10/06/2015 05:32 EDT | Updated 10/06/2016 05:12 EDT

How 4 Digital Giants May Ignite a New Trust-Bust Era

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Peter Dazeley via Getty Images
Online judgement/auction

Will Google, Apple, Facebook, Amazon (the GAFA) ignite a new trust bust era ?

Even though events in the Mideast demonstrate that our world remains chaotic and very much driven by geopolitics, oil and the possibility of escalated military conflict, our digital and virtual worlds are also being rocked by a new cold war between giant "nations" vying for the crown: Google, Apple, Facebook and Amazon, the so-called GAFA.

The days of collaboration symbolized by Google's chairman Eric Schmidt sitting on Apple's board seem all but over, and the tech industry will be affected by what amounts to a new digital cold war. Advance warnings of what's to come include Apple decoupling itself from Google Maps and Facebook "greying" out YouTube videos in the feed, but such events remain few and far between.

The decision by Amazon, the world's largest retailer, to stop selling its competitors' over-the-top devices such as Google Chromecast and AppleTV is a preemptive strike with possibly momentous implications.

As summarized by Tim Carmody on the Verge:

"Amazon's decision to ban sales of Apple TV and Google's Chromecast and Nexus Player from its retail store, including its partner stores, somehow manages to be both a total surprise and not a surprise at all. It's not surprising because everyone's gotten used to a multi-front platform cold war, where the big tech companies try to outmaneuver each other by controlling as much of their own ecosystems as possible, while grudgingly granting and denying access to each other's products and services depending on the deals and strategic advantage available. I mean, this is basically the reason Amazon's Prime Video service isn't on Apple's or Google's video devices in the first place."

M.G. Siegler's Medium article This is why we can't have nice things (in the living room) is a very astute summary of the power plays at work:

"The Holy Grail of the living room is to be able to walk in, hit one button, ideally "Power," and to sit back and let the content roll before your eyes. The reality is more like: hit the "Power" button, try to remember which one of the HDMI inputs is connected to the device you want, cycle between those inputs until you land at the right one, then grab the other remote for that device and start searching for the content you want. It's a nightmare. For all its flaws, that's the beauty of cable. The industry was able to take over the living room in such a way that turning on the television was the same thing as turning on cable. It was always on in the background, and its input was the default."

Let's ponder the possible scenarios that could unfold here:

1. Apple and Google could start the process for a court case.

If history is any indicator, such a case could result in landmark decisions akin to the 1948 Supreme Court decision which re-ordered the entertainment business. We could be on the cusp of an era of tech trust busts. The case could be as follows: by unfairly blocking access to consumers' ability to purchase their product, Amazon is using its near monopoly on retail as a anti-competitive tool. This case could also lead to a new era of "commoning", enforced by the U.S. justice system. The roots of the internet via DARPA could conceivably be used to justify reasonable and equitable access to digital networks.

Control of entertainment devices has been a violent clash of interests since their inception in the late 19th century. It would seem that history has a habit of stuttering.

2. Apple decides to buy Netflix to strike Amazon and establish itself as the core provider of digital entertainment.

Apple has made rumblings on the content front that Andrew Wallenstein reported on August 31. I provided some context in a previous article here. My hunch is that the Amazon move could force Apple into a much more large-scale content initiative. Apple's hardware focus is such that it needs content to push regular upgrades to its product line-up. Should Amazon continue to play hardball, Apple could be compelled to strike it in the jugular and go big by acquiring Netflix.

3. Netflix uses this digital cold war to emerge as a white knight by merging -- à la AOL-TimeWarner -- with a cable operator.

Netflix is reinventing itself as HBO, but part of HBO's clout has always been its corporate parent TimeWarner. Netflix incubated Roku and spun it off so it relies on others to get its content in front of its subscribers. Given the digital cold war at play, Netflix could feel the pressure of being sandwiched between hardware makers like Apple and the cable companies.

Netflix' growth and global footprint make it an attractive stock, and it could very well ape the Steve Case playbook and use its stock to merge with a major cable operator. That market is also being rocked by the mediaquake after the Charter-TimeWarnerCable merger and more consolidation on the way. European cableco Altice's two-punch entry into the U.S. market in a matter of months, acquiring Suddenlink and now Cablevision, will spell more deals. With a little under five million U.S. cable subscribers, Altice is already number four in the market. The Netflix-Altice match is an interesting possibility that could remake the US cable and entertainment business.


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