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Analysis: Why the WGA Opposes Comcast-NBC Universal Deal

In the past couple of days, both the WGA West and WGA East have weighed in against the Comcast-NBC Universal deal, which was greenlit earlier this week by the FCC on a 4-to-1 vote, albeit with a variety of conditions. In an exclusive interview with WGA East executive director Lowell Peterson, The Hollywood Reporter explored the reason for that union’s opposition.

THR also asked WGA West to elaborate, but the Los Angeles-based union declined. (The WGA is actually two separate unions, WGA West and WGA East. They negotiate some contracts together -- notably, the AMPTP agreement.)

Both unions, however, issued statements. The WGA East’s was extensive:

The Writers Guild of America, East is disappointed by the FCC’s approval of the joint venture between Comcast and NBC Universal. We consistently have opposed this action because entertainment and news media already are too consolidated; too few multinational mega-corporations control what people watch on television and in movie theaters. The Comcast/NBCU deal is particularly frightening because it brings together one of the largest internet service and cable TV providers with one of the largest content providers. Without strong and meaningful safeguards, the economics of the deal virtually mandate that Comcast/NBCU will discriminate in favor of its own content and leave writers and other independent members of the creative community out in the cold. This will impact not only entertainment programming but the diversity of news and public affairs voices so vital to a democracy.

We applaud Commissioner Copps for his opposition to the deal as approved. While we also appreciate that the FCC has conditioned its approval on a number of commitments made by Comcast and NBCU, with all due respect, we think these conditions simply make the venture a little less disastrous. Time will tell if writers and other creators will be squeezed out of the internet, and if a small handful of powerful entities continue to control what people watch.

The WGA West statement was shorter but also quite clear:

After a thorough review of yesterday’s announcements by the FCC and DOJ, the WGAW disagrees with their decisions approving the Comcast-NBCU merger. Even with the conditions placed on the merger by the FCC and the DOJ, we believe this merger is anti-competitive and is not in the public interest or the interests of our members. The WGAW remains committed to joining with other organizations and individuals to continue the fight for an open Internet, independent production, and diversity of voices in all media.

At the core of these statements is the WGA East’s concern that “Comcast/NBCU will ... leave writers and other independent members of the creative community out in the cold” and WGA West’s similar note that “this merger is ... is not in ... the interests of our members.”

In an interview, Peterson offered several explanations for the union’s criticism. With regard to writers who are also independent producers, he argued that “the net neutrality rules don’t prohibit paid prioritization” – a practice in which, for instance, an end user’s ISP might deliver faster video streams from some sites in exchange for a fee from the favored sites.

That potential practice makes the guild uneasy because it means that sites with deeper pockets – think YouTube, Netflix or Hulu – would be able to provide higher quality video to its users than would a startup company or independent producer. In other words, paid prioritization would tilt the playing field.

But is Peterson correct that the net neutrality rules – which the FCC adopted last month (and which Verizon challenged in a lawsuit filed Thursday) – don’t prohibit this approach to Internet bandwidth? The answer is murky. The key portion of the rules is one that provides that a broadband ISP (typically a telephone company or cable provider) “shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service.”

So does that rule prohibit paid prioritization? That’s where things get unclear. An FCC press release (PDF download), quoting from the rules, says “Pay for Priority Unlikely to Satisfy ‘No Unreasonable Discrimination’ Rule.” That has a surprisingly tentative ring to it.

In any case, the FCC notes that “pay for priority would represent a significant departure from historical and current practice . . . (that) could cause great harm to innovation and investment (and) . . . may particularly harm non-commercial end users.” One could add to that, of course, a concern for small commercial users as well – independent producers and startup websites.

The FCC adds that “broadband providers that sought to offer pay-for-priority services would have an incentive to limit the quality of service provided to non-prioritized traffic.” That gets to the crux of Peterson’s opposition to the Comcast deal: Comcast-NBC Universal, as both a content owner and broadband provider, could prioritize its own content. Even if the company’s content divisions have to pay a prioritization fee, that money would simply be paid to another Comcast division, which keeps the cash -- and the profits -- in-house.

In fact, the FCC rules address precisely those concerns: “The practice of a broadband Internet access service provider prioritizing its own content, applications, or services, or those of its affiliates, would raise the same significant concerns and would be subject to the same standards and considerations in evaluating reasonableness as third-party pay-for-priority arrangements.”

That cuts against Peterson’s declaration that “the net neutrality rules don’t prohibit paid prioritization.” Still, the FCC’s equivocal language – “In light of each of these concerns, as a general matter, it is unlikely that pay for priority would satisfy the ‘no unreasonable discrimination’ standard” – make the guild objections unsurprising.

FCC officials were not available for comment.

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Peterson also notes that the net neutrality rules don’t apply to mobile Internet access. That’s true, at least with respect to “No Unreasonable Discrimination” rule. Given the growing importance of mobile, the guild’s concern might seem understandable here too – except that Comcast’s mobile offerings are, at least as yet, quite limited.

Although the WGA East expresses concern for independent producers, it’s worth noting that the Independent Film & Television Alliance, which represents independent producers, supports the deal.

In a statement earlier this week, IFTA president-CEO Jean Prewitt said, “Despite our ongoing concern about the effects of industrywide consolidation, we are satisfied that the FCC and the DOJ have acted responsibly in their approval.” Among other things, Prewitt cited a four-year agreement between IFTA, Comcast and NBCU that provides for a variety of benefits for independent producers, including “a development fund devoted to independents.”

Under the contract, which was filed as part of the record, the fund amounts to $1.5 million per year. The fund is available only to IFTA members or other independent companies that are “financially able to deficit finance network-quality scripted series or longform programming” and meet other criteria. That would presumably exclude most WGA members.

What about WGA members who aren’t doing their own producing – how are they injured by the Comcast deal? Here, net neutrality is not in play, but media consolidation is. Peterson argues that consolidation that results in fewer buyers means that the “price writers can charge goes down.” He adds that the companies can dictate prices and that it becomes harder for writers to get their quotes.

Whether this is true for a merger between a content company (NBC Universal) and a company largely focused on carriage (Comcast) is probably something that economists could debate on both sides. However, Comcast does own cable networks E!, Style and G4, which produce about 10 shows that the WGA West is in fact trying to unionize.

Peterson also asserted that “more consolidation means more uniformity of content” (which would presumably limit opportunities for some writers). It’s not clear that he’s correct; after all, NBC Universal owns channels ranging from Bravo to Syfy to Telemundo, as well as stakes in A&E and others.

Not everyone in the Hollywood union world opposes the Comcast deal. For example DGA national executive director Jay Roth weighed in with a June 21, 2010, letter in which he cited “the issue of jobs maintenance and creation” and expressed satisfaction with “Comcast’s commitment to grow the industry, infuse new capital into the entertainment business and invest additional resources into programming, (and) support independent programming, including adding new independently owned and operated channels.” Although the letter doesn’t explicitly express support for the deal, the import seems clear.

Peterson also acknowledged a diversity of opinion within WGA East leadership, citing “robust discussions” among the guild’s governing council and officers, but he said there was ultimately a consensus on the Comcast deal. He also said that the deal “isn’t doomsday” and expressed hope that the guild’s fears would be wrong. But, he added, "we're very concerned, (and) we'll keep monitoring (the situation)."