James Pethokousis of AEI interviews me about the current miserable state of modern science fiction, which is just dripping with dystopian dread in every movie, show, and book plot. How does all the techno-apocalyptica affect societal and political attitudes about innovation broadly and emerging technologies in particular. Our discussion builds on my recent a recent Discourse article, “How Science Fiction Dystopianism Shapes the Debate over AI & Robotics.” [Pasted down below.] Swing on over to Jim’s “Faster, Please” newsletter and hear what Jim and I have to say. And, for a bonus question, Jim asked me is we doing a good job of inspiring kids to have a sense of wonder and to take risks. I have some serious concerns that we are falling short on that front.

How Science Fiction Dystopianism Shapes the Debate over AI & Robotics

[Originally ran on Discourse on July 26, 2022.]

George Jetson will be born this year. We don’t know the exact date of this fictional cartoon character’s birth, but thanks to some skillful Hanna-Barbera hermeneutics the consensus seems to be sometime in 2022.

In the same episode that we learn George’s approximate age, we’re also told the good news that his life expectancy in the future is 150 years old. It was one of the many ways The Jestons, though a cartoon for children, depicted a better future for humanity thanks to exciting innovations. Another was a helpful robot named Rosie, along with a host of other automated technologies—including a flying car—that made George and his family’s life easier.

Most fictional portrayals of technology today are not as optimistic as  The Jetsons, however. Indeed, public and political conceptions about artificial intelligence (AI) and robotics in particular are being strongly shaped by the relentless dystopianism of modern science fiction novels, movies and television shows. And we are worse off for it.

AI, machine learning, robotics and the power of computational science hold the potential to drive explosive economic growth and profoundly transform a diverse array of sectors, while providing humanity with countless technological improvements in medicine and healthcare, financial services, transportation, retail, agriculture, entertainment, energy, aviation, the automotive industry and many others. Indeed, these technologies are already deeply embedded in these and other industries and making a huge difference.

But that progress could be slowed and in many cases even halted if public policy is shaped by a precautionary-principle-based mindset that imposes heavy-handed regulation based on hypothetical worst-case scenarios. Unfortunately, the persistent dystopianism found in science fiction portrayals of AI and robotics conditions the ground for public policy debates, while also directing attention away from some of the more real and immediate issues surrounding these technologies.

Incessant Dystopianism Untethered from Reality

In his recent book Robots, Penn State business professor John Jordan observes how over the last century “science fiction set the boundaries of the conceptual playing field before the engineers did.” Pointing to the plethora of literature and film that depicts robots, he notes: “No technology has ever been so widely described and explored before its commercial introduction.” Not the internet, cell phones, atomic energy or any others.

Indeed, public conceptions of these technologies, and even the very vocabulary of the field, has been shaped heavily by sci-fi plots beginning a hundred years ago with the 1920 play  R.U.R. (Rossum’s Universal Robots), which gave us the term “robot,” and Fritz Lang’s 1927 silent film Metropolis, with its memorable Maschinenmensch, or “machine-human.” There has been a deep and rich imagination surrounding AI and robotics since then, but it has tended to be mostly negative and has grown more hostile over time.

The result has been a public and policy dialogue about AI and robotics that is focused on an endless parade of horribles about these technologies. Not surprisingly, popular culture also affects journalistic framings of AI and robotics. Headlines breathlessly scream of how “Robots May Shatter the Global Economic Order Within a Decade,” but only if we’re not dead already because… “If Robots Kill Us, It’s Because It’s Their Job.”

Dark depictions of AI and robotics are ever-present in popular modern sci-fi movies and television shows. A short list includes:  2001: A Space Odyssey, Avengers: Age of Ultron, Battlestar Galactica (both the 1978 original and the 2004 reboot), Black Mirror, Blade Runner, Ex Machina, Her, The Matrix, Robocop, The Stepford Wives, Terminator, Transcendence, Tron, WALL-E, Wargames and Westworld, among countless others. The least nefarious plots among these films and television shows rest on the idea that AI and robotics are going to drive us to a life of distraction, addiction or sloth. In more extreme cases, we’re warned about a future in which we are either going to be enslaved or destroyed by our new robotic or algorithmic overlords.

Don’t get me wrong; the movies and shows on the above list are some of my favorites.  2001 and Blade Runner are both in my top 5 all-time flicks, and the reboot of Battlestar is one of my favorite TV shows. The plots of all these movies and shows are terrifically entertaining and raise many interesting issues that make for fun discussions.

But they are not representative of reality. In fact, the vast majority of computer scientists and academic experts on AI and robotics agree that claims about machine “superintelligence” are wildly overplayed and that there is no possibility of machines gaining human-equivalent knowledge any time soon—or perhaps ever. “In any ranking of near-term worries about AI, superintelligence should be far down the list,” argues Melanie Mitchell, author of Artificial Intelligence: A Guide for Thinking Humans.

Contra the  Terminator-esque nightmares envisioned in so many sci-fi plots, MIT roboticist Rodney Brooks says that “fears of runaway AI systems either conquering humans or making them irrelevant aren’t even remotely well grounded.” John Jordan agrees, noting: “The fear and uncertainty generated by fictional representations far exceed human reactions to real robots, which are often reported to be ‘underwhelming.’”

The same is true for AI more generally. “A close inspection of AI reveals an embarrassing gap between actual progress by computer scientists working on AI and the futuristic visions they and others like to describe,” says Erik Larson, author of, The Myth of Artificial Intelligence: Why Computers Can’t Think the Way We Do. Larson refers to this extreme thinking about superintelligent AI as “technological kitsch,” or exaggerated sentimentality and melodrama that is untethered from reality. Yet, the public imagination remains captivated by tales of impending doom.

Seeding the Ground with Misery and Misguided Policy

But isn’t it all just harmless fun? After all, it’s just make believe. Moreover, can’t science fiction—no matter how full of techno-misery—help us think through morally weighty issues and potential ethical conundrums involving AI and robotics?

Yes and no. Titillating fiction has always had a cathartic element to it and helped us cope with the unknown and mysterious. Most historians believe it was Aristotle in his Poetics who first used the term katharsis when discussing how Greek tragedies helped the audience “through pity and fear effecting the proper purgation of these emotions.”

But are modern science fiction depictions of AI and robotics helping us cope with technological change, or instead just stoking a constant fear of it? Modern sci-fi isn’t so much purging negative emotion about the topic at hand as it is endlessly adding to the sense of dread surrounding these technologies. What are the societal and political ramifications of a cultural frame of reference that suggests an entire new class of computational technologies will undermine rather than enrich our human experiences and, possibly, our very existence?

The New Yorker’s Jill Lepore says we live in “A Golden Age for Dystopian Fiction,” but she worries that this body of work “cannot imagine a better future, and it doesn’t ask anyone to bother to make one.” She argues this “fiction of helplessness and hopelessness” instead “nurses grievances and indulges resentments” and that “[i]ts only admonition is: Despair more.” Lapore goes so far as to claim that, because “the radical pessimism of an unremitting dystopianism” has appeal to many on both the left and right, it “has itself contributed to the unravelling of the liberal state and the weakening of a commitment to political pluralism.”

I’m not sure dystopian fiction is driving the unravelling of pluralism, but Lapore is on to something when she notes how a fiction rooted in misery about the future will likely have political consequences at some point.

Techno-panic Thinking Shapes Policy Discussions

The ultimate question is whether public policy toward new AI and robotic technologies will be shaped by this hyperpessimistic thinking in the form of precautionary principle regulation, which essentially treats innovations as “guilty until proven innocent” and seeks to intentionally slow or retard their development.

If the extreme fears surrounding AI and robotics  do inspire precautionary controls—as they already have in the European Union—then we need to ask how the preservation of the technological status quo could undermine human well-being by denying society important new life-enriching and life-saving goods and services. Technological stasis does not provide a safer or healthier society, but instead holds back our collective ability to innovate, prosper and better our lives in meaningful ways.

Louis Anslow, curator of  Pessimists Archive calls this “the Black Mirror fallacy,” referencing the British television show that has enjoyed great success peddling tales of impending techno-disasters. Anslow defines the fallacy as follows: “When new technologies are treated as much more threatening and risky than old technologies with proven risks/harms. When technological progress is seen as a bigger threat than technological stagnation.”

Anslow’s Pessimists Archive collects real-world case studies of how moral panic and techno-panics have accompanied the introduction of new inventions throughout history. He notes, “Science fiction has conditioned us to be hypervigilant about avoiding dystopias born of technological acceleration and totally indifferent to avoiding dystopias born of technological stagnation.”

Techno-panics can have real-world consequences when they come to influence policymaking. Robert Atkinson, president of the Information Technology & Innovation Foundation (ITIF), has documented the many ways that “the social and political commentary [about AI] has been hype, bordering on urban myth, and even apocalyptic.” The more these attitudes and arguments come to shape policy considerations, the more likely it is precautionary principle-based recommendations will drive AI and robotics policy, preemptively limiting their potential. ITIF has published a report documenting “Ten Ways the Precautionary Principle Undermines Progress in Artificial Intelligence,” identifying how it will slow algorithmic advances in key sectors.

Similarly, in his important recent book Where Is My Flying Car ?, scientist J. Storrs Hall documents how “regulation clobbered the learning curve” for many important technologies in the U.S. over the last half century, especially nuclear, nanotech and advanced aviation. Society lost out on many important innovations due to endless bureaucratic delays, often thanks to opposition from special interests, anti-innovation activists, overzealous trial lawyers and a hostile media. Hall explained how this also sent a powerful signal to talented young people who might have been considering careers in those sectors. Why go into a field demonized by so many and where your creative abilities will be hamstrung by precautionary constraints?

Disincentivizing Talent

Hall argues that in those crucial sectors, this sort of mass talent migration “took our best and brightest away from improving our lives,” and he warns that those who still hope to make a career in such fields should be prepared to be “misconstrued and misrepresented by activists, demonized by ignorant journalists, and strangled by regulation.”

Is this what the future holds for AI and robotics? Hopefully not, and America continues to generate world-class talent on this front today in a diverse array of businesses and university programs. But if the waves of negativism about AI and robotics persist, we shouldn’t be surprised if it results in a talent shift away from building these technologies and toward fields that instead look to restrict them.

For example, Hall documents how, following the sudden shift in public attitudes surrounding nuclear power 50 years ago, “interests, and career prospects, in nuclear physics imploded” and “major discoveries stopped coming.” Meanwhile, enrollment in law schools and other soft sciences typically critical of technological innovation enjoyed greater success. Nobody writes any sci-fi stories about what a disaster that development has been for innovation in the energy sphere, even though it is now abundantly clear how precautionary principle policies have undermined environment goals and human welfare, with major geopolitical consequences for many nations.

If America loses the talent race on the AI front, it has ramifications for global competitive advantage going forward, especially as China races to catch up. In a world of global innovation arbitrage, talent and venture capital will flow to wherever it is treated most hospitably. Demonizing AI and robotics won’t help recruit or retain the next generation of talent and investors America needs to remain on top.

Flipping the Script

Some folks have had enough of the relentless pessimism surrounding technology and progress in modern science fiction and are trying to do something to reverse it. In a 2011  Wired essay decrying the dangers of “Innovation Starvation,” the acclaimed novelist Neal Stephenson decried the fact that “the techno-optimism of the Golden Age of [science fiction] has given way to fiction written in a generally darker, more skeptical and ambiguous tone.” While good science fiction, “supplies a plausible, fully thought-out picture of an alternate reality in which some sort of compelling innovation has taken place,” Stephenson said modern sci-fi was almost entirely focused on its potential downsides.

To help reverse this trend, Stephenson worked with the Center for Science and the Imagination at Arizona State University to launch Project Hieroglyph, an effort to support authors willing to take a more optimistic view of the future. It yielded a 2014 book, Hieroglyph: Stories and Visions for a Better Future that included almost 20 contributors. Later, in 2018, The Verge launched the “Better Worlds” project to support 10 writers of “stories that inspire hope” about innovation and the future. “Contemporary science fiction often feels fixated on a sort of pessimism that peers into the world of tomorrow and sees the apocalypse looming more often than not,” said Verge culture editor Laura Hudson when announcing the project.

Unfortunately, these efforts have not captured much public attention and that’s hardly surprising. “Pessimism has always been big box office,” says science writer Matt Ridley, primary because it really is more entertaining. Even though many of great sci-fi writers of the past, including Isaac Asimov, Arthur C. Clarke, and Robert Heinlein, wrote positively about technology, they ultimately had more success selling stories with darker themes. It’s just the nature of things more generally, from the best of Greek tragedy to Shakespeare and on down the line. There’s a reason they’re still rebooting Beowulf all these years later, after all.

So, There’s Star Trek and What Else?

While technological innovation will never enjoy the respect it deserves for being the driving force behind human progress, one can at least hope that more pop culture treatments of it might give it a fair shake. When I ask crowds of people to name a popular movie or television show that includes mostly positive depictions of technology, Star Trek is usually the first (and sometimes the only) thing people mention. It’s true that, on balance, technology was treated as a positive force in the original series, although “V’Ger”—a defunct space probe that attains a level of consciousness—was the prime antagonist in Star Trek: The Motion Picture. Later, Star Trek: The Next Generation gave us the always helpful android Data, but also created the lasting mental image of the Borg, a terrifying race of cyborgs hell-bent on assimilating everyone into their hive mind.

The Borg provided some of The Next Generation’s most thrilling moments, but also created a new cultural meme, with tech critics often worrying about how today’s humans are being assimilated into the hive mind of modern information systems. Philosopher Michael Sacasas even coined the term “the Borg Complex,” to refer to a supposed tendency “exhibited by writers and pundits who explicitly assert or implicitly assume that resistance to technology is futile.” After years of a friendly back-and-forth with Sacasas, I felt compelled to even wrap up my book Permissionless Innovation with a warning to other techno-optimists not to fall prey to this deterministic trap when defending technological change. Regardless of where one falls on that issue, the fact that Sacasas and I were having a serious philosophical discussion premised on a famous TV plotline serves as another indication of how much science fiction shapes public and intellectual debate over progress and innovation.

And, truth be told, some movies know how to excite the senses without resorting to dystopianism.  Interstellar and The Martian are two recent examples that come to mind. Interestingly, space exploration technologies themselves usually get a fair shake in many sci-fi plots, often only to be undermined by onboard Ais or androids, as occurred not only in 2001 with the eerie HAL 9000, but also Alien.

There are some positive (and sometimes humorous) depictions of robots as in  Robot & Frank, or touching ones as in Bicentennial Man. Beyond The Jetsons, other cartoons like Iron Giant and Big Hero 6 offer more kindly visions of robots. KITT, a super-intelligent robot car, was Michael Knight’s dependable ally in NBC’s Knight Rider. And R2-D2 is always a friendly helper throughout the Star Wars franchise. But generally speaking, modern sci-fi continues to churn out far more negativism about AI and robotics.

What If We Took It All Seriously?

So long as the public and political imagination is spellbound by machine machinations that dystopian sci-fi produces, we’ll be at risk of being stuck with absurd debates that have no meaningful solution other than “Stop the clock!” or “Ban it all!” Are we really being assimilated into the Borg hive mind, or just buying time until a coming robopocalypse grinds us into dust (or dinner)?

If there was a kernel of truth to any of this, then we should adopt some of the extreme solutions, Nick Bostrom of Oxford suggests in his writing on these issues. Those radical steps include worldwide surveillance and enforcement mechanisms for scientists and researchers developing algorithmic and robotic systems, as well as some sort of global censorship of information about these capabilities to ensure the technology is not used by bad actors.

To Bostrom’s great credit, he is at least willing to tell us how far he’d go. Most of today’s tech critics prefer to just spread a gospel of gloom and doom and suggest  something must be done, without getting into the ugly details about what a global control regime for computational science and robotic engineering looks like. We should reject such extremist hypothesizing and understand that silly sci-fi plots, bombastic headlines and kooky academic writing should not be our baseline for serious discussions about the governance of artificial intelligence and robotics.

At the same time, we absolutely should consider what downsides any technology poses for individuals and society. And, yes, some precautions will be needed of a regulatory nature. But most of the problems envisioned by sci-fi writers are not what we should be concerned with. There are far more specific and nuanced problems AI and robotics confronts us with today that deserve more serious consideration and governance steps. How to program safer drones and driverless cars, improve the accuracy of algorithmic medical and financial technologies, and ensure better transparency for government uses of AI are all more mundane but very important issues that require reasoned discussion and balanced solutions today. Dystopian thinking gives us no roadmap to get there other than extreme solutions.

Imagining a Better Future

The way forward here is neither to indulge in apocalyptic fantasies nor pollyannaish techno-optimism, but to approach these technologies with reasoned risk analysis, sensible industry best practices, educational efforts and other agile governance steps. In a forthcoming book on flexible governance strategies for AI and robotics, I outline how these and other strategies are already being formulated to address real-world challenges in fields as diverse as driverless cars, drones, machine learning in medicine and much more.

A wide variety of ethical frameworks, offered by professional associations, academic groups and others, already exists to “bake in” best practices and align AI design with widely shared goals and values while also “keeping humans in the loop” at critical stages of the design process to ensure that they can continue to guide and occasionally realign those values and best practices as needed.

When things do go wrong, many existing remedies are available, including a wide variety of common law solutions (torts, class actions, contract law, etc.), recall authority possessed by many regulatory agencies, and various consumer protection policies and other existing laws. Moreover, the most effective solution to technological problems usually lies in more innovation, not less. It is only through constant trial and error that humanity discovers better  and safer ways of satisfying important wants and needs.

These are complicated and nuanced issues that demand tailored and iterative governance responses. But this should not be done using inflexible, innovation-limiting mandates. Concerns about AI dangers deserve serious consideration and appropriate governance steps to ensure that these systems are beneficial to society. However, there is an equally compelling public interest in ensuring that AI innovations are developed and made widely available to help improve human well-being across many dimensions.

So, enjoy your next dopamine hit of sci-fi hysteria—I know I will, too. But don’t let that be your guide to the world that awaits us. Even if most sci-fi writers can’t imagine a better future, the rest of us can.

I’ve just released a new PFF white paper looking at the hysteria that has often accompanied major media mergers and then taking a look at the marketplace reality years after the fact.  Here‘s the PDF, but I have also pasted the entire thing down below.

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A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC

by Adam Thierer

Although the pending union of Comcast and NBC Universal has not yet made it to the altar, Chicken Little-esque wails about the marriage have already begun in earnest. For example, the pro-regulatory media organization Free Press has already set up a website to complain about the deal.[1] And Jeff Chester, executive director of the Center for Digital Democracy, has called it “an unholy marriage.”[2] The fever only promises to spread once the deal is formally announced, and a lengthy fight over the deal is expected at the Federal Communications Commission (FCC) and whichever antitrust agency reviews the deal.[3]

But reality tends to play out somewhat less dramatically than the script penned by the media worrywarts. It’s worth looking back at some of the more prominent examples of media merger hysteria in recent years to understand why such panic is unwarranted, and why a deal between Comcast and NBC Universal is unlikely to lead to the sort of problems that the pessimists suggest.[4]

AOL-Time Warner: From the “New Totalitarianism” to Digital Divorce Court in Less Than a Decade

When the mega-merger between media giant Time Warner and Internet superstar AOL was announced in early 2000, the marriage was greeted with a cacophony of righteous indignation and apocalyptic predictions.  When referring to the dangers of the deal, syndicated columnist Norman Solomon, a longtime associate of the media watch group Fairness & Accuracy In Reporting, summoned the ghost of Aldous Huxley when he and referred to the transaction in terms of “servitude,” “ministries of propaganda,” and “new totalitarianisms.”[5] Similarly, USC Professor of Communications Robert Scheer wondered if the merger represented “Big Brother” and claimed, “Diversity is out, niches are gone, it’s Skippy peanut butter time. AOL is the Levitown of the Internet, mom and apple pie, ‘50s boredom, conformity and dullness as a virtue: A Net nanny reigning in potentially restless souls.”[6]

Such pessimistic predictions proved wildly overblown. To say that the merger failed to create the sort of synergies (and profits) that were originally hoped for would be an epic understatement.[7] The titles of two popular books about the deal summed up the firm’s troubles: One was entitled Fools Rush In (by Nina Munk) and the other, There Must Be a Pony in Here Somewhere (by Kara Swisher and Lisa Dickey).[8]

The numbers were mind-boggling. By April 2002, just two years after the deal was struck, AOL-Time Warner had already reported a staggering $54 billion loss.^[9] By January 2003, losses had grown to $99 billion.^[10] By September 2003, Time Warner decided to drop AOL from its name altogether and the deal continued to slowly unravel from there.^[11] In a 2006 interview with the Wall Street Journal, Time Warner President Jeffrey Bewkes famously declared the death of “synergy” and went so far as to call synergy “bullsh*t”!^[12] In early 2008, Time Warner decided to shed AOL’s dial-up service^[13] and now is set to spin off AOL entirely.[14] Looking back at the deal, Fortune magazine senior editor at large Allan Sloan called it the “turkey of the decade”:

The day the deal was announced, Jan. 10, 2000, Time Warner closed at the equivalent of $184.50 a share. After almost 10 years of travail, the $184.50 has shrunk to about $42.25, consisting of one Time Warner share and a quarter of a Time Warner Cable share. The 77 percent decline is triple the decline in the Standard & Poor’s 500-stock index over the same period.[15]

And the Time Warner-AOL split wasn’t the end of this messy divorce process. In 2008, Time Warner Cable and Time Warner Entertainment decided to split.^[16] Time Warner has even spun off some of its oldest properties. In 2006, it announced that it was putting 18 of the 50 magazines in its Time magazine division up for sale.^[17]

As is always the case, these divestitures and down-sizing efforts garnered little attention compared with the hullaballoo and hysteria that accompanied the announcement of the deal back in 2000.^[18]

News Corp/DirecTV: Murdoch’s “Digital Death Star” Blows Up

No media industry personality attracts more attention (or angst) than News Corp. Chairman and CEO Rupert Murdoch. The popular leftist blog The Daily Kos has likened him to “a fascist Hitler antichrist.”[19] And CNN founder Ted Turner once compared the popularity of the News Corp.’s Fox News Channel to the rise of Adolf Hitler prior to World War II.^[20] Alternatively, Murdoch has been accused of being a Marxist.[21] Meanwhile, Karl Frisch, a Senior Fellow at Media Matters for America, speaks of Murdoch’s “evil empire”^[22] and a recent MSNBC poll has asked people to vote on the question: “Is Rupert Murdoch evil?”[23] In 2003, when asked by talk show host Chris Matthews, “Would you break up [News Corp.-owned] Fox?” then Democratic presidential candidate Howard Dean answered, “On ideological grounds, absolutely yes.”^[24] And in their book Our Media, Not Theirs, John Nichols and Robert McChesney took the Murdoch-as-evil-overlord storyline to its logical extreme when they suggested Hollywood was on to something by scripting a media tycoon like Murdoch as the bad guy in a James Bond movie: “No wonder conspiracy theories are so popular in America; no wonder, when the makers of James Bond movies look for believable villains these days, they eschew Eurotrash bad guys for more credibly threatening villains such as the Rupert Murdoch-like media baron of 1997’s Tomorrow Never Dies.”^[25]

These Murdochian fears came to a head in 2003 when News Corp. announced it was pursuing a takeover of satellite television operator DirecTV.  Paranoid predictions of a pending media apocalypse followed.  A group of regulatory activists filed joint comments to the FCC claiming that if News Corp. and DirecTV were allowed to merge, “the result will be unprecedented concentration within all aspects of the television marketplace, as well as increased prices for consumers of cable and satellite television.”[26] Similarly, then-FCC Commissioner Jonathan Adelstein worried that the deal would “result in unprecedented control over local and national media properties in one global media empire. Its shockwaves will undoubtedly recast our entire media landscape.” He continued; “With this unprecedented combination, News Corp. could be in a position to raise programming prices for consumers, harm competition in video programming and distribution markets nationwide, and decrease the diversity of media voices.”[27]

Not to be outdone, full-time media fussbudget Jeff Chester predicted that Murdoch would use this “Digital Death Star” as the base of a nefarious scheme to conquer the media universe:

Murdoch will use DirecTV as a ‘death star’ to force his programming on cable companies by threatening a price war unless they give Fox favorable access. Since News Corp will control cable TV’s principal multichannel competitor, it will easily create new channels—unlike anyone else in the TV business.  Rather than engage in open combat and competition, cable powerbrokers such as Comcast and AOL-Time Warner will likely accommodate Murdoch and add his new channels to their own services. Imagine Fox News on steroids. Worse, with DirecTV’s capacity to ‘spotbeam’ channels to serve distinct communities, localized versions of Fox programs could be available in major cities across the nation.[28]

Imagine the horror of new, “spotbeamed” local media competition!  However, unlike the destruction of the planet Alderaan by the Death Star in Star Wars,[29] no one was harmed in the making of the News Corp-DirecTV marriage.  Indeed, the rebels would get the best of Darth Murdoch since his “Digital Death Star” was abandoned just three years after construction.  In December 2006, News Corp. decided to divest the company to Liberty Media Corporation in an effort to win back more controlling News Corp. stock.^[30]

Ironically, many of the same groups that had vociferously protested the original News Corp-DirecTV deal again found reason to complain when the deal was being undone! The FCC’s failure to implement various restrictions as part of the license transfer, they claimed, would “result in continuing control by News Corp. over content distribution, harming competition in both the programming and distribution markets, reducing consumer choice and raising cable prices.”^[31] Unsurprisingly, little mention was made of the previous round of pessimistic predictions or whether there had ever been any merit to the lugubrious lamentations of the media critics.

Sirius-XM: “Merger to Monopoly” or Prelude to Bankruptcy?

Some of the most entertaining and wrong-headed predictions about the future of the media marketplace often come from media moguls themselves. For example, back in 2003, when he was still President and Chief Operating Officer of Viacom, Mel Karmazin said in reference to Microsoft, AOL Time Warner, and Comcast: “I can’t imagine being a competitor with any of these guys.”[32] Just six years later, however, plenty of others are competing with those companies. Microsoft finds itself in a heated war with Google on all fronts, AOL-Time Warner has fallen apart, and Comcast is squaring off against telco (e.g., Verizon’s FiOS and AT&T U-Verse) and online video competitors (e.g., YouTube, Hulu) that were unfathomable in 2003—not to mention the traditional satellite TV competitors they still face. Meanwhile, Karmazin abandoned Viacom and is now struggling to find a way to make subscription-based satellite radio survive the ongoing digital music bloodbath caused by the rise of online music services and a little thing called the iPod.

Of course, hysteria ran rampant when Sirius and XM were merging, too.  Critics called it a “merger to monopoly” and predicted a variety of coming calamities.[33] National Association of Broadcasters Vice President Dennis Wharton described the merger as a “monopoly platform for offensive programming” that would be “anti-consumer.”^[34] Mr. Wharton later remarked that the merged firms “will raise prices, won’t improve their technology and will limit their offerings.”^[35] A coalition of six non-profits claimed that the merger was “perhaps the worst offense against the basic principle that competition is the consumer’s best friend” and, if approved, “a tsunami of mergers could ripple through the digital space at the worst possible moment.”^[36] They predicted that “once the competition is eliminated, prices will rise over time,” “innovation will slow to the pace preferred by the monopolist and consumers will be much worse off in the long run.”^[37] Another coalition argued that the new company would “abuse consumers, artists and other input suppliers in the satellite radio market.”[38]

In the end, the merger took an astonishing 500-plus days for the FCC to finally approve[39] and was conditioned with a lengthy set of “voluntary concessions” to supposedly rectify these potential harms—including pricing constraints that could limit the firm’s ability to cover costs and pay down debt over time.

Unsurprisingly, things haven’t turned out so well for Sirius XM. When the merger was finally approved by the FCC in August 2008, Commissioner Copps dissented vigorously on various grounds but specifically insisted that, “We must assume that the marketplace can support two financially viable competitors.”[40] Unfortunately for Commissioner Copps—as well as Sirius XM—it’s not even clear that the market can sustain one satellite radio provider. The company’s stock went into freefall following completion of the deal and, at one point, its stock fell below 10 cents per share. The company flirted with bankruptcy in February of this year as “satellite radio failed to win over many younger listeners, and competition from other sources slowed subscriber growth.”[41] In March 2009, Karmazin orchestrated a cash-for-stock swap with Liberty Media to get a $530 million lifeline and avoid bankruptcy.[42] But even with the cash infusion Sirius XM faces an uncertain future with stiff competition.[43] “Sirius is girding for slower growth than in the past,” notes Olga Kharif of Business Week, “and analysts remain concerned about the company’s ability to control costs.”[44] Former stockbroker and RealMoney.com contributor Tim Melvin predicts the overleveraged company “will disappear from the landscape. The subscribers will go to another tech or entertainment company in bankruptcy proceedings. Subscription radio just does not have that much appeal to most people.”[45]

Whether Melvin’s dour forecast for satellite radio proves accurate remains to be seen. What’s clear, however, is that the fears bandied about by critics when the Sirius-XM deal was pending have not come to pass.

Murdoch’s Wall Street Journal Quest

In 2007, Rupert Murdoch announced his desire to purchase The Wall Street Journal.  Once again, a great deal of hand-wringing ensued. “This takeover is bad news for anyone who cares about quality journalism and a healthy democracy,” argued Robert McChesney. “Giving any single company—let alone one controlled by Rupert Murdoch—this much media power is unconscionable.”[46] And FCC Commissioner Copps warned that “It will create a single company with enormous influence over politics, art and culture across the nation and especially in the New York metropolitan area.”[47]

Today, however, the Journal keeps humming along and continues to produce some of the finest journalism on the planet. Meanwhile, “politics, art and culture” seem largely unaffected by the deal—either in New York or the nation.

And the deal certainly hasn’t made Murdoch or News Corp. any richer. “His purchase of The Wall Street Journal is widely seen as one of the worst moves of his career,” notes Michael Wolff of Vanity Fair.[48] News Corp. has already taken a whopping $3 billion write-down on the deal.  Considering the $5 billion price tag Murdoch paid two years ago, one wonders if he’ll hold on to this property any longer than he did DirecTV.

Comcast-NBC Universal: Debunking the Fears Preemptively

No doubt we’ll soon be hearing many of these same apocalyptic predictions about the Comcast-NBC deal. Free Press has said the new entity “will have an incentive to prioritize NBC shows over other local and independent voices and programs, making it even harder to find alternatives on the cable dial.”[49] And Free Press Executive Director Josh Silver has called for the Obama Administration to block the deal saying “it would further starve Americans of [media] diversity.”[50] Even competitors are complaining. Liberty Media Corp. Chairman John Malone, which owns DirecTV, has suggested that they might push the government to reject the deal.[51] Many other rivals will likely join that bandwagon.

These critics will likely raise vertical integration fears and claim that Comcast will act as a “gatekeeper” by limiting the ability of independent voices to get a slot on cable distribution systems, or by withholding NBC-Universal content from other platforms and providers. But there’s little historical evidence that suggests this will be a problem. As the adjoining exhibit illustrates, the overall number of video programming channels available in America has skyrocketed, from just 70 channels in 1990 to 565 channels in 2006, the last year for which the FCC has made data available.

More importantly—and despite claims to the contrary—vertical integration in the video marketplace has plummeted over the past two decades. While many more cable and satellite networks are available today than ever before, the greatest share of the growth in the multichannel video marketplace has come from independently owned video networks. Since 1990, the number of cable-owned or affiliated channels has increased slightly, but it pales in comparison with the growth of independently owned and operated video networks. In real terms, therefore, the percentage of the overall video marketplace controlled (i.e., owned and operated) by cable companies has plummeted—from 50% in 1990 to just 14.9% in 2006. Moreover, in the wake of the Time Warner Cable and Time Warner Entertainment divorce, vertical integration in the cable sector has probably fallen into the single digits. Even if the merger of Comcast and NBC-Universal results in slight increase in industry vertical integration, it almost certainly will not surpass 20 percent.  Consequently, as far as vertically integrated industries go, it is impossible to conclude that this market could be characterized as being controlled by “gatekeepers.”

It is difficult to imagine that Comcast would buck these trends and begin restricting independent options on its systems or withhold its content from others.  Video distributors don’t make money by restricting choice. Consumers would flock to alternative video providers and media services if Comcast played such games. The great thing about the modern media marketplace is that there is always another place for consumers to turn to find something they want.[52] Sports programming could be an exception to the rule, and is the one issue that Comcast may need to bargain over with FCC regulators or antitrust officials since they own regional sports networks that other video distributors want access to.^[53] But traditional concerns about access to over-the-air broadcast signals (namely, the NBC local broadcast television properties) shouldn’t be as much of an issue today as it was the past.  Frankly, local broadcasters need all the eyeballs they can get these days. Thus, it’s unlikely that Comcast would try to withhold those stations from other video distributors, especially since a great deal of NBC programming is already available through other means. And intense competition exists for some of the most important news and informational services that NBC offers, such as local news, weather, and traffic.

Overall, therefore, it’s hard to see the case for the FCC rejecting the deal. Regulators need to be forward-looking about what is driving this deal.  This deal isn’t about protecting old markets but instead about building new ones. “The real motivation behind this deal,” argues Mike Berkley, former CEO of SplashCast Media, “is survival.”

Comcast understands that the price point for distributing TV into homes is going to fall dramatically in the coming years. Comcast’s 3 distribution products, Voice – TV – Internet, are collapsing into just one, single product: Internet. This poses a huge threat to Comcast’s top line. As such, Comcast is hedging through diversification into content, moving up the media value chain. Comcast will be looking to replace lost revenue in distribution with revenue from content (advertising, subscriptions, etc).[54]

Similarly, Wall Street Journal business columnist Holman Jenkins points out that Comcast is scrambling to find a way to rework their business model as the era of set-top box-delivered video slowly gives way to a world of ubiquitously available online video:

This would be a merger, after all, of two businesses that seem headed toward some combination of the fates of newspapers, music CDs and the old wireline telephone business. Customers want the product for free. Comcast’s lifeblood, the $100-a-month cable bill and the $50-a-month broadband bill, increasingly look like duplicative expenses. And so on. True, the number of households that have actually dropped their cable subscriptions in favor of subsisting on TV streamed or downloaded from the Internet is not yet large. But for the Roberts family and its Comcast property, their worst fears lurk just around the corner—being reduced to a “dumb pipe,” subject to commodity pricing while somebody else (Google) makes all the money. Yet an escape route is vexingly hard to envision. Time Warner and Comcast have been talking up plans to make their respective cable lineups available by computer—as long as you keep paying your cable bill. This is a stopgap, especially appealing to anyone who owns two homes but wants to pay only one cable bill. Never mind, too, that hundreds of shows are already available online for free, via Web sites operated by none other than Comcast and the TV networks themselves.[55]

In light of such technological upheaval and marketplace uncertainty, it’s important that regulators proceed cautiously when reviewing this deal or future deals.

Conclusion: Let Markets Evolve

The point here is not that media mergers are inherently good or always make sense. Indeed, as the examples discussed above illustrate, mergers sometimes prove to be huge blunders.[56] But the hysteria sometimes heard before media mergers are consummated rarely bears any relationship to reality once the deals move forward. Media markets are extremely dynamic and prone to disruptive change and technological leap-frogging. Mergers are often one response to that turbulence.

But mergers are no panacea, and they often fail to produce the “synergies” hoped for. A 2004 survey by McKinsey & Co. found that “Nearly 70 percent of the mergers in our database failed to achieve the revenue synergies estimated by the acquirer’s management.”[57] Perhaps, therefore, the best argument for blocking media mergers is not their potentially pernicious effect on markets or consumers, but rather to save the merging firms (and their stockholders) from a miserable marriage!

On the other hand, experimenting with alternative business models and ownership structures is an important part of any dynamic market, because markets are not static but represent and ongoing processes of entrepreneurial “discovery.”[58] Thus, policymakers would be wise to avoid micro-managing mergers and instead let things run their course.  Sometimes collaboration makes a great deal of sense, especially when the significant costs of providing a media service becomes impossible absent a partnership. Indeed, federal officials and agencies are currently exploring how (or whether) journalism can survive an era of seeming perpetual media upheaval.[59] Healthy media companies certainly must be part of the answer and new ownership arrangements might be part of the solution.

Given how difficult it is to predict the future course of events in this chaotic sector, humility—not hubris—is the sensible disposition when it comes to media merger policy. At a minimum, policymakers should insist that ongoing debates are governed by facts instead of fanaticism, because, if the past decade is any guide, discussions about media mergers have been more often rooted in hyperbolic rhetoric and unsubstantiated hysteria.

[1] www.freepress.net/comcast

[2] Quoted in Cecilia Kang, Public Interest Groups Rail against a Comcast and NBC Merger, Washington Post, Post Tech Blog, Nov. 9, 2009, http://voices.washingtonpost.com/posttech/2009/11/for_example_were_advancing_tv.html

[3] “For regulators, a deal like this is a gift; an occasion to impose their will upon needy companies that would otherwise be outside their regulatory reach.” Craig Moffett, Bernstein Research, Comcast: Snatching Defeat from the Jaws of Victory? Oct. 23, 2009, at 14.

[4] Cecilia Kang, A New Kind of Company, A New Kind of Challenge for Feds, Washington Post, Nov. 26, 2009, at 1, www.washingtonpost.com/wp-dyn/content/article/2009/11/26/AR2009112602500.html

[5] Norman Soloman, AOL Time Warner: Calling The Faithful To Their Knees, Jan. 2000, www.fair.org/media-beat/000113.html

[6] Robert Scheer, Confessions of an E-Columnist, Jan. 14, 2000, Online Journalism Review, www.ojr.org/ojr/workplace/1017966109.php

[7] Looking back at the deal almost ten years later, AOL co-founder Steve Case said, “The synergy we hoped to have, the combination of two members of digital media, didn’t happen as we had planned.” Quoted in Thomas Heath, The Rising Titans of ’98: Where Are They Now?, Washington Post, Nov. 30, 2009, www.washingtonpost.com/wp-dyn/content/article/2009/11/29/AR2009112902385.html?sub=AR

[8] Nina Munk, Fools Rush In: Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner (New York: Harper Business, 2004); Kara Swisher and Lisa Dickey, There Must Be a Pony in Here Somewhere: The AOL Time Warner Debacle and the Quest for a Digital Future (New York: Crown Business, 2003).

[9] Frank Pellegrini, What AOL Time Warner’s $54 Billion Loss Means, April 25, 2002, Time Online, www.time.com/time/business/article/0,8599,233436,00.html

[10] Jim Hu, AOL Loses Ted Turner and $99 billion, CNet News.com, Jan. 30, 2004, http://news.cnet.com/AOL-loses-Ted-Turner-and-99-billion/2100-1023_3-982648.html

[11] Jim Hu, AOL Time Warner Drops AOL from Name, CNet News.com, Sept. 18, 2003, http://news.cnet.com/AOL-Time-Warner-drops-AOL-from-name/2100-1025_3-5078688.html

[12] Matthew Karnitschnig, After Years of Pushing Synergy, Time Warner Inc. Says Enough, Wall Street Journal, June 2, 2006, http://online.wsj.com/article/SB114921801650969574.html

[13] Geraldine Fabrikant, Time Warner Plans to Split Off AOL’s Dial-Up Service, New York Times, Feb. 7, 2008, www.nytimes.com/2008/02/07/business/07warner.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1209654030-ZpEGB/n3jS5TGHX63DONHg

[14] John Letzing, AOL, On The Verge Of Independence, Weighs On Parent, Wall Street Journal, Nov. 4, 2009, http://online.wsj.com/article/BT-CO-20091104-718782.html

[15] Allan Sloan, ‘Cash for . . .’ and the Year’s Other Clunkers, Washington Post, Nov. 17, 2009, www.washingtonpost.com/wp-dyn/content/article/2009/11/16/AR2009111603775.html

[16] Tim Arango, Time Warner Spinning Off Cable Unit, New York Times, April 30, 2008, www.nytimes.com/2008/04/30/business/30warner-web.html?ref=technology

[17] Carolyn Pritchard, Time Inc. to Sell 18 Magazine Titles, MarketWatch, Sept. 12, 2006,  www.marketwatch.com/News/Story/Story.aspx?guid=%7B94967C37%2D9B4A%2D4C1A%2D8AC0%2D64904C1267A1%7D&dist=rss&siteid=mktw&rss=1

[18] “Break-ups and divestitures do not generally get front-page treatment,” notes Ben Compaine, author of Who Owns the Media?  See Ben Compaine, Domination Fantasies, Reason, Jan. 2004, p. 28, www.reason.com/news/show/29001.html

[19] www.dailykos.com/story/2009/9/7/778254/-Rupert-Murdoch-is-a-Fascist-Hitler-Antichrist

[20] Jim Finkle, Turner Compares Fox’s Popularity to Hitler, Broadcasting & Cable, Jan. 25, 2005, www.broadcastingcable.com/CA499014.html

[21] Ian Douglas, Rupert Murdoch is a Marxist, Telegraph.Co.UK, Nov. 9, 2009,  http://blogs.telegraph.co.uk/technology/iandouglas/100004169/rupert-murdoch-is-a-marxist

[22] Karl Frisch, Fox Nation: The Seedy Underbelly of Rupert Murdoch’s Evil Empire? MediaMatters.org, June 2, 2009, http://mediamatters.org/columns/200906020036

[23] www.msnbc.msn.com/id/19817142/

[24] Dean Vows to ‘Break Up Giant Media Enterprises,’ The Drudge Report, Dec. 2, 2003, www.drudgereport.com/dean1.htm; Bill McConnell, Dean Threatens to Break Up Media Giants, Broadcasting & Cable, Dec. 3, 2003, www.broadcastingcable.com/index.asp?layout=articlePrint&articleID=CA339546.

[25] John Nichols and Robert W. McChesney, Our Media, Not Theirs: The Democratic Struggle against Corporate Media (New York: Seven Stories Press, 2002) at 31.

[26] Consumers Union, Consumer Federation of America, Center for Digital Democracy, and Media Access Project, Comments In the Matter of News Corporation/Fox Entertainment Group Merger with Hughes Electronics Corporation/DirecTV, MB Docket No. 03-124, July 1, 2003, www.consumersunion.org/pdf/0701-DirecTV.pdf

[27] Dissenting Statement of Commissioner Jonathan S. Adelstein, Re:  General Motors Corporation and Hughes Electronics Corporation, Transferors, and The News Corporation Limited, Transferee, MB Docket No. 03-124, Jan. 14, 2004, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-330A6.doc

[28] Jeff Chester, Rupert Murdoch’s Digital Death Star, AlterNet, May 20, 2003, www.alternet.org/story/15949

[29] Destruction of Alderaan, Wookieepedia: The Star Wars Wiki, http://starwars.wikia.com/wiki/Destruction_of_Alderaan

[30] News Corporation and Liberty Media Corporation Sign Share Exchange Agreement, News Corp Press Release, Dec. 22, 2006, www.newscorp.com/news/news_322.html.  A frustrated Murdoch referred to DirecTV as a “turd bird” just before he sold it off. See Jill Goldsmith, Murdoch Looks to Release Bird, Variety, Sept. 14, 2006, www.variety.com/article/VR1117950090.html?categoryid=1236&cs=1

[31] Consumers Union, Consumer Federation of America, Free Press, and Media Access Project, Comments In the Matter of Authority to Transfer Control of DirecTV, MB Docket No. 07-18, March 23, 2007, www.mediaaccess.org/file_download/177

[32] Richard Linnett, Media Rivals Backslap at Cable Conference, AdAge.com, June 10, 2003.

[33] Dissenting Statement of Commissioner Michael J. Copps, Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee, MB Docket No. 07-57, Aug. 5, 2008, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-08-178A3.pdf

[34] Dennis Wharton, National Association of Broadcasters, NAB Statement in Response to Sirius/XM Proposed Merger, Feb. 19, 2007, www.nab.org/AM/Template.cfm?Section=Search&template=/CM/HTMLDisplay.cfm&ContentID=8258.

[35] Peter Whoriskey and Kim Hart, Justice Dept. Approves XM-Sirius Radio Merger, The Washington Post, Mar. 25, 2008, www.washingtonpost.com/wp-dyn/content/article/2008/03/24/AR2008032401645.html.

[36] The XM-Sirius Merger: Monopoly or Competition from New Technologies: Hearing Before the Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, 3 & 6 (March 20, 2007) (statement of Common Cause et. al), www.hearusnow.org/fileadmin/sitecontent/2007_-_0320_Public_Interest_GroupsStatement-_Senate_Judiciary.pdf

[37] Id. at 6.

[38] Common Cause, Consumer Federation of America, Consumers Union, Free Press, Comments in the Matter of Consolidated Application for Authority To Transfer Control of XM Radio Inc. and Sirius Satellite Radio Inc., MB Docket No. 07-57July 9, 2007, at 1, www.hearusnow.org/fileadmin/sitecontent/xm-sirius_comments.pdf

[39] James Gattuso, Day 505: The XM-Sirius Circus Is Finally Over, Technology Liberation Front Blog, Aug. 7, 2008, http://techliberation.com/2008/08/07/day-505-the-xm-sirius-circus-is-finally-over

[40] Dissenting Statement of Commissioner Michael J. Copps, Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee, MB Docket No. 07-57, Aug. 5, 2008, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-08-178A3.pdf

[41] Andrew Ross Sorkin & Zachery Kouwe, Sirius XM Prepares for Possible Bankruptcy, New York Times, Feb. 10, 2009,  www.nytimes.com/2009/02/11/technology/companies/11radio.html

[42] Jon Birger, Mel Karmazin Fights to Rescue Sirius, Fortune.com, March 16, 2009, http://money.cnn.com/2009/03/13/technology/birger_sirius.fortune/index.htm

[43] Former stockbroker and RealMoney.com contributor Tim Melvin worries about the “significant competition for the company going forward” He notes:

Most of the younger people I know have iPod docks in their vehicles for listening to music. Smartphones are bringing music and podcasts to mobile consumers. E-reading machines have wireless connections that can eventually deliver content on a subscription or pay-per-use basis. I really do not need the sports channels from Sirius if I can watch and listen to the games I want on my phone. As time goes by, satellite radio will be viewed as a stepping-stone technology that was replaced by smartphones and other portable media devices.

Tim Melvin, Sirius’ Hopes Keep Slipping Away, The Street.com, Nov. 10, 2009, www.thestreet.com/story/10624757/1/sirius-hopes-keep-slipping-away.html?cm_ven=GOOGLEFI

[44] Olga Kharif, Sirius XM: The Good and Bad Earnings News, Business Week, Nov. 5, 2009, www.businessweek.com/technology/content/nov2009/tc2009115_002716.htm

[45] Melvin, supra 39.

[46] Robert McChesney, Murdoch’s Deal for the Journal: Yet Another Blow for Journalism, Free Press Press Release, July 30, 2007, www.freepress.net/release/260

[47] Michael Copps, Letter to FCC Chairman Kevin Martin, Oct. 25, 2007, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-277576A1.pdf

[48] Michael Wolff, Rupert to Internet: It’s War! Vanity Fair, Nov. 2009, at 112.

[49] www.freepress.net/comcast

[50] Josh Silver, Too Big to Block? Why Obama Must Stop the Comcast-NBC Merger, Huffington Post, Nov. 13, 2009, www.huffingtonpost.com/josh-silver/too-big-to-block-why-obam_b_356826.html

[51] www.forbes.com/feeds/afx/2009/11/19/afx7143505.html

[52] Adam Thierer and Grant Eskelsen, The Progress & Freedom Foundation, Media Metrics: The True State of the Modern Media Marketplace, Summer 2008, www.pff.org/mediametrics

[53] However, experience with regulation of sports programming suggests that FCC meddling has had negative unintended consequences.  See W. Kenneth Ferree, Competition in the Sports Programming Marketplace, Testimony before the Subcommittee on Telecommunications and the Internet, House Committee on Energy and Commerce, March 5, 2008, www.pff.org/issues-pubs/testimony/2008/030508ferreetestimony.pdf; Barbara Esbin, Unable to Watch the Big Game? Testimony before the National Conference of State Legislatures Communications, Financial Services and Interstate Commerce Committee, Apr. 25, 2008, www.pff.org/issues-pubs/testimony/2008/080425esbinNCSLpresentation.pdf

[54] Mike Berkley, The Comcast-NBC Deal is a Defensive Move by Comcast. It’s about Survival, TV News Stream, Nov. 16, 2009, http://tvnewsstream.com/the-comcast-nbc-deal-is-a-defensive-move-by-c

[55] Holman Jenkins, The Economics of Jay Leno, Wall Street Journal, Nov. 18, 2009, at A17, http://online.wsj.com/article/SB10001424052748704431804574541684183772504.html

[56] Chris O’Brien, Beware the Hype Around Mergers, MercuryNews.com, Nov. 12, 2009, www.mercurynews.com/chris-obrien/ci_13756963?nclick_check=1

[57] Scott A. Christofferson, Robert S. McNish & Diane L. Sias, Where Mergers Go Wrong, McKinsey on Finance, Winter 2004, at 2, http://westportcapital.com/library/McKinsey_Where_Mergers_Go_Wrong.pdf.  The authors noted that, “acquirers face an obvious challenge in coping with an acute lack of reliable information. They typically have little actual data about the target company, limited access to its managers, suppliers, channel partners, and customers, and insufficient experience to guide synergy estimation and benchmarks.”

[58] See, e.g., Israel M. Kirzner, Competition, Regulation, and the Market Process: An “Austrian” Perspective, Cato Institute Policy Analysis No. 18, 1982, www.cato.org/pubs/pas/pa018.html

[59] For example, congressional hearings have been held on this topic and the Federal Trade Commission is holding a workshop on December 1^st and 2^nd asking, “Will Journalism Survive the Internet Age?” www.ftc.gov/opp/workshops/news/index.shtml

My Kid is the Man of Steel! ... in his mind.

Regular readers will recall my great interest in video games and the public policy debates surrounding efforts to regulate “violent” games in particular. One thing I bring up in almost every essay I write on this subject is how fears about kids and video games are almost always overblown and that kids can typically separate fantasy from reality. Nonetheless, kids have active imaginations and adults sometimes fear that which they cannot understand or appreciate.  Friendly mentoring and open-minding parenting can go a long way to encouraging kids to make smart choices and understand where to draw lines, whereas efforts to demonize video games and youth culture almost always backfire.

Anyway, what got me thinking about all this again was an entertaining column in today’s Washington Post by Ron Stanley (“Who Needs a TV to Play Video Games“), which describes the author’s experiences with his nephew when they played out video game-like scenarios using traditional toys and household items. It’s a wonderful piece worth reading in its entirety, but here’s the key takeaway that I’d like to discuss:

There was no evidence that television and video games had stifled the kids’ creativity. Nor was there any evidence that technology had made them smarter than earlier generations. They simply had a different frame of reference, one that included video games and computers as well as ponies, pet stores and sword fights. Children play with the tools at hand, and they’re great at thinking metaphorically — at imagining that a landspeeder is a sentient robot or that a stick is a gun or that salt-and-pepper shakers are a bride and groom or that a card table is a horse’s stable. They’re also geniuses at figuring out simple mechanics. My 6-year-old nephew had to explain to me that miniature low-rider cars don’t roll very well on carpet and will flip over more than if racing on hardwood floors. Novice that I was, I was choosing cars that looked the coolest. And they are geniuses at intuiting rules and systems, and at re-creating these rules and systems in their own play. Children who play lots of card games will invent their own card games. Children who play lots of board games will invent their own board games. And children who play lots of video games will invent their own video-game-like games when they don’t have access to the game controllers.

What Stanley was discovering with his nephew is that (1) kids have rich imaginations and love play-acting and just being creative, and (2) video games have become part of the new narrative of adolescent play-acting and creativity. Kids adapt and learn to cope with new cultural and technological realities; often much quicker than their parents. More importantly, much of their play-acting, including that in which they play out “violent” scenarios, is an entirely natural part of childhood.

Henry Jenkins has done some brilliant work on this front, and the new book Grand Theft Childhood by Kutner and Olson is also essential reading in this regard [my lengthy review is here]. But the best thing every written on this subject is Killing Monsters: Why Children Need Fantasy, Super-Heroes, and Make-Believe Violence, by Gerald Jones. It is a masterpiece, and I wish every parent and policymaker in America could read it before they propose the regulation of video games. As Jones correctly notes, “Video games are most threatening to adults who have seen images of them but never tried to play them.” He continues:

One of the functions of stories and games is to help children rehearse for what they’ll be in later life. Anthropologists and psychologists who study play, however, have shown that there are many other functions as well–one of which is to enable children to pretend to be just what they know they’ll never be. Exploring, in a safe and controlled context, what is impossible or too dangerous or forbidden to them is a crucial tool in accepting the limits of reality. Playing with rage is a valuable way to reduce its power. Being evil and destructive in imagination is a vital compensation for the wildness we all have to surrender on our way to being good people.

And “playing with rage” is exactly what we old farts were doing as kids too when we played (politically incorrect) games like “Cowboys and Indians” or countless other games that involved toy guns, cap guns, slingshots, bows-and-arrows, and the like. Of course, my generation gradually traded in our BB guns and slingshots for digital equivalents as video games came on the scene. And that was probably a good thing since, as Ralphie’s mom always warned us, “You’ll shoot your eye out” with those things!)

Bottom line: Cultures and the nature of childhood play-acting fantasies may change, but what will never change is the fact that kids need their fantasies. This is why I get down on my knees every night with my two kids and “play monster” with them. I stuff pillows in my shirt and let them bop me good as my dog and I chase them around and try to put them in “the dungeon” (which is usually a laundry basket or cardboard box). The X-Mas season is always great because we have a ton of those left-over cardboard tubes from wrapping paper, which still make the best toy swords. The game typically ends after Dad gets tired of getting bopped and plays “dead” so that the kids can declare victory and return to their castle and go to bed. But lately we’ve been playing video games together that play out in similar ways. (Lego Star Wars and Little Big Planet are big hits in our house currently.)

In the end, it’s just a different sort of fantasy. And they need all of them to become well-functioning adults. As Judge Richard Posner argued in his tour-de-force opinion in the 2000 case of American Amusement Machine Association v. Kendrick:

“Self-defense, protection of others, dread of the ‘undead,’ fighting against overwhelming odds—these are all age-old themes of literature, and ones particularly appealing to the young.” … “To shield children right up to the age of 18 from exposure to violent descriptions and images would not only be quixotic, but deforming; it would leave them unequipped to cope with the world as we know it.” … “People are unlikely to become well-functioning, independent-minded adults and responsible citizens if they are raised in an intellectual bubble.”

Exactly. Why can’t others see this?

Incidentally, I should mention that I just bought my son his first set of boxing gloves and a punching bag for a Christmas present. I’m going to let him beat up the bag a little to give my belly and head a rest!

Today and tomorrow I am attending a terrific conference at Penn State University called, “Playing to Win: The Business and Social Frontiers of Videogames.” It features panel discussions about various legal and business issues facing the video game industry, as well as discussions about how video games are used to aid teaching and learning. There are also panels on multiplayer online worlds and virtual reality environments and the issues surrounding both. [They will apparently be posting videos from the conference on their site shortly.] The folks at PSU were kind enough to invite me to deliver the luncheon keynote on Day 1 and I decided to provide a broad overview of the policy issues facing video games that I have covered in some of my past work. My presentation was entitled, “Video Games, Ratings, Parental Controls, & Public Policy: Where Do We Stand?” and the entire 36-slide presentation is now available online here. Down below, I thought I would just outline a couple of the key themes I touched upon in my presentation.

ESRB: Strengths & Challenges

One of the things I did in my presentation was to provide a brief sketch of how the Entertainment Software Rating Board (ESRB), the game industry’s voluntary rating and labeling system, works. After doing so–again, you can download the entire presentation if you want those details–I outlined the strengths of the ESRB system, which I listed as follows:

Then I discussed some of the challenges facing the ESRB system…

General Thoughts on Ratings vs. Government Regulation

Later in the presentation, after walking through how various parental control tools worked, I talked about my general feelings regarding critiques of private rating systems and the ESRB in particular:

Future Issues & Controversies

I concluded by throwing out a few predictions about future issues and controversies that I think we will be debating in coming months and years.

I suppose I should provide some more details regarding this last slide since it will be of the most interest to many readers. Here’s some more explanation regarding each of my 7 predictions:

(1) Renewed push for universal media ratings: This issue has always been hanging out there and I think we will continue to hear calls–from both policy makers and media critics–for some sort of universal rating system for all media. God only knows how that would work. The last Star Wars movie (“Revenge of the Sith”) yielded several distinct media products: a major theatrical motion picture, a video game, a book, a comic book, and even a musical soundtrack. Should they all be rated the same way using the same system? I think that would be difficult to pull off. More worrisome is the fact that any move toward a universal rating scheme would undermine much of the education and awareness-building efforts that have helped familiarize consumers (especially parents) with the ESRB and other existing private rating and labeling systems. Finally, because it is unlikely we will ever see a voluntary movement by all major media producers to abandon their existing rating schemes and adopt a universal system, such a move would likely only come about because of action by government officials. Of course, that raises a host of First Amendment issues. For that reason, we might instead see a push for…

(2) Oversight of ESRB by Congress or non-profit / academic groups: Some critics say that the ESRB needs more “objective” oversight by either a regulatory agency or some of the third-party group, like an academic institution. As I point out in some of those slides above, ratings will ALWAYS have a subjective element to them since raters all bring different values and insights to the task of judging artistic expression. So making the rating process more bureaucratic isn’t going to make matters any better. Instead, it will just politicize the system and slow it down. [See my lengthy essay on this issue from a few weeks ago.]

(3) More FTC oversight of retailer enforcement: The Federal Trade Commission already conducts secret shopper surveys and issues an occasional report about the “Marketing of Violent Entertainment to Children.” Those reports has shown that retailer enforcement of the ESRB rating system is improving, but still needs to improve. [Here you will find my detailed thoughts on the conclusion of the last FTC report.] But there have been some calls in Congress for stepped-up FTC oversight, and potential penalties, for retailers who fail to enforce the system properly. (Remember Sen. Clinton’s “Family Entertainment Protection Act”?)

(4) Mandatory age verification for MMOGs & online activities: Here’s one to keep a close eye on. With a debate raging about the wisdom and effectiveness of age verification for social networking sites, it’s only a matter of time before online video games are brought into the discussion in a major way. The recent Bryon report in the UK included a discussion of this in the online gaming section of their final report. Stay tuned, this debate is set to explode here in the States.

(5) Mandatory parental controls defaults: One of my next white papers discusses the perils of government mandates that might force media & technology providers to not only embed parental controls in all their devices, but also turn them “ON” when they are shipped to market (meaning they would set to their most restrictive position as a defaults). For example, it could be required that every video game console be shipped with on-board screening technologies that were set to block any games rated above “E” (i.e., “Everyone”-rated games). Similarly, all personal computers or portable media devices sold to the public could be required to have filters embedded that were set to block all “objectionable” content, however defined. If “default” requirements such as this were mandated by law, parents would be forced to opt out of the restrictions by granting their children selective permission to content above a certain ESRB rating. In theory, this might help create another roadblock to underage access to some objectionable content, but it would also create an enormous consumer backlash and lead to a great deal of regulatory hassles and console hacking. Again, I’ve got an entire paper coming out on this issue from PFF next month that addresses my reservations with such a mandate.

(6) What happens when “AO” games hit consoles? I created some controversy recently when I noted that: “Whether any of us care to admit it, the fact that AO-rated games are currently kept off the major consoles and off the shelves at some major retailers (ex: Wal-Mart and Target) is probably the most important thing holding back a full-on legislative assault on video games.” Some took that to mean that I was advocating rigorous self-censorship of “AO” (Adults Only-rated) games. To the contrary, as I told MTV Multiplayer News, “I am in no way advocating that the industry hold off in terms of allowing complete creative expression.” And I also told MTV Multiplayer that I thought that eventually one of the major consoles–probably Sony–would cave and allow some AO-rated games on their platform. But make no doubt about it, when that happens, all hell is going to break loose. Not only with the typical pro-censorship crowd kick their complaint-generating factories into high gear, but a lot more average parents will protest the move and likely petition lawmakers for greater regulation of games or consoles.

(7) What about virtual reality games? And finally we come to virtual reality. All these other video game debates we have been having pale in comparison to the heated debate we can expect during the coming decade as virtual realities games and devices proliferate. And we all know they are coming. I fully expect that something like the Star Trek “holo-deck” will be in my living room by the time my kids are teenagers. We are already seeing more “tactile” devices coming to market, such as steering wheels and video game guns, that add a new layer of involvement to the games we play. Most recently, video game vests are hitting the market that simulate the sensation of being shot while playing a game. Once you combine these tactile technologies with more visually immersive visual display technologies, we will be well on our way to a serious VR world. And once they figure out a way to make it fully online and interactive, a huge policy debate is going to develop over the wisdom of letting people (especially kids) play holo-deck games where they actually feel like they are inside Halo or World of Warcraft, mowing down competitors with plasma rifles and broad swords. (Personally, I am very eager to try out “Resident Evil” this way!) Regardless, this debate is coming and it will be a very heated affair.