Vertical integration makes this counterattack possible. All four broadcast networks own multiple cable broadcasters, and when they sell these outlets rights they're basically paying themselves, a deal guaranteed to bring a profit. Comcast itself is now one of those networks, and one of those studios, through
This is the just the kind of cozy relationship the government broke up more than 60 years ago, when movie studios owned their own theaters. The studios collapsed, and the cable industry now says they will collapse again unless vertical integration can be used against the threat of Internet delivery services.
But when the studios were broken up, did that end entertainment? Didn't we all just turn on TV, even when shows were controlled by commercial sponsors? Didn't the market work? Didn't Hollywood actually get richer than ever, with a programming outlet now in every home, however poor the quality compared to what you might see in a movie theater?
I think it did. Cable showed the weakness of its market case this week, and that's the story investors need to take home with them.
At the time of publication, the author had no investments in companies mentioned here.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.