In DOJ Trial, Where Are the Concerns Over AT&T Privacy Practices?
It's interesting and instructive to read the trial notes from the court case covering the DOJ's lawsuit against AT&T, particularly in light of the recent Facebook privacy scandal.
On the one hand, we have Facebook CEO Mark Zuckerberg facing a congressional roasting for the company's inadequate protection of consumer data. At the same time, AT&T Inc. (NYSE: T) is arguing in court about how its acquisition of Time Warner Inc. (NYSE: TWX) is critical specifically because of the data that the merged companies can leverage together.
To be clear, data privacy isn't the reason the Antitrust Division of the U.S. Department of Justice is trying to block the AT&T merger. (See AT&T Likens DoJ Suit to Shaved Persian Cat.)
But the topic of AT&T's data ambitions has come up during the trial, along with some fascinating details on how data trafficking works in today's pay-TV market.
Likewise, the concerns over Facebook's handling of user data isn't comparable today to the AT&T situation. The social media company allowed personally identifiable information to be scraped away by the truckload for years. Still, the information about TV data practices that is leaking out suggests that lawmakers should be paying closer attention before a crisis of Facebook magnitude comes to the television sector. (See Facebook: The Sick Man of Silicon Valley.)
First off, Time Warner executives are making the argument that the content company needs AT&T to gain better data about its viewers, which it can then monetize through targeted advertising. In an excerpt of the trial transcript published by analyst Richard Greenfield of BTIG Research, CEO John Martin of Turner Networks (which is owned by Time Warner) says that right now, "We donít know who our viewers are. And as a result of that, we can't market directly to them. We can't speak to them. We don't even know how to make programming that we know for sure that they will like. And we certainly don't know what type of advertisements might resonate with them where they actually might like that."
This, again, is why Time Warner wants AT&T as a parent company -- user data. And the fact that both companies believe that data is valuable enough to warrant an $85 billion merger suggests just how massive the financial incentives are.
AT&T CEO Randall Stephenson reiterated the point in testimony yesterday, according to Variety, saying that using a combination of data from AT&T's wireless and DirecTV businesses would generate returns of three to five times what Time Warner gets from advertising now.
Second, testimony during the trial illustrates how different distribution companies are currently leveraging viewing data, and specifically what a lack of consistency there is across the market. Through its agreement with Hulu LLC , for example, Turner gets access to personally identifiable information (PII) from viewers including names and addresses that it can use in ad sales. With Dish Network LLC (Nasdaq: DISH)'s Sling TV, however, while Turner gets access to viewer data, it's not allowed to pair that information with its ad inventory.
"Itís like having a bicycle, and you can ride it inside. It means I canít use the data to monetize," says Coleman Breland, president of Turner Content Distribution and Turner Classic Movies, in the BTIG transcript.
Lack of consistency sets up an uneven playing field, and that's ultimately going to put pressure on the players that are currently not allowing PII data to be used in advertising.
Finally, it's interesting to note which TV viewer data isn't considered worthwhile within the pay-TV ecosystem. Breland says that his team was pitched set-top data from Comcast as part of their content licensing negotiations. But when his people investigated further, they "came back and said itís not valuable. Itís data that we can get elsewhere."
The fact that Comcast's set-top data isn't valuable shows exactly why those companies that can produce better information wield so much power. And now that other players are waking up to that fact, we can only expect there to be more turf wars and attempts at data consolidation. (See also AT&T Exec Dishes That He's Not So Hot on Rival-Partner Comcast.)
The reason that all of these details are so interesting is that, as BTIG analyst Greenfield points out, so much of this information rarely ever reaches the public eye. It comes out behind closed doors in nasty fights that are only going to get nastier as the financial stakes continue to rise.
Now that the information is in public view, however, everyone would be wise to start paying attention.
— Mari Silbey, Senior Editor, Light Reading