The Liberals’ Oligopoly Model Is Dying

Written by Gary North 

The banking industry is based on oligopoly. The political structure is based on oligopoly.

Now, because Internet bandwidth keeps getting cheaper, the oligopoly model is collapsing. Only in politics and education is the linear model still dominant. But it is clear that it is going to die in education. The Khan Academy is the wave of the future. So is the Ron Paul Curriculum. The bankruptcy of two private colleges last week is the canary in the coal mine of higher education. Sweet Briar and Tennessee Temple are closing their doors. This is the wave of the future.

TELEVISION IS THE MODEL

My wife and I have not watched live television in years. We will not watch television advertising under any circumstances.

We use a cable television service. We automatically record the shows that we like to see each week, and then we watch them the next day or later in the day, in the case of Sunday Morning. When the advertisements come on, either I or my wife speeds through them.

This is going to destroy the networks. Everything hinges on advertising revenue, and the advertisers do not know how many people are watching their ads. Only the late-night infomercials, which also run all day Sunday, are tied to response devices. The ad agency knows whether an ad is profitable. It can trace the response. It will kill an ad that does not work. Companies will not pay for ads that do not pull. They won’t waste money. But this is not true of most television advertising. The advertisers pay for ads that don’t work. But now they don’t have to. They can do an end run around blast ads — linear ads — that do not have response devices.

The latest data for fourth quarter in 2014 revealed that Americans are now watching less TV than ever before. The average family watched slightly less than five hours of live television a week. That is the only television watching that counts for advertisers. Any television watching that is done through TiVo or some similar technology undermines the model for commercial television. That is because people will not watch the advertising. I am not alone in my rejection of television advertising. Just press a button, and the ads race by. So do network revenues.

It is not just that people are not watching network television; they are not watching cable television, either. They are watching Netflix, Amazon Prime, and Hulu. They watch what they want to see when they want to see it. They are now in control of their time schedules.

Unrealistic reality TV shows do not make it onto Netflix or Amazon Prime. They are dropped down the memory hole. Nobody cares who wins the big race once it is over. The Biggest Loser is a big loser on Netflix. These shows are inexpensive to produce, and they have produced enormous net profits for the network television industry, but they do not gain residual income.

LIBERALS ARE LOSING CONTROL

The liberal intelligentsia has been in control of entertainment for 80 years. This control is now fading. Interactive viewing, such as games, undermines the model adopted by the liberal intelligentsia. They adopted one way broadcasting. It is called the linear programming. Today, this model is fading. It is going to continue to fade.

They also adopted an oligopoly model. They gained control of the Federal Communications Commission in the 1930’s, and they began using that control immediately. Liberals had immediate control of radio. This was extended to television after 1945. They had control over the movies, as well. They still maintain control of television, although radio has moved in the direction of talk radio, which is interactive. Here, liberals cannot compete. They had control of newspapers. That control is also fading. Newspapers are disappearing. Young adults do not read them.

Adults do not go to movies often. They are watching less cable television. They are watching less network television. They are reading fewer newspapers. Demographics are against liberals in all four media. This means that the future of liberals’ control over the media is being called into question.

Here is the universal rule of the Internet: bandwidth gets cheaper. In three words, the liberals’ control over American media is being challenged. As bandwidth gets cheaper, more producers can afford to enter the field of digital entertainment. This siphons off adults’ viewing time. Consumers can buy the kind of entertainment they want. They can pay for it on terms suitable to them. They are paying a monthly fee for Netflix. They are paying an annual fee of about $100 for Amazon Prime. They are paying for individual movies on Amazon. This undermines the business models of network television and cable television. Cable television rests on the idea that people will pay for packaged entertainment, 80% of which does not interest them at all. That model is fading fast. People won’t pay for it anymore.

Hollywood used to be built on a tight linear model. Prior to the mid-1960’s, people went to the movies to see a main feature. In order to see the main feature, they also had to put up with a secondary feature, called a B-movie. It was always in black and white. The movie theaters made their money on the sale of popcorn and drinks. So, the goal was to keep people in the movie theaters longer. Hollywood supplied an A-movie and a B-movie. In between was a newsreel. There was an intermission in between. During the intermission, people went to buy popcorn. The goal was to keep people in the theater for at least three hours, and preferably four hours. They would get hungry. They would buy popcorn.

This model began to get challenged sometime around 1965. Multiple screen theaters began, and B-movies disappeared. The goal now was to get lots of people to come lots of A-movies, but only one per ticket. They also watch the advertisements, which are strangely called trailers, even though they begin the movies. Today, theaters are actually selling regular advertising. The old model, which enabled Hollywood to make money from its studios by producing more movies, collapsed after 1965. The studios went bankrupt because overhead costs increased. They trained their technicians with the B-movies. They had lower-paid actors who performed in B-movies. These B-movies generated income. When the multiplexes came, the B-movies died. The old business model died with it.

Consumers’ tastes changed, and old models died. It is happening again. Because bandwidth keeps getting cheaper; old models are dying. When people get greater choice, they benefit, and the suppliers must adjust their models. This is what is happening today, and it is a knife at the throat of liberalism.

A generation ago, someone asked chess master Bobby Fischer what he liked most about chess. His answer was classic: “I love to see ‘em squirm.” I have exactly the same delight as I watch linear programming sink in the continuing storm cheaper bandwidth.