Forget AT&T. The Real Monopolies Are Google and Facebook.

["David Farber" <farber () gmail com>]

Begin forwarded message:

From: Dewayne Hendricks <dewayne () warpspeed com>
Subject: [Dewayne-Net] Forget AT&T. The Real Monopolies Are Google and Facebook.
Date: December 13, 2016 at 8:28:49 AM EST
To: Multiple recipients of Dewayne-Net <dewayne-net () warpspeed com>
Reply-To: dewayne-net () warpspeed com

Forget AT&T. The Real Monopolies Are Google and Facebook.
By JONATHAN TAPLIN
Dec 13 2016
<http://www.nytimes.com/2016/12/13/opinion/forget-att-the-real-monopolies-are-google-and-facebook.html>

The proposed merger of AT&T and Time Warner has drawn censure from both sides of the political aisle, as well as a 
Senate hearing that looked into the potential for the combined company to become a monopoly.

But if we are going to examine media monopolies, we should look first at Silicon Valley, not the fading phone business.

Mark Cuban, the internet entrepreneur, said at the meeting of the Senate Judiciary Antitrust Subcommittee last week 
that the truly dominant companies in media distribution these days were Facebook, Google, Apple and Amazon.

“Facebook is without question in a dominant position, if not the dominant position, for content delivery,” he said.

Look at the numbers. Alphabet (the parent company of Google) and Facebook are among the 10 largest companies in the 
world. Alphabet alone has a market capitalization of around $550 billion. AT&T and Time Warner combined would be about 
$300 billion.

Alphabet has an 83 percent share of the mobile search market in the United States and just under 63 percent of the US 
mobile phone operating systems market. AT&T has a 32 percent market share in mobile phones and 26 percent in pay TV. 
The combined AT&T-Time Warner will have $8 billion in cash but $171 billion of net debt, according to the research 
company MoffettNathanson. Compare that to Alphabet’s balance sheet, with total cash of $76 billion and total debt of 
about $3.94 billion.

In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook, 
according to Brian Nowak, an analyst with Morgan Stanley.

Google and Facebook can achieve huge net profit margins because they dominate the content made available on the web 
while making very little of it themselves. Instead, they both have built their advertising businesses as “free riders” 
on content made by others, some of it from Time Warner. The rise of these digital giants is directly connected to the 
fall of the creative industries of our country.

Every pirated music video or song posted on YouTube or Facebook robs the creators of income, and YouTube in particular 
is dominated by unlicensed content. Google’s YouTube has an over 55 percent market share in the streaming audio 
business and yet provides less than 11 percent of the streaming audio revenues to the content owners and creators. But 
Facebook, which refuses to enter into any licensing agreement on music or video, is challenging YouTube in the free 
online video and music world.

In the past decade, an enormous reallocation of revenue of perhaps $50 billion a year has taken place, with economic 
value moving from creators of content to owners of monopoly platforms.

I reached this conclusion from the following statistics: Since 2000, recorded music revenues in the United States have 
fallen to $7.2 billion per year from $19.8 billion. Home entertainment video revenue fell to $18 billion in 2014 from 
$24.2 billion in 2006. United States newspaper ad revenue fell to $23.6 billion in 2013 from $65.8 billion in 2000.

[snip]

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