Consolidation Strategies Emerge For The Big 3 In Gaming: Nintendo Looks Like It Doesn't Want To Play

from the the-inside-game dept

We've been talking a bit about industry consolidation through mergers and acquisitions (M&As) in the video game industry as of late. The impetus for that discussion has been a series of high-profile acquisitions for several notable companies, namely Microsoft and Sony. Microsoft acquired Zenimax for $7 billion and Activision Blizzard King for a bonkers $69 billion recently, while Sony jumped into the game by acquiring Bungie for $3.6 billion. Of interest for these pages is the different approaches these companies have taken with these acquisitions. Microsoft hemmed and hawed about whether it would start building Microsoft exclusivity for products from its acquisitions, eventually landing on very much embracing exclusivity, while Sony took a much more hands-off approach and stated plainly that Bungie games would still be cross-platform. For those of us interested in digital and technology economies and business models, this is interesting stuff.

But there is a name missing here. The traditional "Big 3" in gaming has long been Microsoft, Sony, and Nintendo. Well, if you like real-world experiments when it comes to business strategies, this looks like it's going to get even more fascinating, as Nintendo is making noises about going an entirely different route.

While Xbox and Sony are entering an acquisition arms race, Nintendo isn’t so eager to snap up a slew of game studios. In a recent investors’ meeting, Nintendo president Shuntaro Furukawa was asked about acquiring game companies—a timely question, that’s for sure.

“Our brand was built upon products crafted with dedication by our employees, and having a large number of people who don’t possess Nintendo DNA in our group would not be a plus,” Furukawa replied, as reported by Bloomberg and Reuters.

Now, this shouldn't exactly come as a shock to anyone who knows the industry and how Nintendo operates. Whatever I might want to say in my series of posts about how "Nintendo hates you", the company has also built a successful business in the space that relies on first-party game titles and franchises compared with Sony and Microsoft. Whatever success those others have had, for instance, Microsoft and Sony simply don't have a version of the Super Mario Bros. franchise. Nintendo has several of these: Super Mario Bros., Zelda/Link, Star Fox, etc. So Nintendo has always been less reliant on 3rd party titles compared with its competitors.

But the open question is whether this more insular focus will work in the post-pandemic period where industry consolidation is not just for the video game industry, but for many others. The Harvard Business Review had a study released in 2021 that predicted what many others have as well: the mid- and post-pandemic economic space will be one that heavily incentivizes mergers and acquisitions. Consolidation is the order of the day/year.

So now we have three distinct strategies from the Big 3 of the video game industry: Microsoft will do M&As and try the exclusivity route, Sony will do M&As and be more open and permissive or cross-platform releases, and Nintendo will simply choose largely to not play this game at all.

At its core, Nintendo is not an enterprise built on corporate consolidation. It’s a company that makes hardware and games for said hardware. That is etched in its DNA.

And now we get to sit back and see how that works in a post-pandemic world.

Filed Under: consolidation, video games
Companies: microsoft, nintendo, sony

Moar Consolidation: Sony Acquires Bungie, But Appears To Be More Hands Off Than Microsoft

from the moar!!! dept

A couple of weeks back we asked the question: is the video game industry experiencing an age of hyper-consolidation? The answer to that increasingly looks to be "yes". That post was built off of a pair of Microsoft acquisitions of Zenimax for $7 billion and then a bonkers acquisition of Activision Blizzard King for roughly $69 billion. Whereas consolidations in industries are a somewhat regular thing, what caused my eyes to narrow was all of the confused communications coming out of Microsoft as to how the company would handle these properties when it came to exclusivity on Microsoft platforms. It all went from vague suggestions that the status quo would be the path forward to, eventually, the announcement that some (many?) titles would in fact be Microsoft exclusives.

So, back to my saying that consolidation does seem to be the order of the day: Sony recently announced it had acquired game studio Bungie for $3.6 billion.

Sony Interactive Entertainment today announced a deal to acquire Bungie for $3.6 billion, the latest in a string of big-ticket consolidation deals in the games industry.

After the deal closes, Bungie will be "an independent subsidiary" of SIE run by a board of directors consisting of current CEO and chairman Pete Parsons and the rest of the studio's current management team.

This is starkly different than the Microsoft acquisitions in a couple of ways. Chief among them is that Bungie will continue to operate with much more independence than those acquired by Microsoft. While Sony obviously wants to recoup its investment in Bungie, the focus there appears to be on continuing to make great games using existing IP, building new IP, and creating content for that IP that expands far beyond just the video game publishing space.

What does not appear to be part of the plan are PlayStation exclusives, as explicitly stated in this interview with both Sony Interactive Entertainment CEO Jim Ryan and Bungies' CEO Pete Parsons.

In an interview with GamesIndustry.biz, Sony Interactive Entertainment CEO Jim Ryan says that Destiny 2 and future Bungie games will continue to be published on other platforms, including rival consoles. The advantages Bungie offers Sony is in its ability to make huge, multiplatform, live-service online games, which is something the wider organisation is eager to learn from.

"The first thing to say unequivocally is that Bungie will stay an independent, multiplatform studio and publisher. Pete [Parsons, CEO] and I have spoken about many things over recent months, and this was one of the first, and actually easiest and most straightforward, conclusions we reached together. Everybody wants the extremely large Destiny 2 community, whatever platform they're on, to be able to continue to enjoy their Destiny 2 experiences. And that approach will apply to future Bungie releases. That is unequivocal."

That's about as firm a stance as you're going to get in this industry. And it is a welcome sign in a few ways. Primarily, Bungie fans will be pleased to know the acquisition doesn't mean they'll lose out on game releases if they don't own a PlayStation. But perhaps just as important is that this demonstrates another route big gaming companies can go with these acquisitions.

As I stated in previous posts on the Microsoft acquisitions: consolidation doesn't have to be a bad thing, but when it results in less customer choice, that's not great. That Sony is doing this differently is a good sign.

Filed Under: consolidation, video games
Companies: bungie studios, microsoft, sony

Are We Entering A Period In The Video Game Industry Of Hyper-Consolidation?

from the bigger-and-bigger-and-bigger dept

You will recall that we had several posts covering when Microsoft acquired Zenimax Media for $7 billion, as well as some of the potential fallout from that acquisition. Much of the focus was on what the purchase of Zenimax and its child studios, such as Bethesda, would mean for long-running game franchises from those studios going exclusive to PC and/or Xbox. Microsoft made a bunch of vague, lightly-conflicting statements on the topic before ripping the bandaid off by making the next Elder Scrolls game an Xbox/PC exclusive.

Most folks in the gaming community are either agnostic about exclusives, or decidedly hate them. There are very few cheerleaders for exclusives in other words, which is why most news about larger publishers acquiring small or mid-sized publishers is greeted with very narrow eyes.

That being said, there are acquisitions, and then there are acquisitions.

You might have heard the news: Microsoft has announced plans to acquire gaming behemoth Activision Blizzard King (ABK) and its subsidiary development studios. The deal is valued at $68.7 billion—or roughly 17 acquisitions of the Star Wars franchise—and that kind of money isn't spent without an expectation of major moves (and revenue) going forward.

From there, the ArsTechnica post digs into some predictions as to what those moves will be: more games going into Xbox's Game Pass, more mobile games spun out through the King studio, and, of course, the potential for franchises like World of Warcraft going exclusive. A good portion of the reaction to this deal being announced is focused on what titles will go exclusive.

But this deal is much, much bigger than that. It is the largest acquisition in the gaming space by Microsoft and the read on it in the financial space is that this is the real start to a much larger trend of consolidation in the industry.

“It’s going to start a major ripple effect in terms of consolidation for other videogame publishers,” said Wedbush Securities analyst Dan Ives.

Microsoft’s purchase of Activision will accelerate more deals in the industry, analysts said, as big tech companies seek to broaden their consumer offerings by acquiring game publishers and developers that attracted players during the pandemic. Microsoft’s purchase of Activision, which owns the Call of Duty, World of Warcraft and Candy Crush franchises, would also help the company edge into the streaming and metaverse spaces, they added.

Notably, once news of this deal broke, stocks for publishers like EA, Ubisoft, and Nintendo all rose significantly. That's the market buying this as a trend and trying to get out ahead of the eventual stock climb when future deals are announced.

So, what does this mean for the industry? It doesn't have to be bad, so long as these large acquisitions are backfilled by new entrants from smaller players. But there are a lot of ways for this consolidation to go wrong. Kotaku's writeup is a bit over the top for my taste, but there are some valid points to consider in there.

This is the future. There is zero chance that boardrooms everywhere from EA to Ubisoft to Sony aren’t going to be full this week with panicked executives talking about their options for something similar, because their only instinct will be to match this. To keep up, keep those share prices growing, until there are only 2-3 companies left at the top of the food chain, and things are just a little worse still for the rest of us. Because they know nothing else.

We're unlikely to reach a reality in which there are 3 parent gaming companies out there. If we did, yeah, that would be bad. Instead, I think the real danger in all of this could be the coordinated fragmentation of the gaming industry along platform lines. If the same companies that make the platforms (PCs, Playstations, Xboxs, etc) also makes some sizable plurality or majority of the games, that absolutely will lead to more exclusivity, more walled gardens, more hoarding of the culture that is games.

And that would ultimately be bad for the industry, no matter how many billions of dollars are exchanged in these acquisitions.

Filed Under: consolidation, video games, world of warcraft, xbox
Companies: activision blizzard, microsoft

Biden FCC Green Lights Yet More Telecom Consolidation With Verizon Tracfone Merger

from the meet-the-new-boss dept

For literally 30 years telecom regulators have, with the occasional rare exception, rubber stamped a steady parade of mergers, resulting in a consolidated, less competitive overall market. The end result of these decisions are everywhere, from terrible customer service and high prices, to routine apathy to consumer privacy and spotty overall telecom coverage. And while regulators occasionally affix merger conditions designed to limit these harms, these conditions are usually either pathetic (often because they're volunteered by the companies themselves) or they're just not enforced in any meaningful capacity (outside of the rare and laughable fine).

While there's a bit more awareness and opposition to mindless mergermania coming from the left, when it comes to regulators and politicians, this obsession with embracing mergers and consolidation is bipartisan. This week, the Biden FCC announced it would be greenlighting Verizon's $6 billion merger with Tracfone. Tracfone, currently owned by América Móvil, largely caters to low-income Americans. Consumer groups initially balked at the deal, arguing that Verizon's long history of nickel-and-diming made it likely the company would inevitably nickel-and-dime those financially precarious users as well.

But Verizon, a company with a long history of not living up to merger promises, made some promises... and now the Biden FCC says it's approving the deal. Verizon has promised to try and keep prices the same for a while, make 5G devices available to these users, continue participation in the FCC's low-income Lifeline program for a while, and generally not be a predatory ass. All overseen by what the FCC calls "strong, independent, enforcement mechanisms":

"The Commission also adopted strong, independent mechanisms for enforcing these conditions and ensuring that the transaction does not harm low-income or other consumers. These enforcement mechanisms include both an internal and an independent compliance officer who are empowered to proactively monitor conditions, ensure that low-income consumers are not being harmed, and facilitate consumer complaints about potential violations."

I'm sure the FCC thinks they've fixed the deal by extracting conditions. The problem is we've been through this rodeo before, and there are 40 years of history showing that these pinky swears are frequently meaningless. Verizon has a long, rich history of nickel and diming consumers and tap dancing around obligations, usually with minimal to no penalty. They're simply responding to pressure to maximize shareholder value within the framework of limited competition and regulatory capture. Claiming they're not going to nickel and dime consumers this time because you hired compliance officer or extracted a few pinky swears is like claiming water won't flow downhill.

The vast majority of the time the FCC lacks the resources, interest, or attention span to follow up after deals like this to ensure meaningful compliance. And if there is a failure to adhere to conditions, the worst that happens is a few million in fines, which is piddly couch change to a giant like Verizon. And as the FCC shifts leadership during elections and falls under Republican control, there's even less incentive to hold Verizon accountable for failures than there is under the historically inconsistent and feckless Democratic party.

It's extremely rare that regulators just... shoot down mergers like this. In large part because companies like Verizon are trusted, patriotic participants in our domestic surveillance efforts. Between that and their deep campaign contributions and political pull, upsetting them by simply blocking more consolidation is frequently just not even considered. So policymakers approve the deal, convince themselves that they've extracted meaningful conditions, and fool themselves into thinking that this time will surely be different. Until it isn't, and the regulators who approved the deal are nowhere to be found.

The same regulators that approve greater telecom consolidation will, with their very next breath, often complain about things like the "digital divide," as if the former isn't directly causing the latter. It's a big dumb loop, and any time there's an effort to appoint the kind of regulators that might break the cycle, these massive, consolidated telecom giants just throw more cash and influence around to block reform and perpetuate the profitable dysfunction.

Filed Under: broadband, competition, consolidation, fcc, telcos
Companies: tracfone, verizon

FTC Study Highlights How 'Big Telecom' Privacy Practices Are Even Worse Than 'Big Tech'

from the stating-the-obvious dept

I've noted for a few times that the very obvious dysfunction in "big tech" has proven to be the gift that keeps on giving for "big telecom." While tech giants like Google, Amazon, and Facebook get the entirety of (often very justified) attention for dodgy business practices and terrible judgement, telecom has basically been forgotten in the DC Policy conversation. While lawsuits and Congressional posturing all focus on expanding oversight of "big tech," "big telecom" and "big media" have been able to lobotomize most of the oversight of its own businesses, despite engaging in all the same (and sometimes worse) dubious business practices.

An FTC report on privacy reiterated that forgetting about telecom and media was a mistake. The FTC's latest report on privacy noted largely what most people knew: telecom and cable companies collect an absolute ocean of data on U.S. consumers, then "sell" access to that data to third parties (they usually just call it something else) without being clear about it. They then provide users with opt out and transparency tools that are intentionally cumbersome, if they work at all. This data then bounces around the internet creating potential harm and abuse among countless parties, whether stalkers, law enforcement, people pretending to be law enforcement, or other corporations.

The FTC found that many ISP and cable companies "privacy policies" are utterly theatrical in nature. As in they're designed to be so cumbersome as to deter people from using them (which companies then use as evidence that consumers "don't care about privacy"). Other times the "opt out" tools don't work at all, and in some cases they result in even more user data being collected. None of this is made particularly clear to the end user:

"...rapid consolidation has allowed ISPs to access and control a much larger and broader cache of consumer data than ever before, without having to explain fully their purposes for such collection and use, much less whether such collection and use is good for consumers."

The FTC correctly noted that as network operators, ISPs and cable companies have access to way more data than even tech giants, app makers, or advertising companies. This includes DNS data, browsing data, clickstream data (how long you spend on each site down to the second), behavioral ad information, location data, race and ethnicity data, data on which TV programs you watch, and more. The report is quick to bring up the repeated location data scandals that have plagued the wireless industry, as well as the "zombie cookie" scandals at Verizon (and briefly AT&T) that involved embedding tracker headers in each user data packet to track them around the internet (again without informing them or letting them opt out):

"Unlike traditional ad networks whose tracking consumers can block through browser or mobile device settings, consumers cannot use these tools to stop tracking by these ISPs, which use ‘supercookie’ technology to persistently track users,” the FTC report said.

ISPs and cable companies will usually tell the press, lawmakers, and regulators they don't "sell" access to this data, but they still technically do. They simply call the practice something else.

Like a network security, auditing, or marketing company will get access to "anonymized" (a worthless term) user datasets as part of a broader contract for "security consultation," "marketing and brand awareness," or "strategic consultation." That company will get a bit more money for whatever their broader contract is, while also often being allowed to sell that data out the back door. It's not technically "selling access to your data" because they've actively just called it something else, knowing that U.S. regulators are too feckless and understaffed to dig through a tangled web of intentional complication.

Of course the FTC's report on the terrible privacy practices of the telecom industry is just a report. Actually doing something about the problem is another issue entirely. And every time we've tried to do something about the problem, lobbyists scuttle it in pretty short order (like those FCC broadband privacy rules killed by a heavily-lobbied Congress before they could even take effect, or even a basic federal privacy law). And, more recently, with telecom and media giant lobbying encouragement, the entirety of DC is so fixated exclusively on the problems with tech giants, telecom and media reform has effectively been forgotten entirely.

Filed Under: big tech, competition, consolidation, ftc, privacy, telcos
Companies: at&t, comcast, verizon

After Exploiting Covid Broadband Program, Verizon Faces Unsurprising Opposition To Tracfone Merger

from the surely-they'll-behave-THIS-time dept

When last we checked in with Verizon, the company had just been caught exploiting the government's Covid broadband relief program to upsell struggling Americans to more expensive plans. Now, as Verizon tries to gain regulatory approval for its $6.2 billion acquisition of Tracfone, consumer groups and a small cadre of Senators are wondering if a company that thinks nothing of exploiting struggling Americans in need is a good steward for a discount phone company whose client base is predominantly comprised of low-income Americans.

Five U.S. Senators recently wrote the FCC, rather timidly wondering if Verizon would use the acquisition to simply upsell these lower-income Americans to more expensive plans (spoiler: yes):

"Senators Richard Blumenthal, Sheldon Whitehouse, Dianne Feinstein, Ron Wyden and Ed Markey said in a letter "Verizon would have significant incentives and opportunities to push subscribers from Lifeline and inexpensive prepaid services to higher revenue plans."

The amusing part here is that there's 40 years of documented history showing how Verizon and AT&T's overall strategy is to acquire everyone, then use that consolidation and reduced competition to relentlessly nickel and dime their subscribers. This is just a factual reality and the way publicly-traded companies are structured to take full tactical advantage of the market and weak regulatory environments to the benefit of investors. It's not some errant opinion that this will happen again in the wake of yet another industry merger, it's the likely outcome based on decades of history.

Yet the concern that they'd do so again here (spoiler: they will) is framed as some kind of radical theoretical or -- as is the preference of the DC Beltway "he said, she said" reporting set -- purely a partisan concern expressed only by Democrats. But the fact Congress could only cobble together five Democratic Senators interested in giving a shit shows you pretty clearly that apathy to this kind of mindless consolidation is very much a bipartisan sport.

1.7 million of Tracfone's customers currently enroll in the FCC's Lifeline program. Started under Reagan and expanded by Bush, the program doles out a measly $9.25 monthly credit that struggling Americans can use to get a discount off of their phone, wireless, or broadband bill (they have to choose one). It's literally the very least the government can do to help poor people afford telecom services, but it's been endlessly demonized by folks like Trump FCC boss Ajit Pai, who think even this half-assed effort is a bridge too far.

If this telecom merger follows the pattern of other U.S. telecom mergers, a bipartisan coagulation of lawmakers will trip over themselves to ignore warnings and approve the deal. They'll then sign off on a bunch of flimsy conditions -- most likely crafted by Verizon -- that not only won't really do all that much, but won't be enforced or adhered to. Meanwhile, Verizon gets way with rather nebulous claims that this deal creates amazing synergies and benefits that you just can't get without greater industry consolidation:

"The company said the proposed deal "will bring value and benefits to value-conscious consumers in a myriad of ways."

Then in two to three years, when policymakers and the press have forgotten all about the deal, Verizon will exploit the consolidation to steadily raise rates. The very same policymakers who signed off on yet more consolidation in the space will then stand around with their hands on their hips and a dumb look on their face wondering how we got here. Right before signing off on yet another "growth for growth's sake" telecom megamerger that benefits absolutely nobody outside of the Hamptons set. Rinse, wash, and repeat, with absolutely nobody learning anything from the experience.

Filed Under: acquisitions, consolidation, fcc, lifeline, mergers, raising rates
Companies: tracfone, verizon

Think Tech Companies Are Too Monopolistic? Then Stop Giving Them Patent Monopolies

from the no-one-to-blame-but-yourself dept

There is a lot of sturm and drang in the halls of government these days about corporate mergers – or, at least, tech company mergers (oddly, this ire doesn't seem to necessarily extend to all mergers). But despite all the gnashing and wailing there's not a lot of understanding of why they happen. Which is strange, because if you think there's a problem, it would help to understand WHY there is a problem, because that understanding will give clues on how to fix it.

So let's think about why a company "merges" with another. I put "merges" in quotes, because usually it boils down to one company buying another – how much of a "merger" it is depends on how similarly positioned the respective companies are and the details of the deal, but regulators today seem most upset about the A part of M&A (acquisition) so let's focus on that aspect. Why would a company want to acquire another?

One big reason relates to patent law. Let's say you're a company with a product, and you want to make that product do something more, or better, or have some new feature that it doesn't already have. You could develop it on your own but (a) that will take time you may not have (ex: the market opening may close before you can get it out the door), (b) money you may not have (ex: you may not have the liquidity needed), or other resources you may not have (ex: you may not have the expertise needed or be able to easily hire it), and (c) even if you had what was needed you may still not be able to develop it on your own because it turns out that someone has already developed the best method, gotten a patent on it, and now they can block anyone else from implementing it with at least the threat of litigation if not also actual litigation.

So the shortest distance between two points for many companies, especially larger tech companies, is often to simply buy the other company that has the missing piece of the technology puzzle they want. This acquisition then does a few things. For one, it gives the purchasing company access to that technology, which means it could potentially produce a better product. Of course, it also gives the company exclusive access to the technology and lets them block anyone else from using it, including their competitors.

In other words, through patent law (and also copyright law, but we'll set that aside for now) we intentionally give companies the power to act like monopolies, even when it's not actually in our interest. So of course we're upset that companies use that power, but the problem is that it's a power we gave them. Splitting them up is not the cure for the problem we created; the only solution is to stop giving them so much monopoly power in the first place.

There are at least two things we should do differently. First, we need to stop giving out so many patents full stop (and we need to stop condemning the people calling for fewer to be issued). Too often these patents are not for actually significant innovations (or innovations at all), and all too often they are on subject matter that should be unpatentable. Every few decades or so the US Supreme Court wakes from its slumber to remind the world that, at least under US law, software is not patentable subject matter. But these decisions haven't stopped people from pursuing, and getting, these sorts of patents. So it's very strange that people wonder why there are so many tech companies with software-driven products that have so much market clout, when it's a power our own USPTO has been purposefully giving them.

But even where patents are issued appropriately, there are still things we can do to mitigate their anti-competitive effects. One of the problems with patents today is how they give patent holders the ability to shut out other users of the technology. That's why patents can have this harmful effect on the marketplace, and it's also what has put modern patent law out-of-step with the authority granted Congress by the Constitution to pass a patent law at all. Congress gets to legislate in this area for the purpose of "promot[ing] the progress" of science and the useful arts, but the reality of today's patent law is that instead of promoting progress it ends up creating huge obstacles to it.

This injunctive power that comes with a patent is also unnecessary to achieve anything that patent law was intended to vindicate. Even accepting as true the idea that innovators need some sort of reward for being the first to innovate something the world would benefit from – beyond, of course, the inherent market advantage that comes from being first – all that means is that if there's some profit to be had from the innovation that the patentholder should get to realize at least some of it. But you don't need the power to shut out all other uses to glean that profit; all you need to do is license it.

Of course, backed with the power to enjoin other uses, license fees today are less about reasonable market rates that provide benefit to everyone: the innovator, the implementer, and the public, which now gets to have more innovation in the marketplace at prices the market can bear. Instead, patent revenue today is more about extortive windfalls. The policy change we need is to switch up that balance. And one way to do that is by replacing the current (and often disproportionate) ability of patentholders to enjoin any uses of their technology with some sort of compulsory license system. A compulsory license system means that patent holders cannot say no to competitors and other innovators who want to use or build on their technologies, either directly, by refusing permission, or indirectly, through excessive license fees. Instead the reward for their patent is the reasonable income returned by the license they must offer.

There are several upsides to changing patent law this way. For one, even if it somehow diminishes the perceived luster of having a patent that would not be a bad thing: as explained before, the landgrab that has been trying to turn every technological improvement, no matter how small, into a powerfully enforceable monopoly has been at the root of much of the anticompetitive behavior regulators now lament, and discouraging it would, on its own, help mitigate those problems. (Constraining the Patent Office so that it also grants fewer patents, especially specious and/or software ones would help as well.)

Secondly, it also means that more people can use the technology, or even build on it. And that's good for society in general. The point of patents is to stimulate that innovation, and this change would do so by clearing the way to it. Furthermore, it would also have the effect of diminishing the monopolistic effects we don't like. Not only would patents now provide less monopoly power, but they would also lessen the incentive companies currently have to acquire other companies in order to horde more of it.

Which would also lead to less market consolidation. For instance, smaller companies with a sought after-innovation, instead of being bought out by one company that could now exclusively benefit from it, could stay going concerns and continue to put products in the market. If the innovations were legitimately patentable they could also use those licensing profits to subsidize their own further innovation and product development, and to the extent that fewer innovations may be patentable, the good news is that this reduction in patentability would mean that there would be more technologies available for them to help themselves to in order to compete, even against the companies we currently worry are too big.

Of course, there is a catch: compulsory license systems are great in theory but often cumbersome in practice, and, as we see in the copyright space, they can introduce new, unwelcome, and debilitating costs and regulatory impediments. (We'd also want to keep an eye on where non-practicing entities owning patents should be in this ecosystem, if anywhere.) So this isn't a case of "just add water" where tacking any old compulsory license system onto patent law will automatically make everything sunshine and roses. It will take some extremely careful thinking in how to implement.

In the meantime, however, we are seeing some other industry adaptations, like patent pools, emerge to help mitigate the extortive power of patents. And, in general, the idea of minimizing the exclusionary control of a patent, including through compulsory licenses, is a good one we would be better served to be thinking seriously about, rather than the zealous appetite to break up companies that has currently seized all of our attention. Especially when these proposed break-ups are so arbitrary, unprincipled, and ultimately costly in ways regulators do not seem to be contemplating.

In any case it just doesn't make any sense for the government to on one hand tell companies to go be monopolies and then immediately complain they are being monopolies. The solution to the problem of companies acting monopolistic is to not deliberately give them so much power to be.

Filed Under: big tech, consolidation, monopolies, patents

'Job Creating' Sprint T-Mobile Merger Triggers Estimated 6,000 Non-Covid Layoffs

from the empty-promises dept

Back when T-Mobile and Sprint were trying to gain regulatory approval for their $26 billion merger, executives repeatedly promised the deal would create jobs. Not just a few jobs, but oodles of jobs. Despite the fact that US telecom history indicates such deals almost always trigger mass layoffs, the media dutifully repeated T-Mobile and Sprint executive claims that the deal would create "more than 3,500 additional full-time U.S. employees in the first year and 11,000 more people by 2024."

About that.

Before the ink on the deal was even dry, T-Mobile began shutting down its Metro prepaid business and laying off impacted employees. When asked about the conflicting promises, T-Mobile refused to respond to press inquiries. Now that shutdown has accelerated, with estimates that roughly 6,000 employees at the T-Mobile subsidiary have been laid off as the freshly-merged company closes unwanted prepaid retailers. T-Mobile says the move, which has nothing to do with COVID-19, is just them "optimizing their retail footprint." Industry insiders aren't amused:

"Peter Adderton, the founder of Boost Mobile in Australia and in the U.S. who has been a vocal advocate for the Boost brand and for dealers since the merger was first proposed, figures the latest closures affect about 6,000 people. He cited one dealer who said he has to close 95 stores, some as early as May 1.

In their arguments leading up to the merger finally getting approved, executives at both T-Mobile and Sprint argued that it would not lead to the kind of job losses that many opponents were predicting. They pledged to create jobs, not cut them.

“The whole thing is exactly how we called it, and no one is calling them out. It’s so disingenuous,” Adderton told Fierce, adding that it’s not because of COVID-19. Many retailers in other industries are closing stores during the crisis but plan to reopen once it’s safe to do so."

None of this should be a surprise to anybody. Everybody from unions to Wall Street stock jocks had predicted the deal would trigger anywhere between 15,000 and 30,000 layoffs over time as redundant support, retail, and middle management positions were eliminated. It's what always happens in major US telecom mergers. There is 40 years of very clear, hard data speaking to this point. Yet in a blog post last year (likely to be deleted by this time next year), T-Mobile CEO John Legere not only insisted layoffs would never happen, he effectively accused unions, experts, consumer groups, and a long line of economists of lying:

"This merger is all about creating new, high-quality, high-paying jobs, and the New T-Mobile will be jobs-positive from Day One and every day thereafter. That’s not just a promise. That’s not just a commitment. It’s a fact....These combined efforts will create nearly 5,600 new American customer care jobs by 2021. And New T-Mobile will employ 7,500+ more care professionals by 2024 than the standalone companies would have."

That was never going to happen. Less competition and revolving door, captured regulators and a broken court system means there's less than zero incentive for T-Mobile to do much of anything the company promised while it was wooing regulators. And of course such employment growth is even less likely to happen under a pandemic, which will provide "wonderful" cover for cuts that were going to happen anyway.

Having watched more telecom megadeals like this than I can count, what usually happens is the companies leave things generally alone for about a year to keep employees calm and make it seem like deal critics were being hyperbolic. Then, once the press and public is no longer paying attention (which never takes long), the hatchets come out and the downsizing begins. When the layoffs and reduced competition inevitably arrives, they're either ignored or blamed on something else. In this case, inevitably, COVID-19.

In a few years, the regulators who approved the deal will have moved on to think tank, legal or lobbying positions at the same companies they "regulated." The same press that over-hyped pre-merger promises won't follow back up, because there's no money in that kind of hindsight policy reporting or consumer advocacy. And executives like John Legere (who just quit T-Mobile after selling his $17.5 million NYC penthouse to Giorgio Armani) are dutifully rewarded, with the real world market and human cost of mindless merger mania quickly and intentionally forgotten.

Filed Under: consolidation, jobs, layoffs, mergers, promises
Companies: sprint, t-mobile

Dish Floats DirecTV Merger, Because What's A Little Mindless Monopolization Among Friends?

from the merge-ALL-the-things dept

We just got done with AT&T's $86 billion merger with Time Warner, a deal that immediately drove up costs for consumers and competitors alike. That was followed up with the recent approval of T-Mobile's $26 billion merger with Sprint, another deal the lion's share of objective experts say will reduce competition, raise rates, and end with thousands of pink slips as redundant positions are inevitably eliminated.

With the ink barely dry on both deals, Dish CEO Charlie Ergen is now (once again) floating a merger with DirecTV, insisting that such a union is "inevitable" as the company continues to reel from TV cord cutting. As the US press loves to do, the proposal was parroted rather unskeptically as a seemingly good idea:

"Ergen also on the call said a long-rumored merger of DirecTV and Dish was "inevitable" — despite reticence from AT&T to divest itself of the asset — as neither satellite TV-delivered linear TV service was growing..."You just can't swim upstream against a real tide of big players," Ergen argued. If AT&T eyes possible buyers for DirecTV, Dish is seen as an obvious suitor, especially after it tried and failed to merge with the satellite TV provider in 2002. Ergen on the afternoon analyst call also made another overture to the Sinclair Broadcast Group to possibly conclude a deal that would see the former Fox Regional Sports Networks return to his distribution platforms."

To be clear, AT&T isn't likely to sell, but in the wake of recent court rulings and mindless M&A mania you can't rule anything out. AT&T bought DirecTV to gain additional scale and leverage in programming negotiations. Even with the service bleeding TV subscribers, it's not likely that it would want to offload DirecTV to Dish anytime soon, as it wants to slowly convert those satellite TV users to AT&T streaming subscribers. AT&T's also facing a massive merger backlash for $150 billion in debt caused by its costly obsession with merger mania, likely making AT&T sheepish.

You used to be able to look at a deal proposal like this and laugh at the mere mention of it, knowing it would likely be blocked. But in the wake of the utterly myopic and idiotic court rulings governing both the Time Warner/AT&T and Sprint/T-Mobile deals (in which mountains of evidence of market harm were almost flippantly and cheerfully ignored), you really can no longer make those assumptions. The US loves it some mindless merger mania; almost as much as it loves ignoring the monopolistic damage such deals cause on tech markets and consumers alike.

Merging AT&T directly with Dish, the only way this deal actually gets done, creates layers of problems. To get the T-Mobile merger approved, the DOJ signed off on a plan that would shovel some T-Mobile spectrum over to Dish Network, which would (theoretically) then build a replacement wireless carrier to Sprint over a period of seven years. Analysts and antitrust experts are already hugely doubtful that network ever gets built. But it would be even less likely to get built should Dish be sold to DirecTV/AT&T, which has a vested interest in ensuring a fourth replacement wireless competitor never materializes.

This deal probably never happens. Dish and DirecTV have floated these kinds of rumors for years just to fluff their stock valuations. Still, recent antitrust enforcement decisions have shown there's no bottom to US M&A myopia, meaning you can't rule such a deal out. Wall Street and executive desires seemingly mute all common sense and any interest in historical context, ensuring we learn absolutely nothing from history as we repeat the same mistakes over, and over, and over again.

Filed Under: antitrust, charlie ergen, competition, consolidation, doj, ftc, satellite tv
Companies: at&t, directv, dish