AT&T’s Real Challenge to HBO

Media industry tongues are still wagging over AT&T executive John Stankey’s June 19 town hall meeting with HBO employees, in which he discussed the telco-giant’s plans for the network.

As first reported by the New York Times, which got its hands on an audio recording of the event, Stankey came off  like a bull in a china shop, seemingly admonishing HBOers they were in for a “tough year” to meet AT&T’s goal of making the boutique network “bigger and broader,” in the Times’ characterization, by cranking out subtantially more content to better compete with over-the-top services like Netflix.

“We need hours a day,” the Times quoted Stankey saying. “It’s not hours a week, and it’s not hours a month. We need hours a day. You are competing with devices that sit in people’s hands that capture their attention every 15 minutes.”

The goal, he said, was more engagement.

“I want more hours of engagement,” Stankey said. “Why are more hours of engagement important? Because you get more data and information about a customer that then allows you to do things like monetize through alternate models of advertising as well as subscriptions, which I think is very important to play in tomorrow’s world.”

To many in the rarefied media-world circles of Manhattan and Beverly Hills, that sounded like to smash HBO’s “bespoke culture,” as HBO’s long-time CEO Richard Plepler is wont to describe it, and turn it into a mere content mill.

A fuller transcript of the meeting later published by Recode, which also obtained the audio, provided more context to Stankey’s comments that made them seem less boorish and threatening, but in some ways even more challenging.

What he was basically saying is that HBO needs to become much more of a direct-to-consumer platform than its current creative and operational orientation as a premium pay-TV channel. It’s not all that different from what Disney is currently trying to do with the upcoming launch of its direct-to-consumer streaming service, and what all traditional media companies are trying to figure out. But it will  be a difficult, and perhaps painful, transition.

HBO currently has 140 million subscribers worldwide, about 10 million more than Netflix currently has. Only about 5 million of those, however, are digital-only subscribers. The other 96 percent of its subscribers obtain HBO through some third-party service provider, such as a cable or satellite TV operator, from whom HBO currently collects affiliate fees that account for more than 90 percent of its revenue.

Apart from the strategic challenge of building up a direct-to-consumer business without cannibalizing the existing affiliate-based model faster than that revenue can be replaced, HBO faces a huge operational and cultural challenge to becoming a serious competitive force in the direct-to-consumer space.

For all its star power and cutting-edge programming, HBO is built and operates as a traditional TV network. Its financial structure is built around affiliate fees, its creative output is geared toward prime time viewing, in weekly installments, over the course of a 12 or 16-week season, and its success is measured by ratings.

None of those skills or priorities will get you very far in the world of direct-to-consumer subscription streaming — a world where binge viewing dominates, subscriber churn is high, analytics are more important than ratings, and where variety and breadth of programming are as important as quality.

To compete with Netflix, Amazon, and Facebook — who Stankey mentioned several times in his town hall — for eyeballs and engagement, HBO will need to learn to think about programming for an audience beyond Sunday night prime time viewers and how to hold onto viewers when the program they’re watching is over.

Fortunately, HBO already has some of the tools it will need in place. It already has valuable non-episodic programming, such as sports, particularly boxing, and comedy specials. HBO could also serve as a streaming “front door” to libraries of non-HBO content, either licensed or aggregated from other Warner Media brands.

Still, becoming a predominantly direct-to-consumer brand will require major operational, organizational, financial, and creative changes at HBO. And it’s likely to take more than one difficult year.

Shallow Harbors: EU Poised To Rewrite Rules For User-Generated Content

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Almost from the day the Digital Millennium Copyright Act came into effect, copyright owners have sought to limit the so-called safe harbor protections against infringement liability the law grants to online service providers that host user-uploaded content.

But a series of lawsuits aimed at setting strict limits on the safe harbors, starting at least as early as Perfect 10’s 2002 litigation against CCBill and stretching through the Veoh cases and Viacom’s long-running battle with YouTube, largely failed in that regard and arguably made things worse for rights owners. The result was a series of court rulings reinforcing the strict and precise requirements of the notice-and-takedown system the law spells out for getting infringing content removed from online platforms.

Legislative efforts to limit or weaken the safe harbors fared no better, culminating in the spectacular crash-and-burn in 2012 of the Stop Online Piracy Act (SOPA) in the House and the PROTECT-IP Act (PIPA) in the Senate, which largely scared Congress off similar attempts ever since.

The legal and legislative battles over the scope of online safe harbors outside the U.S. haven’t followed precisely the same paths as here, due to differences in the statutes and case law, but they have led to the same result, more or less: the safe harbors have remained safe for the online platforms.

The tide may finally be starting to turn, however. This week, the Legal Affairs committee of the European Parliament voted narrowly to approve the European Union’s controversial Copyright Reform Directive. The vote establishes the Parliament’s official position on the proposed directive ahead of final discussions with the European Council and the individual member states, although opponents of the measure may yet be able to force a vote of the full Parliament before those discussions can begin.

The most hotly contest provision of the directive is Article 13, which for the first time would establish an affirmative duty on the part of service providers to actively police the content posted by their users for infringing material:

Information society service providers that store and provide to the public access to large amounts of works or other subject-matter uploaded by their users shall, in cooperation with rightholders, take measures to ensure the functioning of agreements concluded with rightholders for the use of their works or other subject-matter or to prevent the availability on their services of works or other subject-matter identified by rightholders through the cooperation with the service providers. Those measures, such as the use of effective content recognition technologies, shall be appropriate and proportionate. The service providers shall provide rightholders with adequate information on the functioning and the deployment of the measures, as well as, when relevant, adequate reporting on the recognition and use of the works and other subject-matter (emphasis added).

That highlighted clause has been the Holy Grail of rights owners from the beginning. As interpreted by the courts, the DMCA imposes no obligation on service providers who follow the requirements of the notice-and-takedown system to actively search for infringing content on their platforms or to filter such content before it can be uploaded.

Instead, the burden of scouring YouTube, Facebook, Instagram, SoundCloud and hundreds of other user-posted content platforms has fallen entirely on rights holders, who then must follow strict procedures to get it taken down. Rights owners have long complained the task is essentially Sisyphean, since each takedown simply leads to a reposting, forcing them to go through the same process all over again.

A few platforms, notably YouTube and Facebook, have offered rights owners tools such as YouTube’s Content ID to partly automate the process. But the results are still after the fact.

What rights owners have long sought — and courts have long denied them — is to impose a legal obligation on service providers to police their own platforms and prevent the uploading of infringing content.

Should the EU’s Copyright Reform Directive become law (still not certain) it would mark the first time a law in a major market imposed such a requirement.

The EU directive, of course, would apply on with the EU, not in the U.S. But as I noted in the RightsTech blog this week, its impact could be far-reaching.

For one thing, it could encourage rights owners to risk going back to the U.S. Congress to demand the same level of protection here has they would get in Europe.

Further, Article 13’s requirement that service providers take measures “such as the use of effective content recognition technologies” could spur the development of many more technologies like YouTube’s Content ID system. Once those tools exist and are in place, pressure will no doubt grow to deploy them in the U.S. as well. Or, as with the EU’s General Data Protection Regulation (GDPR), U.S. based platforms may simply deploy such technologies globally because it would be more efficient than maintaining two different upload mechanisms.

The net result could be de facto shoaling of the DMCA’s safe harbors.

Thinking Inside The Box

Remember the Great Set-Top Box War of 2016? That was the brouhaha touched off by then-Federal Communications Commission chairman Tom Wheeler’s effort to force cable TV operators to “unlock the box” and make their video service available as a standalone feed so that third-party device makers could incorporate the service into their own platforms and within their own user-interface functions.

The proposal met fierce opposition from the TV networks and cable operators, who feared losing control over the uses and presentation of their programming, as well as from the Republican members of the FCC itself.

After a bruising, months-long fight, Wheeler was forced to pull the proposal on the eve of a planned vote. It was later dropped altogether after Wheeler left and a new, Republican-appointed chairman took over.

Yet for all the sturm und drang, a pair of recent announcements suggests that cable operators and box makers are finding ways to move beyond the controversy to achieve at least some of Wheeler’s hopes regarding innovation in the pay-TV market, if not his ultimate goal of breaking up the traditional pay-TV bundle.

At Apple’s Worldwide Developers Conference this week, the world’s biggest (by market cap) device maker announced a wide-ranging partnership with number 2 cable operator Charter Communications to incorporate Charter’s Spectrum TV app into Apple devices.

As part of the deal, the Spectrum TV app will be available on Apple’s next-generation set-top box, the Apple TV 4K, due later this year. Spectrum subscribers will be able to access “hundreds” of live channels, according to the announcement, and “tens of thousands” of video-on-demand titles through the Apple box.

While Charter has made the Spectrum app available on Roku devices since 2015, the Apple integration goes deeper. For one thing, the Apple 4K will incorporate Siri, allowing at least some functions of the box and its apps to be controlled with voice commands.

More notably, Apple’s latest operating system for the 4K box, tvOS 12, will enable the device to access a broader range of Spectrum subscribers’ program permissions and authorizations, including TV Everywhere authentication — one of the principal goals of Wheeler’s proposal. As described in the announcement, “Apple TV simply detects the user’s broadband network and automatically signs them in to all the supported apps they receive through their subscription—no typing required. Zero sign-on begins with Charter later this year and will expand to other providers over time.”

The feature would still require subscribers to get both broadband and video service from Charter, but it moves Apple TV a step closer to being a viable replacement for the traditional cable box.

Also this week, Amazon unveiled the Amazon Fire TV Cube, which combines features of Amazon’s current 4K-capable Fire TV box with those of its Echo smart speaker, including the Alexa voice assistant.

While Amazon has not announced any pay-TV service integrations with the Cube, the box does support HDMI-CEC (Consumer Electronics Control). Though still a bit dodgy, HDMI-CEC is designed to allow devices connected to a TVs HDMI ports to communicate back and forth with the TV, which means Alexa will be able to control at least some functions of compatible TVs though voice commands.

The Cube also contains IR (infra-red) blasters and comes with an IR dongle that attaches to the back of the device, giving Alexa a measure of control over a variety of cable boxes, soundbars and other TV-connected devices.

According to Amazon, the Cube is compatible with “more than 90 percent” of cable and satellite services, including boxes from Comcast, Dish, DirecTV, Charter, and Verizon.

To be sure, both the Apple and Amazon solutions leave the incumbent pay-TV operators in control of subscribers’ program permissions, as well as how that programming is packaged and presented — a grip Wheeler had hoped to loosen. And they do nothing to break up the Big Bundle.

Yet, by introducing innovations such as effective voice control they could begin to render that packaging and visual presentation moot, achieving through attrition what Wheeler tried to achieve by fiat.

 

The Weight Of The World

Shares of Netflix touched $349.29 this week, raising its stock market value to $153 billion, eclipsing Disney’s $152 billion and making the streaming service, briefly, the most valuable entertainment company in the world.

Netflix’s stock has been the top performer in the S&P 500 so far this year, surging nearly 70 percent since January. But a bullish forecast put out last Friday by Bank of America analyst Nat Schindler suggested the peak is yet to come, fueling this week’s rally.

“We believe Netflix still has a considerable opportunity ahead if it can achieve reasonable penetration levels internationally,” Schindler said in a note to clients. “Netflix will face varying levels of competition, regulation and economic conditions in each individual market it participates in, but its content scale should allow it to become the dominant streaming player in virtually all markets.”

Schindler predicts that Netflix’s global subscriber base can continue to grow by 8 percent annually, reaching 360 million by 2030, as consumers in a growing number of markets get access to broadband. Netflix currently pegs its global subscriber rolls at 125 million. Read More »

How The Creative Industries Are Using Blockchain

This was Blockchain Week in New York, formally known as Consensus 2018, an orgy of  blockchain-focused conferences, hackathons, meetups, hookups, seances and parties organized by CoinDesk that actually ran to 10 days. Yours truly was asked to moderate a panel at one such conference, the Blockchain Brand Innovation Summit put on by the CDX Academy and Columbia University Business School, and to offer a few words on how folks in the creative industries are using, or thinking of using blockchain.

I am no kind of expert on blockchain or the various technologies or mathematical concepts associated with it (crypto, consensus mechanisms, smart contracts, etc.). But in my capacity as co-founder of the RightsTech Project I’ve observed how many different sectors of the creative industries are looking to blockchain as a solution — or part of a solution — to a common set of challenges. So, in preparing for the panel, I pulled together a few “thoughts” on the question and came up with five broad use cases, or categories of use cases, for which people in the creative industries seem to be looking to blockchain. Read More »

Comcast And Netflix: We’re Chill

A story appeared this week in the the music trade Digital Music News claiming that Comcast had coerced Netflix into their recently announced agreement to bundle the streaming service in with Comcast’s pay-TV offering by threatening to impose “paid prioritization” charges on Netflix for delivering its streams to Comcast broadband customers.

The story cited an anonymous source, who pointed to a paragraph in the press release announcing the deal, which reported that “Netflix-related billing will be handled directly by Comcast, giving customers one, simple monthly statement,” as evidence of Comcast’s arm-twisting. Read More »

Set-Top Rapprochement

Back in 2012, writing for the now-defunct GigaOm, I predicted that peace would eventually breakout between pay-TV operators and over-the-top services, a process I dubbed the set-top rapprochement (I was able to find one archived example of my musings still available online).

As OTT services evolved into ever-more viable substitutes for traditional TV, pay-TV providers, I assumed, would eventually realize they were better off embracing the enemy that fighting him, lest they be displaced altogether. OTT services, I imagined, would eventually see the benefit to getting their service onto TV-input 1 in households that held onto their pay-TV service, which is to say most of them. Read More »

The Justice Department’s Fanciful Case Against AT&T-Time Warner

There is rarely anything to celebrate when two companies in the same industry decide to merge. Mergers–whether horizontal or vertical–tend to entrench incumbents and raise barriers to entry for disruptive newcomers, which robs consumers of choices.

Within the industry itself, mergers channel capital toward scale, at the expense of innovation, which can lead to stagnation and ennui.

And, while the shareholders of the companies involved may see a short-term windfall, in the long run the buyer generally just ends up inheriting whatever problems drove the seller to sell in the first place, without actually solving them.

So, there is more than ample cause to be skeptical of AT&T’s proposed $109 billion acquisition of Time Warner.

That said, however, the theory of the government’s case for blocking the merger, which went to trial this week, seems cockeyed. Read More »

Mirror Mirror

Netflix’s content chief Ted Sarandos once famously quipped that his goal was for Netflix to become HBO “faster than HBO can become us.” By that he meant, for Netflix to establish itself as a high-end global TV content brand before the reigning high-end global TV content brand, HBO, could un-tether itself from the legacy pay-TV ecosystem.

So far, Netflix is winning that race. The streaming service now reaches over 100 million subscribers worldwide, more than the entire U.S. pay-TV universe, and will spend upwards of $8 billion in 2018 producing 700 original series.

What’s more, Netflix has successfully colonized HBO’s home turf in the living room. Although today you can watch Netflix on virtually any connected device nearly anywhere in the world, the company reported this week that 70 percent of its streams are delivered to a stationary TV set, either directly via smart TV app, via streaming box, or via its growing number of integrations with traditional pay-TV platforms. Read More »

YouTube Under Fire

YouTube. What is it good for?

Not for making a living, apparently. According to new research by Matthias Bärtl of Offenburg University of Applied Sciences in Offenburg, Germany, 96.5 percent of YouTubers trying to make money from their videos won’t earn enough from advertising to exceed the official U.S. poverty line of $12,140 a year.

That’s in part due to YouTube’s low advertising rates, but mostly due to the fact that a tiny slice of videos grab nearly all of the views. According to Bärtl, 3 percent of most-viewed channels in 2016 attracted almost 90 percent of all views.

There’s a broken heart for every “like” on YouTube.

While Bärtl’s research may say more about the unwarranted expectations of most YouTubers than about anything YouTube itself is doing, another new study this week cast the Google-owned site in a more sinister light. Read More »

Disney Sees Red Over Ruling on Download Codes

Ever since sales of DVDs and Blu-ray Discs began their long eclipse behind the rise of more convenient digital alternatives the Hollywood studios have sought ways to extend the life of the high-margin disc business by finding ways to integrate disc sales with the broader digital economy.

The most systematic effort was the UltraViolet initiative. By creating an UltraViolet account, consumers could register their purchase of a DVD or Blu-ray Disc and obtain access to a digital version of the same movie, which they could then stream to connected devices without a DVD or Blu-ray drive, via participating streaming services.

Disney, which never joined the UltraViolet consortium, had its own version it called Disney Movies Anywhere (now re-christened simply Movies Anywhere and incorporating most of the former UltraViolet studios). Disney packaged its discs with an insert containing a code, which, when entered by the consumer in her online Movies Anywhere account allowed her to stream the movie through participating online services, or to download the movie onto up to eight registered devices.

DVD rental kiosk operator Redbox has likewise struggled with consumers’ declining appetite for DVDs and Blu-rays. It’s main strategy has been to keep its rental prices extremely low, which has often put it at odds with the studios, who by and large would prefer to see the low-end rental market wither away. But Redbox, too, has sought ways to make itself digitally relevant. Read More »

Modernizing Music Licensing

Just before Christmas, a bi-partisan group of lawmakers introduced the Music Modernization Act, which, among other things, would create a new blanket license for mechanical reproduction rights to musical compositions and establish a new entity to collect and distribute mechanical royalties.

The bill is meant to address one of the abiding sources of friction within the digital music streaming business. Musical compositions in the U.S. are subject to a compulsory mechanical license, meaning anyone can record a song and sell copies of that recording by sending a notice of intent (NOI) to the composition’s copyright owners and paying a per-copy royalty set by the Copyright Royalty Board.

Unlike the public performance right, however, where performance rights organizations (PROs) like ASCAP, BMI and SESAC aggregate millions of compositions and offer a blanket license covering their entire repertoires, anyone availing themselves of the compulsory mechanical license is required to identify and pay the appropriate copyright owners individually. Where the copyright owners cannot be identified or located, the user can file the NOI with the U.S. Copyright Office and the royalties paid are held in escrow until the rights owners are located.

The system worked well enough for many years when it was rare for anyone or any outlet to make bulk use of the mechanical reproduction right. With the rise of digital streaming, however, which has been held to implicate both the public performance and the mechanical reproduction right, the lack of an efficient system for administering mechanical rights has been a constant source of tension, between digital service providers like Spoity and Apple Music on the one hand, and music publishers and songwriters on the other.

That tension has frequently erupted into litigation, including the $1.6 billion lawsuit filed against Spotify in December by Wixen Music Publishing over Spotify’s alleged failure to pay required mechanical royalties.

Should it become law, the Music Modernization Act could go a long way toward easing those tensions. Since it’s introduction, in fact, the bill has gained broad support throughout the industry. In a rare show of unity, a group of more than 20 industry organizations representing music publishers, songwriters, record labels, PROs, and service providers issued a joint statement earlier this month endorsing the bill and urging its passage.

Much of the credit for the bill’s introduction and for rallying support behind it belongs to the National Music Publishers Association (NMPA) and its CEO David Israelite, who worked closely with the bill’s sponsors on Capitol Hill and helped broker the joint statement. Israelite will sit down with me for a special fireside chat at Digital Entertainment World on February 5th to discuss the Music Monetization Act, as well as other issues facing the industry, including the music industry’s notorious data challenges, and the future of performance rights licensing in the wake of recent court cases.

This week, we asked Israelite a few preliminary questions to set the stage for his fireside chat:

Concurrent Media: Last week, a group of music industry organizations jointly endorsed the Music Modernization Act, the Classics Act and the AMP Act. To what do you attribute the sudden outbreak of cooperation among so many different stakeholders?

David Israelite: We have a window of momentum and consensus that is ripe for action. Congressional leaders like Judiciary Committee Chairman Bob Goodlatte, who retires this year, has made copyright reform a priority, and with songwriter champions like Rep. Doug Collins (R-GA) and Rep. Hakeem Jeffries (D-NY) offering consensus bills like the MMA – and the Senate hopefully following suit – there is a real opportunity to move legislation that will significantly help the future of songwriting. Additionally, the MMA is not a wish list for music publishers and songwriters – it is a bill that took months to negotiate because it helps both the tech and music industries. No one got everything they wanted – but both sides are better off with the MMA. DiMA, which represents the biggest tech companies in the world is supportive, as are the biggest songwriter groups in the U.S.

Largely because of the momentum around the MMA – the music industry has coalesced around other music bills that will help legacy artists and producers. As I have always said – we are stronger together – and we have a great opportunity to not just help our segment of the pie – but to advance the whole creative class. After years of trying to develop and unite around reasonable reforms, it is truly exciting that today we stand together and that Congress is invested in these changes as well.

Where do you think the debate over the BMI/ASCAP consent decrees goes now in the wake of the 2nd Circuit decision?

BMI’s win sends a strong message that the DOJ cannot simply reinterpret decades of industry practice and upend the lives of thousands of songwriters. The new leadership in DOJ’s antitrust division hopefully offers a new path forward, and I believe they are looking at the consent decrees with fresh eyes. My hope is that they will ultimately abolish them altogether and give songwriters the free market that other intellectual property owners enjoy.

3) What is NMPA’s position on the various PRO database initiatives (ASCAP/BMI; ASCAP/SACEM/PRS)?

The PROs currently offer searchable repertoires. Their efforts to create a single database will bring clarity to the industry – however these initiative will take time and money. I look forward to seeing their progress in the coming months.

Click here for information on how to register for Digital Entertainment World.

Explaining Blockchain With Cats

When Satoshi Nakamoto introduced Bitcoin into the world, whoever he, she, or they were set the total number of coins that can ever be released (“mined” in Bitcoin parlance) at 21 million. While individual bitcoins can be sub-divided into an infinite number of smaller units (fractions of bitcoins), the total whole number of units is finite.

CryptoKitties fat cat Mack Flavelle

That inherent scarcity is one of the reasons for the dizzying run-up in the price of bitcoins: At any given time there is a fixed number of bitcoins in the world.

The key to establishing that scarcity is the blockchain, which leverages cryptography to ensure that individual bitcoins (and their subdivisions) are unique, identifiable, unalterable, and un-reproducible. Unlike the internet, where sending a digital file from one computer to another inescapably involves creating a new copy, bitcoins themselves are not really “sent” or transferred over a network so there is no need to create a copy. Instead, the shared ledger that records ownership of bitcoins is updated to reflect the new network address (i.e. owner) of a cryptographically unique asset on the network.

Those properties, of uniqueness and scarcity, are part of what has attracted many artists to blockchain technology. What is unique and scarce can have and hold value, and what has value can be bought and sold, traded and collected, or held as an asset in the expectation of appreciation.

Getting people who are not steeped in cryptography and are accustomed to the infinite reproducibility of digital files on the internet to become familiar and comfortable with the concepts of digital scarcity and uniqueness, however, is a challenge. Without that buy-in from consumers, the blockchain hopes of many in the media and creative industries could be broken.

It was that challenge that Mack Flavelle and his team of developers at AxiomZen set out to tackle. Their solution? Cats.

The team came up with a collection of digital illustrations depicting goggle-eyed, cartoon cats they called CryptoKitties and created an online game allowing people to buy, sell and collect CryptoKitties using Ether. The game also leverages smart contracts to make the kitties “breedable,” based on their unique “DNA,” creating new, unique CryptoKitties.

Why cats? While there are other blockchain-based digital collectibles on the market, most are targeted at limited audiences, such as RarePepes, based on the adopted alt-right mascot Pepe the Frog. Flavelle’s goal was to appeal to a broader market and introduce ordinary consumers to digital collectibels. “Cats are part of the internet,” Flavelle tells RightsTech.  “People are already familiar with the idea of trading cat videos.”

Trading in CryptoKitties has been robust. At one point, it became the dominant application on the Ethereum network, to the annoyance of others trying to use the network.

According to a third-party site that tracks sales of CryptoKitties, some virtual kittens have sold for the equivalent of more than $100,000, based on the then-current value of Ether.

Flavelle, who’s title is Fat Cat, will sit down for one-on-one fireside chat with me on February 6th, as part of the RightsTech track at the Digital Entertainment World conference in Los Angeles.

We’ll discuss the origins of CryptoKitties, what their creators have learned about the market for digital collectibles, what their popularity portends for consumer adoption of blockchain-based applications, and whether CryptoKitties are a fad or will prove to have nine lives.

Click here for information on registering for Digital Entertainment World.

 

Nothing Neutral About Disney’s Bid For Fox

It was fitting, albeit likely coincidental, that the Walt Disney Co. announced its $52 billion acquisition of most of the movie and TV assets of 21st Century Fox on the day the Federal Communications Commission voted to repeal its own net neutrality rules, because the deal is very much about the future of content delivery over the internet.

Disney CEO Robert Iger

Under the deal, Disney would absorb the 20th Century-Fox film and TV studio and its library, including the first three “Star Wars” films; most of Fox’s cable networks group, including National Geographic, FX, and 300-plus international channels but excluding Fox News or Fox Sports; and 22 regional sports networks (RSNs). The deal also includes Fox’s one-third interest in Hulu, giving Disney majority control over the streaming service.

Assuming the deal passes antitrust muster — highly likely given Rupert Murdoch’s closeness to Donald Trump — it will give Disney control over vast new libraries of content as it prepares to significantly expand its direct-to-consumer streaming business. Strategic control over Hulu will also give Disney a solid foundation from which to challenge Netflix and Amazon directly as an over-the-top content aggregator.

Yet, while the coming showdown with Netflix has grabbed most of the headlines about the deal, there is another important streaming dynamic likely to play out that has gotten less attention but which could be directly impacted by the repeal of the net neutrality rules.

Whether, or not, the bulked up Disney succeeds in challenging Netflix and Amazon, its growing direct-to-consumer ambitions give the Mouse a major stake in the coming contest between programming services and broadband providers over the terms and conditions of engagement on last-mile networks.

The over-the-top streaming business has so far developed very differently from traditional movie and television delivery businesses. In the traditional TV business, the owners of the last-mile pipes — cable and satellite operators, local broadcast affiliates — pay program providers for access to their content.

Disney, in particular, has been successful in leveraging that dynamic, earning ESPN the highest per-subscriber carriage fees of any cable network.

Unlike a cable TV system, however, internet access networks have utility and value independent of any particular content, allowing access service providers to build their networks — and subscriber bases — without having to pay for the content moving across those networks.

If anything, the monopoly or duopoly status most internet access providers enjoy within their footprints has raised concerns that ISPs could use the leverage of their control over their networks to compel content providers to pay for access to their subscribers.

The FCC’s original Open Internet Order was designed in part specifically to deny ISPs that leverage, by prohibiting the blocking or throttling of data based on its source, or accepting compensation for favorable treatment of data from a particular source. Those rules left the status quo in place, at least for the time being. But they left open the possibility that the streaming business could eventually develop more like the traditional TV business, in which access providers are compelled to

The FCC has now voted to lift those rules — their ultimate fate awaits the outcome of inevitable litigation — potentially upsetting the current balance of power.

Determining who will ultimately holds the leverage in that balance remains a work in progress, however. One way to read Disney’s bid for Fox is as an attempt to position itself not only against Netflix but against last-mile network operators for the inevitable battles ahead.

From that perspective, the real trigger event for Disney was AT&T’s (still pending) acquisition of Time Warner. Assuming that deal goes through, it will mean that two of Disney’s (and Fox’s) major competitors — NBCUniversal, now owned by Comcast, and Time Warner — will be owned by major broadband providers. That could leave Disney at a disadvantage in the struggle for leverage over the terms of OTT distribution.

One option would have been for Disney to sell itself to a network operator. But the only one out there with the scale to do it and not already betrothed is Verizon, and Verizon execs have made it clear they’re not in the market for a major studio.

By buying Fox, Disney is hoping to gain enough scale as a content provider to treat with network operators on equal or better terms.