So is the Internet likely to break barriers and bonds? It is, so goes the widespread hype, the media of the future. The scope, we are told, is beyond imagination. The world is becoming one. The science fiction of yesterday are the facts of today. The future of the world lies in the Net. Listen to what Robert W. McChesney has to say and you will slowly realise that all this needs to be taken with a fistful of salt. Advancement of technology is fine, but when technology and the media become a tool in the hands of big corporations, sharing and dissemination of information plays second fiddle to commerce.

Or rather, e-commerce. Commerce, we all know, is a thing of the past. It is now through e-commerce that the corporates are going to rule the world. Last year, the music segment on the Net alone was worth over $87 million. This figure itself is projected to be around $4 billion by the year 2002. According to projections made by the United States government, more than $300 billion will be spent on online purchases by the next three years.

Portal sites direct potential customers to different websites to beguile them into buying (that is how business is done anyway). Search engines are quite often rigged to find the highest bidder to pay for top billing. The success in e-commerce lies in controlling the manipulative portal market. Corporations pay portal sites and these, in turn, direct visitors to those of the corporations. The talk about consumers now having a wider choice is downright rubbish. Consumers have no inkling of the manipulations that go on behind the metatags.

The first manipulation comes from the computer industry itself. Big computer firms are able to influence and direct visitors to surfers that would want them to visit. The producers of Netscape Navigator and Internet Explorer are prime examples. The next to rig the setup those are the telecommunications and cable companies. Five or six companies own about 80 percent of the cable network in the US. And they, regular surfers need not be told, offer their own portals. The manipulation continues.

So, where does the media fit in all this? The battle in the print media has now spilled over into cyberspace. The message that was sent out was that bigger media companies are in a position to offer a better fare to the consumers. Isn't the consumer, after all the king? No, says McChesney as he provides the instance of Viacom's acquisition of CBS to drive home his point.

The Viacom superboss, Sumner Redstone, went on record to say, "When you can make a movie for an average cost of $10 million and then cross promote and sell it off of magazines, books, products, televisions shows - out of your own company - the profit is enormous." A stark instance of his raison d'être came in the form of the 1998 release of the "Rugrats" film produced by Viacom and based on Viacom's Nickelodeon television programme. The film was promoted in not just advertisements, but in the editorial content of Viacom's programs on its Nickelodeon, VH-1 and Showtime cable networks. The film was also promoted editorially in Viacom's Entertainment Tonight, produced by its own Paramount Television studios. The marketing blitzkrieg was multi-pronged. And Redstone did not have to rely too much on others.

When Viacom's Paramount Pictures produced the "Beavis and Butt-Head Do America" film, based on the successful MTV cartoon series, it generated a profit of $70 million. The profit that was raked in was based on similar cross-promotions. Viacom's book-publishing company, Simon & Schuster, has sold off its educational publishing divisions, but has held onto its "trade interests," allowing it to publish a series of books devoted to the antics of none other than the cartoon duo in question.

Like Viacom, Disney too merchandises items based on characters in its animated films, and then sells that merchandise in its stores and theme parks around the country. Its ABC television stars have been recruited to play roles in Disney films and to write books for Disney's publishing firms. Its cable sports channel ESPN now has its own magazine and is launching its own chain of restaurants. Rupert Murdoch's News Corporation benefits from cross-promotion as well. Its Twentieth Century Fox studios produced an X-Files film based on its Fox television programme. News Corp. even launched a travelling X-Files Expo that visited 10 cities, promoting the film and the television programme, while raking in a profit of its own. These cross-promotional corporate strategies now carry over to the Net. In January this year, News Corp. and Yahoo! announced a major strategic alliance, whereby each would promote the other on its channels, through advertising and product placements in News Corp. films and TV shows.


Abridged from the Political Literacy Course

"Two sets of fundamental political questions emerge when we discuss the development of any major communication technology. The first set asks who will. and who will not control the new technology and what purposes will . [or] will not be privileged. " McChesney notes that the decision to place television in the hands of a few large corporations who depend on advertising revenue has created a trajectory of development distinct from where the technology in Europe has gone.

"The second set of questions deals with the social, cultural, economic, and political impact of the new communication technology on the overall society and explores why the new communication technology is important. The process by which society answers these questions can be regarded as policymaking. The more a society is genuinely democratic, the more that society's policy debates concerning the application and development of paramount communication technologies will be open, informed, thoughtful, and passionate. As a general rule, if certain forces thoroughly dominate a society's political economy they will thoroughly dominate its communication system, and the first set of policy questions will not even be subject to debate. So it is and so it has been with the Communist Party in various 'people's republics,' and so, for the most part, with big business interests in the United States.

"The current communication revolution corresponds most closely to the situation in the 1920s, when the emergence of radio broadcasting forced society to address the two sets of political questions mentioned above. Like the Internet in the 1990s, radio broadcasting was a radically new development, and there existed great confusion through the 1920s concerning who should control this powerful technology and for what purposes. There was little sense of how radio could be made a profitable enterprise and much discussion of how liberating and democratic it could be. Much of the impetus for radio broadcasting in the first decade came first from amateurs and then from nonprofit and non-commercial groups. It was only in the late 1920s that capitalists began to sense that through network operation and commercial advertising, radio broadcasting could generate substantial profits. Through their immense power in Washington, these commercial broadcasters were able to so dominate the Federal Radio Commission that the scarce number of air channels were turned over to them with no public and little Congressional deliberation on the matter."

McChesney goes on to show that the reform movement arose in response to commercialisation of the airwaves and then disintegrated in 1934 with the establishment of the FCC. "The radio lobby dominated because it was able to keep most Americans ignorant or confused about the communication policy matters then under discussion in Congress through its control of key elements of the news media and its sophisticated public relations aimed at the remainder of the press and the public. In addition, the commercial broadcasters became a force that few politicians wished to antagonise; almost all of the Congressional leaders of broadcast reform in 1931-32 were defeated in their re-election attempts, a lesson not lost on those who entered the next Congress. With the defeat of the reformers, the industry claims that commercial broadcasting was inherently democratic and American went without challenge and became internalised in the political culture.

"Thereafter, the basis for the 'liberal' claim for regulation was that the scarce number of channels necessitated regulation, *not* that the capitalist basis of the industry was fundamentally flawed. This was a farcry from the criticisms of the 1930s broadcast reformers, who argued that the problem was not simply one of a lack of competition in the marketplace as much as it was the rule of the marketplace per se.By the 1940s and thereafter liberals knew the commercial basis of the system was inviolate, and merely tried to carve out a nonprofit sector on the margins. The primary function of the nonprofit sector in US communications has been to pioneer the new technologies when they are not yet seen as profitable--eg AM radio in the 1920s, FM radio and UHF television in the 1950s - and then to be pushed aside once they have shown the commercial interests the potential of the new media. This has already been the fate of the Internet's computer networks, which after substantial public subsidy were turned over to private operators."

Does this ring any bells? The parallels to today's situation should sound some loud alarms. Consider the lessons about not crossing the new media which politicians learned in the 1930s. Writes McChesney, "Vice-President Gore has actively cultivated computer firm CEOs, forming a 'cyber-cabinet' of these 'Gore-Techs' to meet monthly so he can stay on top of industry policy concerns. By 1998 leading Congressional Republicans were making almost weekly sojourns to Silicon Valley to convince the powers of the computer industry that they, more than the Democrats, would advance their interests on Capitol Hill and elsewhere. The necessity of the privatisation and commercialisation of cyberspace is also the official position of the Clinton Administration, the Republicans, and indeed the entirety of the mainstream political spectrum. As one reporter put it, we live in 'a climate where any regulation of the Internet in its commercial infancy is considered high treason'." Indeed, in the developing presidential election, a major focus of media attention is on the question of which candidate can articulate the concerns of Internet moguls the best.

McChesney writes: "What would be a truly democratic manner to generate communication policymaking? The historical record points to two basic principles which should be made operational. First, in view of the revolutionary nature of the new communication technologies, citizens should convene to study what the technological possibilities are and to determine what the social goals should be. At this point several alternative models of ownership and control should be proposed, and the best model selected. In short, the structural basis of the communication system should be decided after the social aims are determined. The key factor is to exercise public participation before an unplanned commercial system becomes entrenched. Is such public participation an absurd idea? Hardly. In the late 1920s, Canada, noting the rapid commercialisation of the US and Canadian airwaves, convened precisely such a public debate over broadcasting that included public hearings in twenty-five cities in all nine provinces. The final decision to develop a nonprofit system was adopted three years after a period of active debate. .

"Second, if such a public debate determines that the communications system needs a significant nonprofit and noncommercial component, the dominant sector of the system must be nonprofit, noncommercial, and accountable to the public. The historical record in the United States is emphatic in this regard. In addition, it is arguable that commercial interests, too, must always be held to carefully administered public service standards. .

"The US policymaking experience with the Internet follows the undemocratic historical pattern prevalent since the mid-1930s. A crucial difference between the Internet and the previous new communication technologies since AM radio has been that the Internet's interactive, decentralised structure has not lent itself to any existing regulatory model, making it more difficult to know exactly how the Internet should be handled. This environment should have called for deliberation, study, experimentation, and debate; instead the door has been opened to letting commercial interests exploit the new medium to see where the most money could be made." As industry lobbyists entrenched themselves, "By the late 1990s, the sentiment of many, perhaps most, 'Internet experts' was that the 'government had little choice but to leave the meatiest decisions up to private industry.'

"Although this crystallisation of opinion - and utter lack of debate - concerning the Internet accords with the general trajectory of US communication policymaking over the past 65 years, it is nonetheless striking when one considers the origins of the Internet. All historians of the Internet recognise that it is a product of the public sector, and that it was closely associated with the military. But every bit as important, many, perhaps most, of the university scientists who designed the architecture of the Internet did so with the explicit intent to create an open and egalitarian communication environment. The Internet could never have been produced by the private sector; not only would the long-term wait for payoff have been unacceptable but the open architecture would have made no sense for a capitalist to pursue, since it makes 'ownership' of the Internet and profitability much more difficult."

But why not let the free market be the regulator? Competition will create a cornucopia, which leads to, as McChesney describes the argument, "the withering, perhaps the outright elimination, of the media giants and a flowering of a competitive commercial marketplace the likes of which have never been imagined, let alone seen."

But while the premise of the free market is competition, "The simple truth is that for those atop our economy success is based in large part on eliminating competition. I am being somewhat facetious, because in the end capitalism is indeed a war of one against all, since every capitalist is in competition with all others. But competition is something successful capitalists (the kind that remain capitalists) learn to avoid like the plague. The less competition a firm has, the less risk it faces and the more profitable it tends to be.

"It is safe to say that some new communications giants will be established during the coming years, such as Microsoft attained gigantic status during the 1980s. But most of the great new fortunes will be made by start-up firms who develop a profitable idea and then sell out to one of the existing giants. Indeed this is conceded to be the explicit goal of nearly all the start-up Internet and telecommunication firms, which are founded with the premise of an 'exit scenario' through their sale to a giant. For every new Microsoft, there will be a thousand WebTVs or Starwaves or Netscapes, small technology firms that sell out to media and communication giants in deals that make their largest shareholders rich beyond their wildest dreams."

The free market mythology serves to obliterate public debate about regulation with a barrage of rhetoric about competition, which protects the wealth of those at the top. "My point," writes McChesney, "is not that the market is an entirely inappropriate regulatory mechanism in a democracy; whatever its flaws there may well be some - even many - areas where the market can be deployed effectively. My point is that to the extent the market rules in communication, it should be as a result of public debate based on informed and wide-ranging participation, not as the result of secretive deliberation wrapped in a bogus mythology."

Is McChesney right that the politics of the Internet will strengthen oligopolistic media rather than weaken it? Or could he be little more than a crank, trapped in the twilight of early twentieth-century communications history? One source for an answer is assessments from the business media which are often more honest about power relations than are the general media. The reason is simple: investors have to have a relatively realistic view of the world in order to make sound investment decisions. If McChesney is wrong, and competition is heralding unfettered equality of free speech on the Net, then media properties should be decreasing in value as they wither in the face of competition. Second, if he is wrong, competition should generate not only a diverse array of programming but also a diverse array of ownership of that programming.

But if media companies are about to be decimated by competition on an infinite spectrum, why are the stocks of some cable giants like Liberty Media going through the roof, up 29% since its deal with AT&T in early March? As CEO John Malone put it in a front cover story in Forbes (10/18/99), "We are in the sweet spot of the media industry. The growth rates of the industry we are in are attractive by any stretch."

Fortune columnist Geoffrey Colvin examines this issue of competition and diversity in his column "What Internet Media Revolution?" (25 October, 1999). First, he encapsulates the argument that "The Internet would fundamentally reshape the media industry. Goodbye to the old few-to-many model of communication, exemplified by publishers and broadcasters, and hello to a new many-to-many model in which we could all become mini-Murdochs over the Web." But, he points out, to get anybody's attention on the Net you have to have a massive advertising budget, spending many times what a firm makes in profits to grab market share. Like, say, $100 million, which is CNET's budget for the next eighteen months.

Turning to the example of films, Colvin writes, "When anyone can offer movies on line, hundreds will be available. In that marketplace, how would you know about [the recently successful] Blair Witch [Project, often touted as an example of how small filmmakers can hit the big time]. Maybe through word of mouth; it does happen. But more likely the only way any significant number of people would know about it is through [massive marketing]." Colvin notes that even Blair Witch, made for $35,000, had to have an $11 million ad budget behind it to be such a hit.

McChesney adds an interesting wrinkle to the propaganda filter of media-as-delivery-vehicle for serving up consumers to corporations. "Advertising arises to become a primary means of competition in oligopolistic markets. It provides a way to protect or expand market share without engaging in profit-threatening price competition." Those with deep pockets often win these supposedly fair competitions. This is precisely what CNET's budget does in Colvin's example: by spending $100 million in advertising, CNET makes it hard for any competitors to arise unless their pockets are similarly as deep. Media companies seeking a chunk of that $100 million budget must in turn be able to deliver a large enough audience to CNET. Whoever has the most money has the best chance of winning in this hardly free market.

The Internet clearly provides new opportunities - for new levels of media concentration. For example, according to Businessweek (25 October, 1999) the Internet holding company CMGI owns stakes in content companies which include portals and information services, in online infrastructure companies which deliver tools and services for building e-commerce, and in e-commerce companies selling to consumers or businesses. Now, according to billionaire CEO David Wetherell, CMGI is going after stakes in advertising outfits like Adforce, Adknowledge and Flycast Communications. This is the Net equivalent of a big network TV station owning not only radio stations and newspapers, but some of the advertising agencies that place the ads in those media as well.

Returning to Fortune's Colvin, he concludes with words that could easily have been penned by McChesney: "The many-to-many model isn't all wrong. Entrepreneurs will continue to create thousands of Web-based media outlets. But most won't be commercially significant unless they are bought by a major media group or at least get the massive backing available only to a few. My four-word prediction for the media future: More outlets, fewer owners."

(For more political nuggets from more political books check out the Political Literacy Course archives.)