FTC Chair Lina Khan on the 'Red Flags' in Hollywood's Market Structure
FTC Chair Lina Khan on the 'Red Flags' in Hollywood's Market Structure
Khan tells The Ankler 'by some basic metrics, there seems to be something broken in the market'
Hollywood journeymen are telling the Federal Trade Commission — the government entity that aims to protect the public from unfair business practices — that something is broken, and the agency is listening.
FTC chair Lina Khan, who recently spoke at a Writers Guild of America picket in New York outside of The View, sat down on Monday with The Ankler EIC Janice Min and editorial director Richard Rushfield for our podcast to discuss why her agency is keeping a watch on the evolving landscape in Hollywood, and where she sees warning signs.
WGA members have been vocal with the FTC about its thoughts on the changing structure of the entertainment industry as a result of the mergers and vertical integration of recent years, she says.
“The combination of this consolidation and vertical integration seems to have created a market structure where we hear about how writers and producers and showrunners are all making less, even as companies are charging customers more,” Khan told Min and Rushfield. “And critics seem to say that the quality of content being produced is actually in decline. So increasingly we see some of the red flags that suggest the market structure is not actually serving the creators or the ultimate viewers.”
She added: “You can always see how markets can either be structured to incentivize a race to the top or be structured to incentivize a race to the bottom. So sometimes when you see markets that have entered a bit of a doom loop, where everybody is doing a race to the bottom, that can be bad for everybody.”
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The concern over vertical integration — i.e. when different parts of the supply chain are merged, which in Hollywood’s case refers to studios and distributors becoming part of the same companies — dates back to the 1930s and 1940s.
“That big fight ended up resulting in what were known as the Paramount Consent Decrees,” explains Khan on the pod. “So this was a 1948 order by the government that required the breakup of the studios and distributors. We [later] saw something similar known as the financial interest and syndication rules. So this was applying a similar breakup in the context of the television industry.
And basically what this did was help create a much more open market. So through mid-century, we had thousands and thousands of independent movie theaters. We had multiple major studios. And so if you were a producer or a writer and you had a good idea and you wanted to sell it, you had lots of different viable paths to market. Overall, we think that created a healthier ecosystem than a situation where you have a handful of gatekeepers. So the only path to market is increasingly through one or a very small number of companies.”
And the growth of streaming services that do not share data “seems to have broken key signals in the market where before you used to have this feedback loop between publicly accountable metrics of what content was actually doing well and that then led to who was getting to be paid on an ongoing basis, be it through residuals or other things,” she added.
What’s happening in the entertainment industry isn’t unique to Hollywood.
“I think for us as the FTC, what's really notable is just how many analogs and parallels there are between what's happening in this industry and what we see across all sorts of other industries where again, we've seen consolidation, vertical integration, and the rise of dominant middlemen, intermediaries and gatekeepers that sometimes are not always serving the best interests of the customers or the producers that they're connecting,” she continued.
As the writers and actors strikes soldier on, Khan doesn’t want to “prejudge” anything ahead of the conclusion of the contract negotiations, but notes that “based on what we're hearing from writers, from actors, from others, it seems to be that some of these issues are stemming from market structure questions. And so unless those market structure questions are addressed, it seems like potentially some of these power imbalances will persist.”
Listen to Khan’s chat with Janice and Richard here at The Ankler, where you can also find a full transcript of the conversation, available to both free and paid subscribers. I’d love to hear your thoughts on this. Talk to me: elaine@theankler.com.
Today in Strike News
The WGA Strike Softball League — made up of six teams of writers, actors, stunt people and anyone else who wants to partake — has served as welcome diversion. “It’s a way to have everyone come together and give ourselves an hourlong break from worrying about covering bills,” says one of the team captains, Andrew Aroche, a WGA West diversity and inclusion coordinator. (Los Angeles Times)
Actors haven’t been able to promote their work at fan conventions, but many say that the restrictions have actually led to more “meaningful” interactions with their supporters at these events. “I have to say, I have had some of the most interesting panels because of that, because the fans have been asking us different kinds of questions,” Star Trek: Picard actress and SAG’s Los Angeles VP Michelle Hurd explains. “I was talking to Sonequa [Martin-Green] about this, and Anthony Rapp last weekend, and we feel like it’s more personable, we get more intimate.” (The Wrap)
Each picket line is working towards the same set of goals, but those who have been striking long enough are well aware of the differences between each location: Netflix is known as the more energetic and rowdy picket, Paramount is considered “friendly” and “relaxed,” while Disney is known for having the largest crowds and the most families. (Los Angeles Times)
Glendale’s Off the Leash Modern Pet Provisions and nonprofit Better Together are working together to provide for the animals affected by the strike, offering one free bag of pet food per month to select support staff and WGA and SAG-AFTRA members. (The Hollywood Reporter)
Wise guy and Focker aficionados alike were dealt a severe blow Wednesday, as the Tribeca Film Festival announced that “De Niro Con,” a celebration of festival co-founder Robert De Niro’s 80th birthday, is being postponed from late September to April of next year amid the work stoppage. (The Hollywood Reporter)
Picket Sign of the Day
I imagine this T-rex stopped by the Universal picket to check on Tree-gate.
Additional reporting on Today in Strike News by Matthew Frank.
Disclosure: Elaine Low is an inactive SAG-AFTRA member.
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