Should Hulu Brace for Antitrust Action?

by on May 4, 2009 · 19 comments

As many outlets reported last week, Disney’s ABC Enterprises has bought into Hulu, which had been a joint-venture of NBC Universal, News Corp., and investor Providence Equity Partners.  Like other large media platforms before it, Hulu should brace for the possible antitrust implications of its increasing number of content deals—many of them exclusive, at least as it applies to online streaming video—especially considering the Obama’s administration’s stance on antitrust policy.

Many media commentators are already using the kind of language we associate with past media antitrust cases.  Nate Anderson of ArsTechnica predicted Hulu’s forthcoming “lock” on the market saying:

The Disney deal makes it far more plausible that Hulu—mocked when it launched only last year for its name and its business plan—will dominate online streaming of premium content.

Caroline McCarthy of CNET pointed out that the Disney deal has Hulu fraternizing with prior antitrust targets:

Apple CEO Steve Jobs is Disney’s single biggest shareholder, having sold animation studio Pixar to the company in 2006.

McCarthy makes an apt point as Hulu is looking more and more like the iTunes of television, an honor which Mr. Jobs likely hoped would have gone to iTunes itself.

This all makes for fertile ground for a Justice Department and FTC that are breaking with the prior administration’s antitrust policies.  As then candidate Obama declared last May in a Reuters story:

We’re going to have an antitrust division in the Justice Department that actually believes in antitrust law. We haven’t had that for the last seven, eight years.

The outlook looks especially bad for Hulu considering the Obama administration’s stance on competition policy for the media sector in particular.  In June of last year, then candidate Obama spoke with John Eggerton of Broadcasting & Cable about the direction he would take American antitrust policy:

Under current rules, the media market is dominated by a handful of firms. The ill effects of consolidation today and continued consolidation are well-documented—less diversity of opinion, less local news coverage, replication of the same stories across multiple outlets, and others. We can do better.

However, in the same interview, Mr. Obama gives us reason to believe that a FTC or DoJ under his guidance might not pursue such action against Hulu.  As part of his answer to a question on net neutrality, Mr. Obama said:

The Internet is a powerful, democratizing tool. There are very low entry barriers for the delivery of services over the Internet, and public debate is unfettered by either the network owner or any single dominant voice.

Even so, Hulu’s runaway success over the last year and its growing number of exclusivity agreeements mean that it could see some of the added scrutiny that Mr. Obama believes is necessary in the world of media.  Of course, there are thousands of arguments as to why an actual antitrust case would lack any real merit—the availability of media in other formats such as broadcast or DVD, the number of non-exclusive deals Hulu has signed, the low barriers to entry and low costs for others to offer similar streaming video services—yet these arguments have failed to impress judges and administrations in the past.

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