save money.
You'd have to have listen in to a Walmart upper management meeting to see why, but my guess is that all commerce is somewhat fungible. There's always a bit more growth to be eked by lowering prices or increasing value of products.
I'm not saying that this always happens, or that it isn't shared with increasing profits. Gigantism in box stores could be used in areas for monopoly pricing where they have wiped out smaller competitors (who themselves wiped out smaller competitors) but there are numerous cases where it hasn't happened. I'd say that fear of anti-trust action is only part of the reason.
https://www.yalelawjournal.org/note/amazons-antitrust-parado...
> The current framework in antitrust fails to register certain forms of anticompetitive harm and therefore is unequipped to promote real competition—a shortcoming that is illuminated and amplified in the context of online platforms and data-driven markets. This failure stems both from assumptions embedded in the Chicago School framework and from the way this framework assesses competition.
> Notably, the present approach fails even if one believes that antitrust should promote only consumer interests. Critically, consumer interests include not only cost but also product quality, variety, and innovation. Protecting these long-term interests requires a much thicker conception of “consumer welfare” than what guides the current approach. But more importantly, the undue focus on consumer welfare is misguided. It betrays legislative history, which reveals that Congress passed antitrust laws to promote a host of political economic ends—including our interests as workers, producers, entrepreneurs, and citizens. It also mistakenly supplants a concern about process and structure (i.e., whether power is sufficiently distributed to keep markets competitive) with a calculation regarding outcome (i.e., whether consumers are materially better off).
> Antitrust law and competition policy should promote not welfare but competitive markets. By refocusing attention back on process and structure, this approach would be faithful to the legislative history of major antitrust laws. It would also promote actual competition—unlike the present framework, which is overseeing concentrations of power that risk precluding real competition.
But... I didn’t think much of it the first time. I don’t think the claims are well motivated. I think she assumes “Amazon bad” from the beginning and contorts some not-very-strong arguments in favor of that conclusion.
I do remember the claim in the first quoted paragraph that there was something unique about the threat (I guess that’s how she sees it?) posed by Amazon. That had the potential to be an interesting claim, but I really didn’t see any evidence to back it up in the article.
The second quoted paragraph contains one suggestion which is just completely false: that consumer product variety is limited by Amazon. I mean, have you ever tried to wade through pages of junk to find the thing you searched for? I have. There is an absolute profusion of goods on the site. That claim does not stand up to the slightest scrutiny.
If the idea is instead that the fact that most consumers choose amazon instead of some other retailer is the channel by which variety is harmed, well... that also does not stand up to scrutiny in a world with Walmart and target and Etsy and a million other online retailers.
The thing in the same paragraph about the “legislative history” of antitrust is Khan’s idea to try to reorient antitrust law with (from my recollection) a specific desire to punish or break up Amazon in particular in mind. The claim that Amazon does not compete in a competitive market which is supposed to justify this does not stand up to scrutiny either.
I don’t agree (in the third paragraph) that antitrust should be reoriented away from a consumer welfare standard, but even if I did, I think Amazon does compete in competitive markets already! (Why would we orient away from consumer welfare anyway? Would we like (e.g.) all consumers to pay higher prices (lowering welfare) but have the “product variety” provided by hypothetical, post-break-up Amazons 1, 2 and 3? What would be the point of that?)
My overall impression was that the entire article was written with the conclusion “Amazon is bad” in mind.
For what it's worth a company that is valued at between 1.5 and 2 trillion usd has to come with evidence of how it isn't a monopoly/abusing its monopoly position, we can't reasonably talk about a "free market" when those numbers are involved.
I'm not an economist and I'm not good with remembering names, but I do seem to remember that there was more than one economist in the past who said that one of the few ways of getting/acquiring "value" is to reach a monopoly position. $1.5 trillion is a hell lot of value.
There is no good evidence I'm aware of which suggests that Amazon is a monopoly or anything like one in any market I'm aware of: certainly not in retail to consumers, nor in AWS (to pick a frequent target of criticism that I see on this site). If you have evidence which suggests Amazon is a monopolist in some market it competes in, please cite it.
Amazon is large because it is successful. It is successful because it generally offers products cheaply and delivers them quickly. Period.
That is exactly the case that you do not want antitrust law to punish. Antitrust should preserve competition while not punishing successful firms.
It is indeed true that one way to become valuable is to acquire a monopoly position in a market. That is not the only way. And it is not the way that Amazon has become such a valuable company.
If we were to try to define Amazon's market, there's no reasonable definition you could come up with in which Amazon holds more than a 40% market share (https://www.ben-evans.com/benedictevans/2020/10/31/market-de...).
> Amazon has well over half of US book sales, and probably three quarters of ebook sales. So if we’re arguing about how Amazon runs its books business, it unquestionably has market dominance. You have to pull out a segment, not the whole company.
To speak more generally, my understanding is that arguments that Amazon is a monopolist are stronger when we focus on Amazon Marketplace than on (say) AWS, partly because there are many "segments" in which almost all products are sold through Amazon. But I wish that I had more data about this particular claim.
Notwithstanding that, I think the general point is that this is a vertical acquisition completely unrelated to that market, in which Amazon has nowhere close to that kind of market share.
Keep in mind that nobody here is arguing that we ought to have a free-for-all in acquisitions and do away with the FTC entirely. It's just that the FTC doesn't operate off of knee-jerk reactions to absolute dollar amount market valuations. Instead, the level of analysis is one that's more in line with what the GP commenter has been arguing.
I'm curious how this could possibly turn out to be anything but anti-consumer.
I'm sure that in general and in the past there can be and have been welfare-improving vertical mergers. But this particular one seems questionable.
> What job do you want the FTC to do here?
I would like them to carefully and thoroughly evaluate the welfare effects of this merger, and block the merger if it's not obviously welfare-improving, and not in the Kaldor-Hicks sense.
Again... why? The easiest vertical merger cases I teach to undergrads are welfare-improving. I don't see any reason to think that this one is anti-consumer. What do you think will go wrong here?
> I would like them to carefully and thoroughly evaluate the welfare effects of this merger,
They will b/c that's what they do. The OP to whom I was replying suggested that the FTC had "failed" us somehow. I would not expect the FTC to find any grounds to block this acquisition, though I could be wrong.
That probably would happen, by way of more MGM properties becoming available and costing less on the Amazon streaming platform. My concern is that "welfare of consumers who use Amazon to stream MGM movies" is not a useful proxy for "overall effect on society".
Moreover, Amazon is already vertically integrated. They are already a movie and TV studio. They already own and produce a lot of their own content.
What is the broader effect on the market? Will this snowball into further acquisitions that don't benefit consumers later? None of that is covered by the textbook model.
Unless there's serious research that corroborates the textbook outcome in a "realistic" (messy) scenario like this, I can't set my prior to anything but "extremely pessimistic."
Not saying you're lying (I am out of my depth here, for once), but your post reminds of this piece on noahpinion.substack.com, "Experts will lie to you": https://archive.is/ErWwa
An MGM buy just further buys into the practice
Thanks. You can read this material for yourself in any undergraduate industrial organization textbook!
The root of the problem is that all of these platforms users are harmed by the siloed nature of the industry, in more or less the same ways. A better solution for the customer would be something akin to the way licensing works in the music industry. Let everyone host everything, charge what they will, and pay fixed royalties out of their income.
I'm not an economist, lawyer, musician or whatever. I'm just a very disgruntled consumer that's seen the potential of the streaming industry get destroyed by greed and overpaid lawyers. There are many shows and movies that are, for no good reasons, only available on aftermarket listings for old vhs, and sometimes dvd. Finding these alternatively is even difficult.
Companies could be working on UX, social functions, or recommendation algorithms but instead they're lighting money on fire to license a revolving pile of meh that'll juice their subscribers enough to hit their quarterly metrics. I'm entirely disinterested in googling where to stream every show and movie and pay between mandatory ads, and North of $5/episode to watch a show on whichever provider has the rights to stream it. It's such a poor experience that I've returned to a personal media library and have opted out of the streaming industry entirely.
Completely off-topic - is there a term for such 'approximate' idioms? I sometimes can't quite remember the exact words in a turn of phrase - my mind goes blank and I substitute words with similar meaning. The more familiar phrase to parent is "Disney is circling their wagons"
Nice catch!
> If your prediction is that this will result in a welfare loss to consumers I would ask that you offer some evidence.
You are going to need to bring some evidence to support that notion, it's not on average people to prove that your merger isn't going to cause harm. Thankfully the Borkist era is very quickly coming to its end.
Consolidation should be blocked by default once companies reach a certain size. In order to proceed they should have to substantially prove that both consumers and labor are not going to be harmed by the merger. Any other arrangement results in speculative handwaving by lawyers and economists, and the supposed benefits almost never materialize, except for shareholders.
> Most of the hate Amazon gets on this site for being a “monopoly” is extremely wide of the mark.
What nonsense. Amazon has consistently used their platform anti-competitively to take over valuable product lines. They keep expanding into unrelated verticals in violation of federal law, and they are committing substantial, transnational labor abuses. Use whatever term you want to describe it.
What does it mean to be "pro-consumer"? You can't reasonably use that metric to decide antitrust cases if you aren't directly querying consumers on whether they want the company to be broken up or not. When the FTC decides what is or isn't pro-consumer, that's the same as me claiming that I know how you're going to vote on issue X, and then claiming that you're "voting against your interests" when you vote the opposite way.
Anyway, there's another lens besides consumer welfare and monopoly here: diversity provides protection against the unforeseen, as well as an increased rate of innovation. We see this in natural selection where species routinely go extinct and, on the occasion, whole classes of animals are wiped off the planet but life as a whole continues because of the diversity before any event.
When we accept high concentration in our economy, we lose the safeguards that come with diversity. With enough concentration the unforeseen events become actual existential threats. I'm not going to claim we're there yet -- if Amazon failed we still have Walmart, and Azure, etc -- but I didn't see anything in your viewpoint that protects against a future where some things become "too big to fail".
tl;dr diversity is a desirable property of most systems, and an antitrust framework should consider it.
I judge these things on the potential for harm to consumers. I don’t see that here. Perhaps you do.
Do you see this leading to increased prices or a reduction in quantity consumed? (And of what, btw?) That’s how we make these judgments so if it’s obvious to you, let’s talk.
Who else is it about? If any sort of investigation is to be brought into it, the main investigation would be on behalf of consumers right?
> "single-handedly makes up 4% of the US economy"
Correction: 4% of the US stock market, not the US economy.
Regardless, is your argument that any company that is at a certain threshold % of the US economy/stock market should not do acquisitions or expand their business?
Economists do get it wrong. If you think this will reduce consumer welfare (which is one of the standards used to judge mergers), tell me how.
I see no reason to block the merger on the grounds that Amazon is a trillion dollar company, rather than a 900 or 800 or whatever billion dollar company.
Amazon is not 4% of the US economy, btw.
We’re way past that at this point. Amazon is closer to a level of government than traditional company. They are already under multiple antitrust investigations in multiple countries and jurisdictions so it’s nuts for you to go all pikachu face on the comment that they may be guilty of such.
The amount of power Amazon has over media, retail and internet is unparalleled and is a threat to a well regulated democracy. Their second HQ is going in DC metro for a reason.
IMO Amazon should be split into a dozen companies. Would that be good for consumers on day 1? No. But it would create a better market over time just as when the megacorps of the past have been split up.
I'm not sure what this could possibly mean.
> is a threat to a well regulated democracy
Ok - tell me how. Is Jeff Bezos going to... buy the Presidency? A Senate seat? Or... ? I really don't see what you have in mind.
> IMO Amazon should be split into a dozen companies.
You can do this if you want. You could split AWS from the retail operation, I guess. I wouldn't expect any outcome for consumers to be better. If you have a different idea, tell me what outcome and why you think it gets better.
And probably you don't want this, b just like w/ Standard Oil this would likely have the effect of making Jeff Bezos richer.
Amazon is already under antitrust charges in the EU and under investigation for antitrust in the US, stop ignoring that fact.
I'm trying to understand what you meant when you said that Amazon is a threat to democracy. That is a very strong claim. What exactly do you mean and what is your evidence for it?
> stop ignoring that fact
I'm not ignoring the fact that there is criticism of Amazon and that it is being investigated. I'm expressing an opinion on the basis of professional expertise: I do not see Amazon as a monopolist in general, nor do I see any particular concern from this acquisition.
I don't subscribe to any Amazon-owned media. I consume tons of media practically every day. If Amazon was a monopoly in media, shouldn't it be near impossible for me to get non-Amazon owned media?
I've purchased maybe a dozen items from Amazon in the last few years. It makes up <1% of my retail spending. If they were a monopoly in retail, shouldn't it be hard for me shop at any other retail space?
I somehow manage to host tons of applications both professionally and personally. I only really use S3 and Amazon DNS, and that's in only a few limited places and could be easily replaced. If Amazon was a monopoly in internet services, shouldn't I pretty much be forced to use them for something?
I don't even have to try and I can avoid them for my own usages, both professionally and personally.
Why does Amazon buying MGM and getting some exclusive MGM content harm consumers?
That's not a law.
There are a lot of examples of more competitive markets harming consumers - the trick is regulating the products and the relationship between producer and consumer.
If this is your objection: "It is a bad thing for the consumer because it means more exclusive titles which is gives rise to a false market. It looks like consumers have a choice of platforms with content, but when that content is exclusive the consumer ends up having to pay for all the platforms to see the content they want to see. This in effect means more costs for the consumer and less choice."
Then wouldn't consolidating existing exclusive content mean consumers pay for less platforms?
This is a vertical merger. Vertical mergers are quite different in their welfare effects to consumers than horizontal mergers. Vertical mergers can frequently be welfare-improving to consumers.
Indeed, this is why vertical mergers are harder to regulate than horizontal mergers. The welfare effects are not obvious ex ante. This has a decent chance to be pro-consumer. I don’t see any reason for the FTC to object to this on antitrust grounds.
Most of the hate Amazon gets on this site for being a “monopoly” is extremely wide of the mark. If your prediction is that this will result in a welfare loss to consumers I would ask that you offer some evidence.