What the Mid-Term Elections Will Mean for Hollywood

Bad news for net neutrality, good news for media consolidations — and an embattled, logjammed Julius Genachowski

OK, so the Republicans are going to take the House and possibly the Senate.

What does that mean for Hollywood?

For months, the media industry has harvested the fruits of the 2010 election in the form of unprecedented amounts of spending on political ads.

But what about the results of those ads?

In just one hint of the potential impact this week, some Republicans critical of the firing of commentator Juan Williams questioned NPR and public broadcasting funding — something that hasn’t happened much lately.

Here are some other likely ripples:

PRESSURE ON FCC CHAIRMAN (and friend of Hollywood) JULIUS GENACHOWSKI

If the GOP wins control of the House while Democrats retain control of the Senate, the resulting logjam will wind up putting more pressure on the Federal Communications Commission and its chairman, Julius Genachowski.

“The oversight would make Genachowski’s life much less pleasant,” said Andy Schwartzman, EVP of the Media Access Project, a public-interest law firm that closely follows communications law. He said House Republicans without the ability to enact legislation would likely try to use Congressional hearings “to hem him in.”

The FCC is already under pressure to make a number of major decisions in the next year. Not only is it reviewing the Comcast-NBCU deal, it needs to decide whether to go ahead with net neutrality conditions and has to review government media ownership rules — which includes how many stations a company can own in a market and whether media companies can buy newspapers and TV stations in the same market.

The good news, though, is that several of the issues the industry has been most concerned about – piracy, for one – could be exceptions to the overall partisan stalemate, because there is broad support for action from both parties.

“The issues that are central to our industry are not partisan," said Howard Gantman, EVP of the Motion Picture Association of America. "Rather they are about promoting creativity and production and creating millions of jobs all across the United States.”

COMCAST-NBCU

Government review of Comcast’s deal for NBCU was supposed to be finished before the new Congress takes over in January. There is now some doubt that timeline will actually be met, but even if the FCC’s review gets delayed until February, it’s far enough along that the deal is unlikely to be much impacted by a Congressional change.

There has been speculation that a government OK would lead to a wave of similar mergers in the entertainment industry. A GOP takeover of the House could ease roadblocks for those, but there have been Republicans and Democrats on both sides on the deal.

The election, however, could rewrite some key Congressional committees examining the deals. In the Senate, it means the retirement of Sen. Byron Dorgan, D-N.D., a populist Democrat, who has often led the charge against media consolidation.  

NET NEUTRALITY

Democrats have the majority of the FCC and have the votes to impose net neutrality if they want, but a Republican takeover of the House would lead Genachowski being called in far more often to face unhappy Congressmen if he moved forward.

While a number of Democrats and Republicans in the House oppose net neutrality, the leadership of the House Energy and Commerce Committee, like the leadership of the Senate Commerce Committee, supports it. That has helped to provide Genachowski cover to proceed.

Under Republican rule in the House, Genachowski would be sharply questioned if he chose to proceed.

In the Senate, both Democrats and some Republicans support net neutrality, but legislation under a Republican House would be unlikely. A close split between the parties, together with some differences between the House and Senate, would most likely serve to extend the legislative logjam on Congress in passing major broadcasting legislation.

OBSCENITY

The FCC’s ability to assess fines for broadcast indecency violations is in doubt because of a court ruling. Another appellate court ruling about CBS’ telecast of the Janet Jackson Super Bowl wardrobe malfunction halftime show is imminent.

The impacts of those two rulings could well play out in the next Congress, especially if, as expected, the FCC’s fining of CBS stations for the Janet Jackson case is overturned.

Republicans have been more generally concerned about indecency issues, and GOP control of the House could serve to heighten attention to them. Still it’s not yet certain who would lead the House Energy and Commerce Committee under Republicans, and the exact court decision could play a big role in deciding exactly what happens.

PIRACY

Probably the issue where the election will have the least difference. Both Democrats and Republicans believe piracy is hurting the U.S. economy, and both support legislation that would step up government enforcement.

The biggest difference here is who writes the legislation — and even that is unlikely to change. Sen. Pat Leahy, D-Vt., who now heads the Senate Judiciary Committee, is expected to move forward with legislation.

Consumer groups, who have warned that the legislation could impact privacy rights, will likely get less attention in a GOP-led House, but a number of their concerns have already helped to shape legislation.

MEDIA OWNERSHIP

The FCC is required to re-examine rules that regulate how many stations one company can own in a market, whether a newspaper and TV station can buy each other and a number of other related rules.

In recent years, the subject has been a source of major controversy. Media companies argue that existing rules are antiquated and should be eased to ensure local media thrives; consumer groups argue that easing rules would give consumers fewer choices for content, news and information.

Congress will play a major role in determining how changes play out, and GOP control of the House would likely increase pressure for further easing of the rules.

CARRIAGE WARS

Cablevision’s fight with Fox has again demonstrated the problems with the current retransmission carriage law that gives the FCC little authority to act when disputes bog down.

Both the House and Senate could well hold hearings on the issue either next month or next year, but enacting legislation could be complicated.

A GOP takeover of the House would probably decrease the possibility that Congress would give the FCC authority to act to impose settlements, but Congressmen of both parties are getting complaints, and there could be some bipartisan push for legislation that would at least give viewers more notice of upcoming problems.

Democratic control also could lead to the FCC getting some authority to resolve disputes; Republican control could lessen that possibility.

There’s also a possibility Cablevision could resolve its fight with Fox before the new Congress takes over.

PRIVACY

A fight over behavioral tracking on the web that is likely to play out in the next Congress could have all sorts of impact on big media companies looking to targeted ads to help boost internet revenues.

Recent stories, a number of them by the Wall Street Journal, about personally identifiable information about users being shared with advertisers have increased the likelihood of legislation next year.

Consumer groups are urging legislation that would require websites to get specific user opt-in permission before they could engage in behavioral tracking. This could make it much more difficult for sites to offer ads based on users’ surfing activities.

Both Republicans and Democratic legislators are irate, but Democrats would likely move forward with broader legislation.