RCN, a broadband and cable overbuilder, has filed very disturbing documents in the FCC review of the Adelphia transaction. RCN recounts how PBS has apparently signed an exclusive deal with Comcast for video on demand distribution of its PBS Kids Network and Sprout Network (oriented toward younger children). Comcast has wassted no time leveraging this exclusive distribution deal to disadvantage RCN — which competes with Comcast in Boston, Philadelphia, and Washington DC.
Last year, PBS Kids pulled access to its programming from RCN. The effect on RCN's video on demand (VoD) service was immediate and dramatic. According to RCN, use of VoD dropped by 85%.
While stunning, it seems obvious in retrospect. Parents will use VoD to keep the kids entertained, and PBS Kids has trusted programming. Folks who dislike the crass commercialism of Nickelodeon or Disney, or who want to provide educational programming rather than just entertainment, will want PBS programming.
Ultimately, RCN agreed to terms that provided it access to PBS' VoD programming. But it has now hit a new wrinkle. PBS has signed an exclusive distribution deal for PBS Kids and Sprout with Comcast's VoD distribution platform, Comcast Media Center. Unsurprisingly, Comcast wants RCN to pay through the nose, including for content it already gets through its chosen VoD provider, TVN. Anyone familiar with the history of Microsoft and how it leveraged its desktop dominance by requiring distributors to pay licensing fees even when they didn't take the product — or risk exclusion from all MS products — understands how this kind of deal kills competition. No one wants to pay twice. Heck, if they want to stay in business and offer products to customers at competitive prices, they can't afford to pay twice.
What makes this particularly outrageous, in my opinion at least, is that the PBS Kids and Sprout programming at issue is developed in no small part with public money and donations from viewers and businesses that had no intention of giving Comcast a club to beat competitors over the head.
In the short term, the FCC should address this issue as part of any program access conditions it imposes. PBS Kids programming for VoD appears, at least on the basis of RCN's experience, as much “must have” programming as regional sports. In addition to fighting the “last war” by making sports programming available, the FCC should also stop anticompetitive practices in the merging VoD services — particularly when the “must have” programming got financed by tax dollars and donations.
But the PBS situation highlights a broader problem. We have disserved our public institutions and centers of knowledge terribly, with the result that they remain vulnerable to this kind of exploitation. The PBS-Comcast deal flows from the same problems and attitudes that created the Smithsonian-Showtime deal (under which Showtime acquires exclusive rights to an as yet undisclosed amount of Smithsonian material) and the numerous examples of drug companies using public grants and grants to universities to develop medications they market for billions.
For too long, we have moved from treating the non-commercial community, folks like PBS, the Smithsonian, etc. with contempt. Gone are the Progressive and Great Society ideals that all citizens should have access to a common treasury of culture, education, and innovation. For years, Congress and society at large have scorned these publicly supported endeavors while praising the private sector. We have repeatedly cut funding for these institutions, required them to find funding on their own, and chastised them for living as “permanent dependencies” rather than supporting them.
Small wonder that these institutions increasingly drift away from their missions and ideals. Worse, the non-stop denigration of their contributions to our art and culture causes them to undervalue the resources they have. If we keep saying that Nickelodeon and Disney can do a better job than PBS, that Kim Possible is just as good as Cyberspace and that Rugrats is interchangeable with Between the Lions, we should not be surprised to find that these financially strapped institutions not only sell themselves, but sell themselves cheaply.
I call this the “Magic Bean” problem. Cash strapped non-profits, with no appreciation for the value of what they hold, trade their milk cow to a big corporation for a handful of “magic beans” that supposedly grow into a giant beanstalk leading to the pot of gold of self-sufficiency. Unfortunately, this isn't a fairy tale. At the end of the day, the public and the public institutions get a bunch of scawny bean plants while the private sector companies milk the public.
In the short term, the FCC should put a stop to Comcast's ability to leverage its exclusive deal with PBS Kids and Sprout by imposing a suitable condition on the Adelphia transaction. In the longer term, however, we must deal with the “magic bean” problem before all our non-commercial cultural institutions have made similar bad deals.