4 ms·

Netflix is a business success and a product success. They played a difficult game and won. I don't have anything disparaging to say about them as a company, but

Netflix is a business success and a product success. They played a difficult game and won. I don't have anything disparaging to say about them as a company, but as a type of company.... We (as consumers & residents of an economy) need to pay attention to what Peter Thiel called "monopoly" when he (playing provocateur) said that "competition is for losers." The reason Netflix became so successful, and managed to play with the entertainment oligopolies is that they built and control a bottleneck. They are the biggest streaming company, one of a handful in any given market. Terrestrial TV came with frequency band issues. Broadcasting had to be licensed so everyone wouldn't step all over eachothers' signals. This resulted in a structural oligopoly, where only a handful of licencees could broadcast. Then cable came. This came with physical infrastructure, and structural tendencies to local monopoly. They also developed an oligopolistic industry structure, where licensing and content acquisition is only really possible if you are fairly big. Now internet. Online, Netflix and other streaming companies have built their companies specifically around the goal of owning a bottleneck. This time, there is no tangible reason for it. It's just a tendency of digital services that one service "wins" a race to monopolize a sector. There are a ton of inefficiencies in an oligopolistic market. I pay for house of cards by subscribing to Netflix. You pay for American gods by subscribing to Amazon. Why can't we both watch both shows? It wouldn't defund the shows, since we both keep paying the same. It wouldn't be skin off either of our noses either. Show creators would prefer universal availability and so would consumers. The reason Amazon and Netflix want this situation to exist, is because it maintains their respective "moats." There is no string underlying economic (pertaining to resource allocation and scarcity) reason for it. Basically, we need to watch out for these intermediaries. They are very innovative and consumer friendly in their first decade or two. That's how they succeed at first. Later, they succeed by maintaining their monopolies any way they can.

cptskippy 8y ago
> Makers would prefer that and so would consumers Unfortunately makers aren't the ones controlling the content. You forgot about the Studio Oligarchy that wishes to control exactly how and when you consume their content. They can negotiate higher royalties out of the likes of Netflix and Amazon through exclusivity. Another tactic employed by studios is artificial scarcity. Disney is a pioneer in this technique and routinely locks movies in the vault until demand peaks then releases them at $25 a pop which is a premium over all but new releases. When was the last time you saw Alice In Wonderland for $9 at Best Buy? Never. The studios are even starting to roll their own streaming services to compete with Netflix and Amazon. This is why Netflix, Amazon, Hulu, and now even Apple are becoming their own studios. Because the streaming business itself is dying and you either need to be the content provider or the service provider to survive. Eventually studios and ISPs are going to start merging into one proprietary pipe.
dpark 8y ago
> Basically, we need to watch out for these intermediaries. In what sense is the company that plans, funds, creates, and delivers a show an "intermediary"? > Why can't we both watch both shows? It wouldn't defund the shows, since we both keep paying the same. It wouldn't be skin off either of our noses either. Show creators would prefer universal availability and so would consumers. You are proposing that all content should be free. You just don't realize that's what you're saying. You believe you should get Amazon content for free because you pay for Netflix. You argue this doesn't de-fund, but it does, because if I can watch Amazon content for free, I'll cancel my subscription to Amazon. I'll pay for the cheapest streaming service that exists if it somehow grants me access to the entire world of content. Universal access would mean a race to $0/month.
- dalbasal 8y ago
  To your first point, "delivers" is the key term. Netflix' "moat" is built around being the deliverer of content. It does other things too, but they are optional. I'm not saying Netflix suck. They don't. You believe you should get Amazon content for free because you pay for Netflix. It's impolite to tell people what they believe, or what they said, so I'll take these as conversational questions. In any case, I do not. I am pointing out an inefficiency, a suboptimal economic resolution of the kind a more competitive market dynamic would tend to minimise. The primary reason intermediaries pay extra for exclusivity is exclusivity, cutting out their competition. This doesn't generally happen in markets with enough buyers and sellers. If there were only two or three retailers in a market, they'd be cutting exclusivity deals with wholesalers or manufacturers of goods.
  - dpark 8y ago
    > I am pointing out an inefficiency, a suboptimal economic resolution of the kind a more competitive market dynamic would tend to minimise. The primary reason intermediaries pay extra for exclusivity is exclusivity, cutting out their competition. This doesn't generally happen in markets with enough buyers and sellers. I am pointing out that your claim is fundamentally contradictory. You assert that universal access would not "defund", but your universal access idea is predicated on a free market driving down the cost of access across the board. It realistically cannot be both. You can't have Netflix bundle Amazon content and vice versa and not expect a drop in total revenue. Sure, you'd expect some additional subscribers, but you'd also expect current dual-subscribers to cancel one of their subscriptions[1], and you'd also expect Netflix and Amazon to be reduced to competing primarily on price, driving revenue down. Exclusives drive an increase in funding because they encourage the market to pay for more than one option. > If there were only two or three retailers in a market, they'd be cutting exclusivity deals with wholesalers or manufacturers of goods. It happens all the time. Crate and Barrel sells exclusive furniture designs. So does every other furniture store. It's not hurting the market and in fact increases choice because most retailers actively pursue the creation of new exclusives. [1] There aren't a lot of people paying for HBO Go and HBO Now. Once you've got access to the content, you don't pay for it in other ways as well.
sievebrain 8y ago
Netflix built a global CDN. That's physical infrastructure which isn't readily replicated
- draw_down 8y ago
  Lot easier to build out than a content business, believe it.

cptskippy 8y ago

> Makers would prefer that and so would consumers Unfortunately makers aren't the ones controlling the content. You forgot about the Studio Oligarchy that wishes to control exactly how and when you consume their content. They can negotiate higher royalties out of the likes of Netflix and Amazon through exclusivity. Another tactic employed by studios is artificial scarcity. Disney is a pioneer in this technique and routinely locks movies in the vault until demand peaks then releases them at $25 a pop which is a premium over all but new releases. When was the last time you saw Alice In Wonderland for $9 at Best Buy? Never. The studios are even starting to roll their own streaming services to compete with Netflix and Amazon. This is why Netflix, Amazon, Hulu, and now even Apple are becoming their own studios. Because the streaming business itself is dying and you either need to be the content provider or the service provider to survive. Eventually studios and ISPs are going to start merging into one proprietary pipe.

dpark 8y ago

> Basically, we need to watch out for these intermediaries. In what sense is the company that plans, funds, creates, and delivers a show an "intermediary"? > Why can't we both watch both shows? It wouldn't defund the shows, since we both keep paying the same. It wouldn't be skin off either of our noses either. Show creators would prefer universal availability and so would consumers. You are proposing that all content should be free. You just don't realize that's what you're saying. You believe you should get Amazon content for free because you pay for Netflix. You argue this doesn't de-fund, but it does, because if I can watch Amazon content for free, I'll cancel my subscription to Amazon. I'll pay for the cheapest streaming service that exists if it somehow grants me access to the entire world of content. Universal access would mean a race to $0/month.

dalbasal 8y ago
To your first point, "delivers" is the key term. Netflix' "moat" is built around being the deliverer of content. It does other things too, but they are optional. I'm not saying Netflix suck. They don't. You believe you should get Amazon content for free because you pay for Netflix. It's impolite to tell people what they believe, or what they said, so I'll take these as conversational questions. In any case, I do not. I am pointing out an inefficiency, a suboptimal economic resolution of the kind a more competitive market dynamic would tend to minimise. The primary reason intermediaries pay extra for exclusivity is exclusivity, cutting out their competition. This doesn't generally happen in markets with enough buyers and sellers. If there were only two or three retailers in a market, they'd be cutting exclusivity deals with wholesalers or manufacturers of goods.
- dpark 8y ago
  > I am pointing out an inefficiency, a suboptimal economic resolution of the kind a more competitive market dynamic would tend to minimise. The primary reason intermediaries pay extra for exclusivity is exclusivity, cutting out their competition. This doesn't generally happen in markets with enough buyers and sellers. I am pointing out that your claim is fundamentally contradictory. You assert that universal access would not "defund", but your universal access idea is predicated on a free market driving down the cost of access across the board. It realistically cannot be both. You can't have Netflix bundle Amazon content and vice versa and not expect a drop in total revenue. Sure, you'd expect some additional subscribers, but you'd also expect current dual-subscribers to cancel one of their subscriptions[1], and you'd also expect Netflix and Amazon to be reduced to competing primarily on price, driving revenue down. Exclusives drive an increase in funding because they encourage the market to pay for more than one option. > If there were only two or three retailers in a market, they'd be cutting exclusivity deals with wholesalers or manufacturers of goods. It happens all the time. Crate and Barrel sells exclusive furniture designs. So does every other furniture store. It's not hurting the market and in fact increases choice because most retailers actively pursue the creation of new exclusives. [1] There aren't a lot of people paying for HBO Go and HBO Now. Once you've got access to the content, you don't pay for it in other ways as well.

sievebrain 8y ago

Netflix built a global CDN. That's physical infrastructure which isn't readily replicated

draw_down 8y ago
Lot easier to build out than a content business, believe it.