Oligopoly in the Media

We have antitrust laws because, usually, oligopoly is bad for the industry and society in general. During the last financial crisis, so many banks were too big to fail. Now, most likely, Boeing will be saved by tax money, even though we have not seen any real innovation from Boeing or Airbus for a very long time.

I’d like to take a look at the media concentration for the two biggest forms of media: TV and Digital, and OTT, which is booming at this moment.

Top 100 Websites in the US by Monthly Traffic
Top 100 TV Networks in the US by Viewership

It’s no surprise that digital media has a much higher concentration toward a very small number of players compared to TV networks. Most of the top websites use Google or Facebook to monetize their web traffic. In terms of the share of U.S. digital advertising revenue by company, Google + Facebook accounts for 60% of the total market ($130Bn in 2019).

Despite recent M&A activities, TV networks remain very fragmented. This is affecting their ability to unite and fight against digital media. OpenAP is a good initiative to bring together all TV networks. However, lots of uncertainty surround it.

OTT is a fairly new market. With all of the new apps coming to the market, I thought that it was very fragmented. I was shocked to learn that it is actually much more consolidated already.

Top 100 OTT Apps in the US by User Time Spent

The top 10 OTT apps account for about 80% of total time spent. This is almost two times higher than that of TV networks.

Share of Top 10 destinations by Media

Why is the OTT landscape not more fragmented? Early on, most of Netflix’s shows were syndicated. As a result, there should not have been a barrier to entry from a content point of view. I guess there are some barriers in terms of technology. However, I don’t think there is a noticeable difference in terms of the user experience among all major OTT apps.

One thing to notice is that most of the top OTT players (Netflix, YouTube, and Amazon) have other cash-flow-positive businesses (e.g., DVD and Search Ads) to support their tech and content development. Other TV networks had a good portfolio of content but treated Netflix like a distribution partner. Their investment in their own OTT platform was too little and too late.

I don’t need to emphasize the many advantages that monopoly companies enjoy. All digital advertising technology companies suffer from the duopoly of digital media. I predict that the media concentration will continue to increase in the next 5-10 years unless there are new regulations. This isn’t going to help a third-party measurement company.

Current antitrust law doesn’t count the global presence of these powerful companies. Many of them also form a strong product portfolio (e.g., Google) or build vertical integration (e.g., AT&T and Comcast). As long as their market share is not very high in one category, they are not going to be prosecuted for violating antitrust laws. 

I hope my prediction is wrong. However, the industry might need a paradigm shift (e.g., AR and VR) to regain its competitiveness.

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