5 ms·

The low prices were never sustainable. Streaming companies have ever-increasing costs and they can either make money with subscriptions, one-time rental fees (c

The low prices were never sustainable. Streaming companies have ever-increasing costs and they can either make money with subscriptions, one-time rental fees (common on Amazon Prime Video) or advertisements -- or a combination of those. Low subscription prices are sustainable when the subscriber base is growing and continually bringing in more money, but at some point most of the customer base has been reached and then the only way to increase revenue is to raise prices. Until recently, streaming customers have had their subscription prices subsidized by subscriber growth. Why can't streaming companies be happy with the revenue they already have? They need to increase revenue not solely because shareholders demand it, but also because the price of content continues to increase, especially when content providers know they have leverage when licensing terms are negotiated. The bigger a streaming company gets, the more eyeballs will see the content, so content providers feel justified in asking for more money. Also, streaming companies generally have libraries of content that increase in size over time, so the total money they pay for licensing will also continue to increase even if the price of each piece of content does not. On top of all that, they need to pay for the infrastructure to deliver all the bytes. (This is why Disney's streaming service is in such a good spot -- they already own the content, and they have a huge back catalog.) Say what you will about the cable companies (and they really do suck) but their pricing was not entirely a result of monopolistic practices. Price pressure from content owners was also a major factor, and it is such a strong force that streaming companies can't escape it.

chii 6y ago
It's a problem of business model to me. Streaming companies are starting to look like cable companies, because the "system" incentivizes exclusivity of content. When netflix started, they didn't make their own content, but instead licensed it. They offered fast and reliable services, and the content was tangential. But as soon as content producers (and other media companies including cable companies) saw how profitable netflix was, they either raised their content license fees, or withdrew it to add to their own streaming service for exclusivity. Therefore, netflix needed to complete with exclusivity. This is starting to look like the cable days. I would propose that all content producing companies have to license their content to anyone who is willing to pay, at the "same" price (per user? per year? etc? this is something yet to be decided). That is, a content producer cannot charge one entity one price, and another entity a different price, nor refuse to license it to another entity (in the same way that a store cannot charge one customer one price, while another customer gets a different price).
- nitrogen 6y ago
  That is, a content producer cannot charge one entity one price, and another entity a different price, nor refuse to license it to another entity (in the same way that a store cannot charge one customer one price, while another customer gets a different price). Compulsory licensing for mass-distributed media is a good idea. Ever since the Napster days I've wished the media market worked kind of like a spot electricity auction market, and any provider could bid on any show.
  - hakfoo 6y ago
    Aside from simpler billing, this would also encourage innovation in the tech space separate from the content space. If I develop a service with a clever new gimmick-- a better recommendation algorithm, a clever social feature, improved accessibility, whatever, it's dead in the water today due to no content. I have to sell out to a big player to have any chance at traction. If I can just pay for a compulsory license, I can focus on the thing that makes my offering unique. I also think compulsory licenses might provide a desirable social benefit-- separating the artist from their work in the public's eye. Look how every election year you get the songwriters beefing and suing "I don't want campaign A playing song B". If everyone knows all content can be compulsory licensed, the air of endorsement is gone and nobody has to get inconvenienced or angry.
    - patrickyeon 6y ago
      Specifically to the campaigns playing songs, copyright also has a concept of "moral rights", specifically one considered "right to integrity of the work". Where this lands on a technical legal standpoint I'm not qualified to speak to, but it's something interesting to read up on. Not everything covered by copyright is a purely economic transaction. To varying degrees, some or most art is an expression of the artist and means something to them. There's more to seeing someone you disagree with use a piece you poured your heart and soul into than just an assumed endorsement.
      - nitrogen 6y ago
nitrogen 6y ago
Until recently, streaming customers have had their subscription prices subsidized by subscriber growth. This makes no logical or arithmetic sense. How does adding more watchers improve profitability if each viewer has the same associated costs? The code is written. You just need content. Either each viewer pays enough for the content that viewer sees, or they don't. If the content Say what you will about the cable companies (and they really do suck) but their pricing was not entirely a result of monopolistic practices The cable companies own a lot of the content companies though.
- imtringued 6y ago
  I disagree with the idea that subscriber growth is subsidizing anything as well. There are probably some grandfathered subscriptions but Netflix can just set a time limit for those discounts. If Netflix is losing money from grandfathered subscribers then it would be better to just cancel their subscriptions. If they don't cancel the subscription then the loss they are making is a user acquisition fee/marketing fee and not a subsidy.
- twblalock 6y ago
  > How does adding more watchers improve profitability if each viewer has the same associated costs? Because each additional viewer does not cost the same as the previous one. Why would you assume that?
  - nitrogen 6y ago
    Past the point of ROI on marketing spend, every new viewer adds the same burden on infrastructure and licensing, do they not?
    - twblalock 6y ago
      Netflix does not pay a license fee per viewer. They generally negotiate multi-year deals that are priced in advance at fixed rates. Whether one person or a million people watch a show, Netflix pays the same licensing fees. Plus, a Netflix membership is like a gym membership. Some users watch a lot more content (and cost more in terms of infrastructure) than others. Much like at a gym, all subscribers pay but only some cost as much as they pay. If a gym only charged people who showed up, the fees would need to be much higher. If every subscriber cost more than they brought in, Netflix would have gone flat broke years ago. There is a reason shareholders wanted subscriber growth and got spooked when it slowed.
IAmGraydon 6y ago
> Low subscription prices are sustainable when the subscriber base is growing and continually bringing in more money, but at some point most of the customer base has been reached and then the only way to increase revenue is to raise prices. This makes no sense. These services charge a monthly fee. What you are saying only applies to business models that charge a single upfront fee.
- xg15 6y ago
  I think it works under some circumstances, for a limited time: Imagine you have some fixed costs per user and some fixed revenue per user. Revenue is less than costs, so in theory, you should make a loss each month. However, imagine you find a way to have costs lag a month behind revenue: A user pays their fee on first of month n, costs occur on first of month n+1. Then as long as you keep acquiring new users, you can "run away from your costs" by paying your gap with the "extra fees" of new users. Of course this is completely unsustainable and basically a ponzi-scheme - but I imagine there will be temptation to do this, as long as there is sufficient growth...

chii 6y ago

It's a problem of business model to me. Streaming companies are starting to look like cable companies, because the "system" incentivizes exclusivity of content. When netflix started, they didn't make their own content, but instead licensed it. They offered fast and reliable services, and the content was tangential. But as soon as content producers (and other media companies including cable companies) saw how profitable netflix was, they either raised their content license fees, or withdrew it to add to their own streaming service for exclusivity. Therefore, netflix needed to complete with exclusivity. This is starting to look like the cable days. I would propose that all content producing companies have to license their content to anyone who is willing to pay, at the "same" price (per user? per year? etc? this is something yet to be decided). That is, a content producer cannot charge one entity one price, and another entity a different price, nor refuse to license it to another entity (in the same way that a store cannot charge one customer one price, while another customer gets a different price).

nitrogen 6y ago
That is, a content producer cannot charge one entity one price, and another entity a different price, nor refuse to license it to another entity (in the same way that a store cannot charge one customer one price, while another customer gets a different price). Compulsory licensing for mass-distributed media is a good idea. Ever since the Napster days I've wished the media market worked kind of like a spot electricity auction market, and any provider could bid on any show.
- hakfoo 6y ago
  Aside from simpler billing, this would also encourage innovation in the tech space separate from the content space. If I develop a service with a clever new gimmick-- a better recommendation algorithm, a clever social feature, improved accessibility, whatever, it's dead in the water today due to no content. I have to sell out to a big player to have any chance at traction. If I can just pay for a compulsory license, I can focus on the thing that makes my offering unique. I also think compulsory licenses might provide a desirable social benefit-- separating the artist from their work in the public's eye. Look how every election year you get the songwriters beefing and suing "I don't want campaign A playing song B". If everyone knows all content can be compulsory licensed, the air of endorsement is gone and nobody has to get inconvenienced or angry.
  - patrickyeon 6y ago
    Specifically to the campaigns playing songs, copyright also has a concept of "moral rights", specifically one considered "right to integrity of the work". Where this lands on a technical legal standpoint I'm not qualified to speak to, but it's something interesting to read up on. Not everything covered by copyright is a purely economic transaction. To varying degrees, some or most art is an expression of the artist and means something to them. There's more to seeing someone you disagree with use a piece you poured your heart and soul into than just an assumed endorsement.
    - nitrogen 6y ago

nitrogen 6y ago

Until recently, streaming customers have had their subscription prices subsidized by subscriber growth. This makes no logical or arithmetic sense. How does adding more watchers improve profitability if each viewer has the same associated costs? The code is written. You just need content. Either each viewer pays enough for the content that viewer sees, or they don't. If the content Say what you will about the cable companies (and they really do suck) but their pricing was not entirely a result of monopolistic practices The cable companies own a lot of the content companies though.

imtringued 6y ago
I disagree with the idea that subscriber growth is subsidizing anything as well. There are probably some grandfathered subscriptions but Netflix can just set a time limit for those discounts. If Netflix is losing money from grandfathered subscribers then it would be better to just cancel their subscriptions. If they don't cancel the subscription then the loss they are making is a user acquisition fee/marketing fee and not a subsidy.
twblalock 6y ago
> How does adding more watchers improve profitability if each viewer has the same associated costs? Because each additional viewer does not cost the same as the previous one. Why would you assume that?
- nitrogen 6y ago
  Past the point of ROI on marketing spend, every new viewer adds the same burden on infrastructure and licensing, do they not?
  - twblalock 6y ago
    Netflix does not pay a license fee per viewer. They generally negotiate multi-year deals that are priced in advance at fixed rates. Whether one person or a million people watch a show, Netflix pays the same licensing fees. Plus, a Netflix membership is like a gym membership. Some users watch a lot more content (and cost more in terms of infrastructure) than others. Much like at a gym, all subscribers pay but only some cost as much as they pay. If a gym only charged people who showed up, the fees would need to be much higher. If every subscriber cost more than they brought in, Netflix would have gone flat broke years ago. There is a reason shareholders wanted subscriber growth and got spooked when it slowed.

IAmGraydon 6y ago

> Low subscription prices are sustainable when the subscriber base is growing and continually bringing in more money, but at some point most of the customer base has been reached and then the only way to increase revenue is to raise prices. This makes no sense. These services charge a monthly fee. What you are saying only applies to business models that charge a single upfront fee.

xg15 6y ago
I think it works under some circumstances, for a limited time: Imagine you have some fixed costs per user and some fixed revenue per user. Revenue is less than costs, so in theory, you should make a loss each month. However, imagine you find a way to have costs lag a month behind revenue: A user pays their fee on first of month n, costs occur on first of month n+1. Then as long as you keep acquiring new users, you can "run away from your costs" by paying your gap with the "extra fees" of new users. Of course this is completely unsustainable and basically a ponzi-scheme - but I imagine there will be temptation to do this, as long as there is sufficient growth...