Time To Break Up the Band: Do the Digital Monopolists Need New Limits?

Jonathan Taplin has been at the center of the content-creation industry for most of the past five decades. And boy, is he mad at the mess that Google, Facebook and Amazon have made of music, books, film and television since they grew to unparalleled power in the economy.Taplin's entertainment industry credentials are immaculate. He was the road manager for Bob Dylan and The Band. He was a producer of Martin Scorsese's first film, as well as important documentaries such as "The Last Waltz" and "Cadillac Desert." In the 1980s, he worked with the billionaire Bass brothers to remake Disney, and hunt for other media deals. Then in the 1990s, he became a digital disruptor, launching Intertainer, one of the first video-on-demand services.After Intertainer, Taplin became head of the USC Annenberg Center for Innovation, where he is now emeritus director. And he just wrote a book: "Move Fast and Break Things: How Facebook, Google and Amazon Cornered Culture and Undermined Democracy." It is, of course, available on Amazon, because, as Taplin ruefully notes, Amazon controls 70 percent of online book sales.And that's just one example of a larger set of issues related to the market reach of Google, Facebook and Amazon, and their disastrous effects on the creative industries and culture at large, here in the wake of controversies over fake news, an advertiser boycott over placement next to terrorist videos, "attention pollution" and most recently, the Facebook Live killer.Now it's time, Taplin says, to consider limiting the power of the Big Three, updating aging antitrust laws. That update would recognize that digital monopolies powered by the multiplier power of network effects are different from industrial-age vertical integrations. What worked in limiting the power of Standard Oil and Ma Bell is less useful in the digital era, yet the influence and reach of the Big Three is incontrovertible, Taplin says.“I realized they were monopolies in the most classic sense,” Taplin said. “In any other business, those companies were subject to antitrust regulation. But the Internet was set up to be free of any regulation whatsoever, even from taxation.”That no-government-allowed mindset jibed with the libertarian politics of Facebook investor Peter Thiel, now a Trump tech advisor, and Google co-founder Larry Page, among other Internet leaders.The resulting hands-off approach has helped the Big Three build overwhelming market advantages. Google dominates the search market, for instance. In turn, it offers a wide range of free services that deliver to it vast amounts of user information that it uses to target ads back to those users more precisely and profitably.Facebook and its mobile subsidiaries (WhatsApp, Messenger, Instagram) do much the same with their collective massive share of internet social media and messaging traffic. Again, that information allows Facebook to create highly targeted and profitable advertising while financing its forays into other sectors."They don’t care about content at all," Taplin says. "Content to them is a commodity, whether it’s a Marty Scorsese short video or a cat video, they could not care less. All they want is to get you in there so they can scrape your data and sell it back to advertisers for a large premium."Amazon is somewhat different, using the deep data it collects to better target all the stuff it directly sells to its millions of users. But Amazon, like Google and Facebook, is aggressively moving into original content, competing directly with traditional Hollywood, as shown by its remarkable Emmy showcase this week of 10 of its original series.Analysts recently projected Amazon will spend $4.5 billion this year on content, and perhaps another $1 billion to market. That's just a small part of Amazon, which now has a market capitalization of about $430 billion, built largely through its online sales and cloud computing services. But that spending would be a big chunk of change in Hollywood. And that's the larger point. Market power in one area has allowed the Big Three to insert themselves into unrelated other areas with little real risk.Taplin differentiates how the Big Three work from that of the one company bigger than any of them, Apple.“Apple is in a very different business,” Taplin said. “Apple is not in the advertising or search businesses, so they feel no need to retain all your data to target you and get you to buy stuff. These three, they’re pushing it further into your home. What is the Amazon Echo (digital assistant)? It’s a surveillance device. It’s always on, listening.”That also inspired Taplin's term for the business practices that finance the Big Three: "Surveillance capitalism." By always watching and extracting data about their users, they can reap huge financial benefits.In response, Taplin suggests that regulators could approach the issue as they did with the original AT&T, which in the first three-fourths of the 20th Century controlled the U.S. telephone industry. As a condition for allowing its vast economic power as a regulated public utility, the company was required to license for free all the patents from its famously fecund Bell Labs to any U.S. company.That spurred a range of new tech companies in sectors such as transistors, solar cells and satellites, including Fairchild Semiconductor, Motorola, Nokia and Comsat, Taplin said. Eventually, even that arrangement ended, and the government embarked on a decades-long antitrust suit that finally broke up AT&T in the 1980s. Now, of course, AT&T is busy reassembling into its own market behemoth, buying DirecTV and trying to acquire Time Warner, but that will be a different book for somebody.The European Union has regulated American social-media and technology companies more closely than has their own country. Taplin blames that in part on endemic European suspicions of the intentions of any American company. But the European Union also recognizes the rights of creators ("droit d'auteur") and have done a better job avoiding “regulatory capture,” the peopling of industry-connected executives in key regulatory bodies.Don't expect significant regulatory changes anytime soon at the federal level. Congress and Trump just passed legislation allowing Internet companies to resell users’ web-browsing data.“As long as Peter Thiel is in White House, I can’t imagine they’ll do anything to hurt Facebook,” said Taplin. “Once again, this is going to have to start in Europe.”Taplin suggests that some states’ attorneys general may move to protect privacy, bring antitrust cases and pursue other issues.Taplin also would like to restrict the Big Three from any additional acquisitions, so they can't grow into new businesses or buy/choke off potential competitors, such as Snapchat.Will those nostrums make a difference? There's reason to be skeptical. But it's clear that the conversation has begun to shift, and new thinking is needed to deal with the 800-pound digital gorillas of our new Gilded Age. We've realized many benefits, but the festering controversies of recent months show that there are downsides too. It's time for that discussion.For more on my conversation with Taplin, check out the audio of my full discussion below:https://soundcloud.com/user-137159280/david-bloom-chats-with-annenberg-director-emeritus-jonathan-taplin