Tag: streaming

Final act for the streamers

Netflix introduced ads and now Amazon Prime too. It’s your fault.

Screenshot of Amazon Prime home page on 4 January 2024. Prominent at the top is Saltburn

It’s a three-act drama

In act one it’s about growth—extravagent, out-of-control, venture-funded growth—you remember that. Piling on millions—hundreds of millions—of users as quickly as possible. And in this act the product improves. It has to. Features are added with no concern for cost—bigger libraries, 4K and HDR video, better sound. Data centres blossom everywhere, fast caches and CDNs eliminate latency. Distribution partners are falling over themselves to sign up, production budgets are lavish—insane, in fact (how about $58M per episode?). This is how you acquire a big audience and a chunky annuity income fast.

In act two—in the classical model—it’s crisis. Cheap money is over, we’re told, capital is withdrawn, invested elsewhere, exit horizons shorten. Services collapse or are quietly closed. Even the biggest corporations—the heroes of previous eras—admit defeat: their shabby content libraries and derivative branding weren’t up to the job. And the sheer profusion of competing services with impenetrable offers and stupid names was bound to produce a shake-out. Carnage.

Act three brings resolution—consolidation. Services are merged, prices increased and catalogues simplified. And, for users, everything gets worse. Say goodbye to 4K and password sharing. And, worse, ads are inserted. For a CFO or an investor the logic of the last one is absolutely unarguable. A huge library of video files, sitting on expensive, top-tier servers all over the world, begins to look like an under-exploited asset—or, worse, a liability. I mean they’re really not paying their way are they, all those MP4s? Just sat there, earning a bit of subscription income.

In this phase, that precious movie library is redefined as a vast store of unsold advertising inventory. And, as the economics gets nastier, not inserting ads—not sweating your asset properly—begins to look like a mug’s game. Especially when everyone else is doing it. Investors will only have one question—when are we introducing ads? In this world, the audience is also redefined.

And you, the happy punter, originally thought to be literally the ideal customer because you were ready to give Netflix or Amazon or Hulu money every month whether you used the service or not (basically a mug) begin to look a bit ‘low-yield’. Not really working hard enough for a decent return on investment. You are now the problem.

Big bogus ratio

Golden Ratio, by fdecomite

Anti-piracy people are fond of citing the big ratio. They’re talking about the ratio of paid-for music downloads to non-paid-for (i.e. stolen) music downloads. They like the big ratio because it makes things look really bad for the content industry – it dramatises the narrative. Here it is again, in the FT, quoted by Salamander Davoudi and Tim Bradshaw:

For every track bought online, 20 were downloaded illegally last year, according to IFPI, the international music industry lobby group

But the big ratio is, at best, unhelpful and, at worst, utterly misleading.

When they say: “look. N times as many tracks were downloaded illegally as legally. It’s a tsunami, a cataclysm, an [insert apocalyptic noun here].” they’re making a category error. They’re comparing different categories of behaviour: different because each is conditioned by a different price.

There’s no meaningful comparison. Tracks downloaded for nothing are not the same as tracks downloaded at a price. Stuff that can be acquired for nothing is wholly different from stuff that has to be paid for.

Here the wheelbarrow principle applies: if you hear that Tesco’s are selling tins of beans for nothing you’re going to leave the string bag at home and show up with a wheelbarrow. If the works of James Brown are available for nothing you’re not going to download the Best of… You’re going to download all of it. Discrimination, in a zero price-world, is redundant. And, of course, that’s not to say that discrimination doesn’t happen any more or even that downloaders don’t practice it. It does and they do. Just not at the point of sale.

And meanwhile, the record labels continue to lean on the big ratio, a bogus comparator that doesn’t help us understand the behaviour of music downloaders and can’t help us measure the crisis for the content industry.