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As just about everyone knows, the suits in Washington D.C. have it out for Big Tech these days. Listen to the cocktail conversations about antitrust reform. Or watch the marches into courtrooms where the main objective is to break ’em up. And now read the executive order being signed on Friday by President Joe Biden, determined to undercut these behemoths and shift power from corporate gatekeepers to American workers. Then again, one $235 billion company stands to benefit from Biden’s move — a tech giant that’s convinced everyone it’s not really a tech giant, the member of FAANG never invited to those grill sessions on Capitol Hill where lawmakers use tech executives as hamburger patties. Just how did Netflix get so lucky?
Netflix is far and away the leader in streaming these days. It’s also the star that everyone in the entertainment business with a telescope has been watching with envy. The last few years have brought one nascent streaming service after another. Except to succeed, Hollywood studios have convinced themselves they need scale. And so, we see both vertical integration as well as horizontal consolidation.
Now, through his executive order, Biden is directing federal agencies to get tougher on proposed mergers. Very solid and wise reasons exist for more vigorously blocking and even unwinding mergers. Nevertheless, one has to ask: What might be a side effect of putting up more formidable hurdles to large-scale transactions in the entertainment space?
Arguably (and yes, these arguments are almost certain to be raised in future legal challenges to blocked mergers), Netflix’s position as top dog becomes more entrenched. If the FTC takes Biden’s tip and pulls back on Trump-era guidelines for vertical mergers, that could hurt Amazon’s prospect for acquiring MGM and transforming its Prime service into Netflix’s toughest competitor. (Not that FTC chair Lina Khan needs any more reasons to stick it to Amazon.) And if the DOJ begins scrutinizing proposed mergers for how they impact labor markets, that could hold ramifications for WarnerMedia-Discovery or any other future tie-up that could threaten Netflix’s ability to win the streaming wars.
Netflix’s hardly going to mind if others find it more difficult to combine forces, and the good news for the company from Biden’s executive order hardly stops there.
For years, Netflix has been poaching top executive talent from its rivals. So much so that big studios including Fox and Viacom have hauled the streamer into court for tortiously interfering with contracts. In response, Netflix has argued that these employment deals are void under a California law that frowns upon non-compete provisions. Netflix hasn’t been successful thus far thanks to the judicial conclusion that there’s nothing illegal about a fixed-term contract so long as the non-compete doesn’t extend beyond termination. That conclusion is on appeal.
Now comes news that Biden is taking aim at non-competes. It remains to be seen if the FTC really is empowered to bar the types of contractual provisions that impede workers from switching jobs, but the development still amounts to wind behind Netflix’s sails. Plus, who knows? As Netflix continues to aggressively grow itself through recruitment, perhaps Netflix will have better luck with Biden-era federal agencies than it’s had with California courts.
Still not convinced that the Biden order is very Netflix-friendly?
Well, consider how Biden is urging the FCC to reinstate Obama-era net neutrality rules. Remember this used to be a huge policy priority for the bandwidth hog that is Netflix, and while the streamer has been a lot less vocal in recent years at the prospect of telecoms throttling its traffic, it surely still sees the development as a positive. Plus, should Biden eventually get around to nominating a third FCC commissioner, there’s always the possibility that the independent agency enacts net neutrality rules that favor Netflix by being even tougher than the set that came before. For instance, banning interconnection charges or stopping telecom data providers like AT&T and Comcast from “zero rating” owned content.
To be sure, not everything in Biden’s order will be advantageous to Netflix. For instance, the White House is encouraging the FTC to establish rules on data surveillance. The streamer, which famously collects a lot of data from users and has been a pioneer on the algorithmic programming front, will need to carefully navigate any future regulations on ensuring the privacy and visibility of data.
But insofar as this executive order being hyped as Biden’s big move to take on Big Business, Netflix should gladly take it. Almost a decade ago, legal scholar Tim Wu wrote glowingly about Netflix’s audacious, radical plan for the future. Now that the Netflix era has arrived, as the Biden aide who is serving as the administration’s technology and competition point figure, he’s doing quite a lot to ensure it carries forward.
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