Biden Silicon Valley Winners – WSJ

Netflix co-CEOs Reed Hastings and Ted Sarandos arrive for the Allen & Company Sun Valley conference last week in Idaho.


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There is a lot of talk on Beltway and in the media that President Joe Biden’s regulatory agenda threatens big business and especially big tech. But history suggests otherwise. This year marks the 50th anniversary of the publication of George Stigler’s essay “The Theory of Economic Regulation” in the Bell Journal of Economics and Management Science. After investigating various markets, the University of Chicago economist noted that “regulation is generally acquired by the industry and is designed and operated primarily for its profit.” As Stigler described the phenomenon of regulatory capture, the future Nobel Laureate understood that it is often easier to navigate complex and costly rules for market giants than for their entry-level competitors. Free and open markets, on the other hand, present fewer obstacles to those who wish to challenge incumbents.

Stigler also knew that many of his academic colleagues would not easily give up their idealistic view of government regulation. He once noted that “the economic role of the state has managed to hold the attention of researchers for over two centuries without arousing their curiosity.”

For anyone really curious about which tech giants will benefit the most from the Biden era, Eriq Gardner of The Hollywood Reporter makes a convincing argument for Netflix.

Before we get into the details of why this might be Silicon Valley‘s most politically-favored company, let’s take a look at some of the provisions of President Joe Biden’s new effort to regulate various US industries.

“The heart of American capitalism is a simple idea: open and fair competition”, mentionned the president on Friday, before signing an executive order ordering government agencies to undertake no less than 72 specific interventions in US markets. Given this ambitious regulatory agenda, some readers may wonder what exactly he meant by ‘open’ competition and maybe even Mr Biden isn’t exactly sure, but his comments on Friday suggest, among other things. , that business combinations will be much more difficult to execute in the United States:

The executive order that I will soon sign commits the federal government to fully and aggressively enforce our antitrust laws. More tolerance for abusive actions by monopolies. No more bad mergers that lead to massive layoffs, higher prices, fewer options for workers and consumers.

On the same day, Acting Deputy Attorney General Richard A. Powers and Federal Trade Commission Chairman Lina Khan published a joint declaration:

We must ensure that merger guidelines reflect current economic realities and empirical learning, and that they guide law enforcement authorities to review mergers with the skepticism required by law. The current guidelines deserve careful consideration to determine if they are too permissive.

Mr. Gardner of the Hollywood Reporter Remarks that for Netflix, the current leader in video streaming services, it could simply mean that its “leadership position is becoming more entrenched.” If FTC takes Biden’s advice and withdraws Trump-era guidelines for vertical mergers, it could hurt Amazon‘s

prospect of acquiring MGM and turning its Prime service into Netflix’s toughest competitor. (Not that FTC President Lina Khan needs other reasons to stick with Amazon.) And if the DOJ starts looking at proposed mergers to determine their impact on labor markets, it could have ramifications for WarnerMedia-Discovery or any future merger threaten Netflix’s ability to win the streaming war.

Another part of Biden’s decree proclaims: “Powerful companies require workers to sign non-compete agreements that restrict their ability to change jobs. The Biden order then states:

To address agreements that may unduly limit workers’ ability to change jobs, the FTC Chairman is encouraged to consider working with the rest of the Commission to exercise the regulatory authority of the FTC under the Federal Trade Commission. Act to reduce the use of competition clauses and other clauses or agreements that may unfairly limit the mobility of workers.

Mr. Gardner notes:

For years, Netflix has poached the best talent of its rivals. So much so that major studios, including Fox and Viacom, have taken the streamer to court for tortiously interfering with contracts. In response, Netflix argued that these employment agreements are void under a California law that disapproves of non-compete provisions. Netflix has so far been unsuccessful thanks to the legal finding that there is nothing illegal about a fixed-term contract until the non-competition extends beyond termination. This finding is under appeal.

Now comes the news that Biden is aiming for non-competition. It remains to be seen whether the FTC really has the power to ban the kinds of contractual arrangements that prevent workers from changing jobs, but development is always blowing back behind Netflix’s sails.

Perhaps the biggest advantage of all for Netflix in Executive Order Biden is his instruction to the Federal Communications Commission to restore the Obama-era “net neutrality” policy. By applying old-fashioned regulation of the telephone industry to the Internet, the government would likely limit the prices charged by broadband service providers to Netflix, a voracious consumer of Internet bandwidth.

According to the website, 99% of Netflix employee contributions to candidates and parties in the 2020 campaign cycle went to Democrats.

And there are even more reasons for employees at the Silicon Valley streaming giant to be optimistic about their relationship with Team Biden. Tim Wu, Mr. Biden’s special assistant for technology and competition policy, is known for his criticism of some big tech companies, but he admired Netflix’s role in creating a more fragmented video entertainment market. In one 2013 piece in The New Republic, Mr. Wu wrote:

If modern American popular culture was built on a central pillar of mainstream entertainment flanked by smaller subcultures, what will replace it is a very different infrastructure, comprising islands of fandom. Without a standard daily cultural regime, we will switch even more from a country united by shows like “I Love Lucy” or “Friends” to a country where people claim more personalized allegiances, like the particular group of viewers who are obsessed with “Game of Thrones” or who find Ricky Gervais infallibly hysterical, as opposed to painfully offensive.

… it should be borne in mind that the very idea of ​​a great entertainment medium uniting the country is not really such an old tradition, especially American, nor necessarily a noble one. We may come to remember it as a twentieth-century quirk, born out of particular business models and an obsession with indelible national unity tied to darker plans. The ideal of “forging one people” is not entirely benevolent and has always been at odds with a country supposed to be the homeland of freedom.

Certainly, a culture where the niche supplants the mass is approaching the original vision of the Americas, of a new continent truly open to all the diverse and eccentric groups that present themselves. The United States was once, almost by definition, a place without a dominant national identity. By revolutionizing television, Netflix is ​​only helping us return to that past.

Will Mr. Wu and his colleagues in the Biden administration now help Netflix?


James Freeman is the co-author of “The Cost: Trump, China and the American Renewal”.


Follow James Freeman on Twitter.

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