Category: Television
Netflix economics and the future of Netflix
Ted Gioia writes:
Netflix’s market share has been declining steadily, and has now fallen below 50%. One estimate claims that the company’s share of consumers fell more than 30% in a single year. Netflix’s recent quarterly report was a disaster, spurring a share sell-off. You could easily conclude that “Netflix’s long awaited funeral is finally here”—as Bloomberg hinted in its blunt assessment of the results.
Of course the company is still worth quite a bit, so my own view is no more or no less optimistic than what the market indicates. Still, it is worth asking what the equilibrium here looks like. There is also AppleTV, Disney, Showtime, HBOMax, Hulu, AmazonPrime, and more. I don’t think it quite works to argue that we all end up subscribing to all of them, so where are matters headed? I see a few options:
1. Netflix and its competitors keep on producing new shows until all the rents are exhausted and those companies simply earn the going rate of return on capital, with possible ongoing rents on longstanding properties of real value (e.g., older Disney content). These scenarios could involve either additional entry, or more (and better?) shows from the incumbent producers.
2. Due to economies of scale, one or two of those companies will produce the best shows and buy up the best content. We end up with a monopoly or duopoly in the TV streaming market, noting there still would be vigorous competition from other media sources.
3. The companies are allowed to collude in some manner. One option is they form a consortium where you get “all access” for a common fee, divvied out in proper proportion. Would the antitrust authorities allow this? Or might the mere potential for antitrust intervention makes this a collusive solution but one without a strict monopolizing, profit-maximizing price?
4. The companies are allowed to collude in a more partial and less obvious manner. Rather than a complete consortium, some of the smaller companies will evolve into “feeder” services for one or two of the larger companies. Those smaller companies will rely increasingly more on the feeder contracts and increasingly less on subscription revenue. This perhaps resembles the duopoly solution analytically, though a head count would show more than two firms in the market.
It seems to me that only the first scenario is very bad for Netflix. That said, it seems that along all of these paths short-run rent exhaustion is going on, and that short-run rent exhaustion is costly for Netflix. They keep on having to pump out “stuff” to keep viewer attention. It doesn’t matter that new shows are cheap, because as long as the market profits are there the “bar” for retaining customers will continue to grow. Very few of their shows are geared to produce long-term customer loyalty toward that show – in contrast, people are still talking about Columbo!
Putting the law aside, which economic factors determine which solution will hold? My intuition is that there are marketing economies of scale, but production diseconomies of scale, as the media companies grow too large and sclerotic. So maybe that militates in favor of scenario #4? That to me also suggests an “at least OK” future for Netflix. The company would continue its investments and marketing and an easy to use website, while increasingly going elsewhere for superior content.
My Israel-only Conversation with the excellent Russ Roberts
Here is the audio, video, and transcript, here is the CWT summary:
In this special crossover special with EconTalk, Tyler interviews Russ Roberts about his new life in Israel as president of Shalem College. They discuss why there are so few new universities, managing teams in the face of linguistic and cultural barriers, how Israeli society could adapt to the loss of universal military service, why Israeli TV is so good, what American Jews don’t understand about life in Israel, what his next leadership challenge will be, and much more.
We didn’t shy away from the tough stuff, here is one question:
COWEN: Let me ask you another super easy question. Let’s say we think that under current circumstances, a two-state solution would not lead to security either for Israel or for the resulting Palestinian state. Many people believe that. Let’s say also, as I think you believe, that a one-state solution where everyone votes would not lead to security for a current version of Israel or even a modified version of it.
Let’s say also that the current reliance of the Palestinian territories on the state of Israel for protection, security, intelligence, water — many important features of life — prevent those governing bodies from ever attaining sufficient autonomy to be a credible peace partner, guaranteer of its own security, and so on. From that point of view, what do we do? We’re not utilitarians. We’re thinking about what’s right and wrong. What’s the right thing to do?
Do read Russ’s answer! (Too long to excerpt.) And:
COWEN: Now, the United States has about 330 million people, yet there are more Israeli TV shows I want to watch than American TV shows. There’s Srugim, there’s Shtisel, there’s Prisoners of War, there’s In Judgment, there’s Tehran. There’s more. Why is Israeli TV so good?
ROBERTS: I’m glad you mentioned Prisoners of War, which doesn’t get enough — Prisoners of War is in my top five. If I had to list my top five, I’d pick Shtisel, Prisoners of War, The Americans, probably The Wire, and The Crown. Do you have a top five that you could reel off?
COWEN: The Sopranos would be my number one. Srugim and Prisoners of War plausibly would be in my top five.
We then consider the Israeli topic at hand. Interesting throughout, a very good dialogue.
What to Watch
Some things I have watched, some good, some not so good.
Cobra Kai on Netflix: A reliable, feel good show, well plotted. It plays like they mapped each season in advance covering all permutations and combinations of friends turning into enemies and enemies turning into friends. Do I really need five seasons of the same thing? No. But I still watch. Popcorn material.
Maid on Netflix: I appreciated the peek into the difficulties of managing the welfare system and pulling oneself up by one’s bootstraps when your family is pulling you down. Margaret Qualley (Andie MacDowell’s daughter who plays her mother on the show) has an odd charisma. It’s been noted that she is an impossibly perfect mother. Less noted is that she is a terrible wife, a poor daughter to her father and a bad girlfriend. Everyone deserves a break is the message we get from this show, except men. Still, it was well done.
The Last Duel is one of Ridley’s best. Superb, subtle acting from Jodie Comer–deserving of Oscar. Slightly too long but there are natural breaking points for at home watching. N.B. given the times it can’t be interpreted ala Rashômon as many people suggest but rather the last word is final which reduces long term interest but I still liked it.
Alex Rider on Amazon: It’s in essence a James Bond origin story. If that sounds like something you would enjoy, you will. I am told the books are also good for YA.
14 Peaks: Nothing is Impossible: A mountain documentary following Nimsdai Purja as he and his team attempt to summit all 14 of the world’s 8,000-meter peaks in seven months. In many ways, the backstory–Purja is a Gurka and British special forces solider–is even more interesting. It does say something that most people don’t know his name.
The Eternals on Disney: Terrible. Didn’t finish it. A diverse cast with no actual diversity. Kumail Nanjiani, Dinesh from Silicon Valley, plays his super hero like Dinesh from Silicon Valley. Karun, the Indian sidekick, is the most authentic person in the whole ensemble. Aside from being boring it’s also dark, not emotionally but visually. It doesn’t matter the scene, battle scenes, outdoor scenes, kitchen table scenes–all so dark they are literally hard to see.
Wheel of Time: It’s hard to believe they spent a reported $10 million per episode on this clunker. The special effects were weak, the editing was bad, the mood-setting and world building were poor. The actors have no chemistry. Why would anyone be interested in Egwene who shows no spunk, intelligence or charisma? For better in this genre is The Witcher on Netflix.
The French Dispatch (theatres and Amazon): I loved it. Maybe the most Wes Anderson of Wes Anderson movies, so be prepared. Every scene has something interesting going on and there’s a new scene every few minutes. A send-up and a love story to the New Yorker. Lea Seydoux is indeed, shall we say, inspiring.
Samsung markets in everything
What would Marshall McLuhan say?:
Staring at your non-fungible tokens on a smartphone or laptop screen is fine and all, but why not remind everyone who visits your home of the money you spent on digital art NFTs by showcasing them on your TV screen? Somehow we’re in a world where that’s about to become reality: Samsung says it’s planning extensive support for NFTs beginning with its 2022 TV lineup.
Here is the full story, via the excellent Samir Varma.
*The Many Saints of Newark*
Much better than its reviews, though the drama only works for those with an intricate knowledge of The Sopranos proper, and perhaps of Northern New Jersey as well. The performances are uniformly excellent and the historical detail remarkable (where did they get that Bamberger’s delivery truck? The store disappeared in 1986.) The younger versions of the characters are simply uncannily accurate, though perhaps young Carmela struck me as a bit too modern looking? I view the core theme as one of unfreedom and determinism. As a viewer, you see the characters as unfree because you already know what is going to happen to them. As the story unfolds, you see how much they are unfree in a more fundamental sense as well. No one talks conceptually, except for the uncle in prison, who also is the only free person in the story. Recommended, but probably for the dedicated only. To really follow and understand the film, you need to have all the images of the earlier Sopranos scenes, including settings and not just characters, filed away in your mind.
More on US vs. UK television shows
From Alex Griffiths:
In a recent article you wrote about the historic difference between British and American panel shows and I wanted to share my theory.
I think that there are two factors at play in the difference between British and American panel shows. 1. Market size, 2. Culture. 3. What is funny in US vs. UK.
1. Historically the small number of domestic television stations that the British television market could make profitable (until very recently 5 at most) meant that unlike in America there was limited choice and further the talent pool of people working on the programmes was also small and so the people making the programmes had both the ability due to being smaller to be relatively nimble to changes in culture and also had little choice but to watch the selection they were picking and so had an incentive to make the programming interesting to watch.
By contrast in America with its comparable size it was easier to fund lots of movies for different audiences but when it comes to television it was more difficult for major networks to necessarily change direction (a TV schedule is zero sum whereas you can simply add new films to a cinema selection) and additionally in American TV you could easily hate what you do and still watch something else on a different channel.
2. Combined with this is a different attitude towards comedy and television culture. In America TV seems to be more “working class” as a medium and aimed more at making people feel good- e.g Friends, Rosanne, Cheers, and even Frasier that most British of American TV is aimed at laughs as Frasier has already made it, whereas in the UK television has been more middle class orientated and about betterment and self improvement even if done with a comic twist. Almost every top British show ever made is about people trying to go upwards economically, politically or socially, e.g. Blackadder, Only Fools and Horses, Fawley Towers, Yes Minister, Porridge.
3. An example of the difference between British and American comedy which I found quite a good summary (I can’t remember who said it), imagines a comedy sketch where a musician is playing a guitar badly and a man comes up and smashes it over the musician’s head. The contention is that an American comic would want to be the one smashing the guitar whereas a British comic would want to be the one getting hit with the guitar. America, the ultimate immigrant nation goes for obvious and broad comedy so everyone can understand whereas the British, comparably more dominated by class distinctions and still a lot more culturally homogeneous, goes for the joke about subverting the norm which of necessity requires an understanding about norms in a society.
I just want to finally add that whilst historically I would say that British panel shows have been better than American ones I think the Internet and its rise in a wider selection of shows, as well as a shift towards just raw viewership numbers as the dominant motivator for television programmes, has meant that there has been a decline in the quality of British television programming and that with every passing year it seems more and more like the US market which is sad but I’m not sure reversible without a UK television subscription service which can afford to raise its ambitions.
Why are American talk shows so much worse than British ones?
Sam Enright emails me:
My girlfriend is American, and she’s been struck by how the UK panel shows – QI, Would I Lie to You, 8 Out of 10 Cats – are so much better than the American ones, and play to the lowest common denominator less. There don’t seem to be a lot of panel shows in America per se, but the closest thing is late night shows, and so far as I can tell, they’re all terrible. A lot of whining about politics. Previously good comedians like Trevor Noah or John Oliver seem to become remarkably un-funny upon becoming hosts of US shows. Yet America has no deficit in producing quality films and TV in general. Do you have a theory about this? Are there culture-specific cues that I’m not picking up on? Is the American elite more competitive and therefore more politically unified, and does this filter down to there being a remarkably narrow range of views you can implicitly endorse in American comedy? Is it all just that the BBC has good taste in what it funds?
I don’t watch enough television to have an informed opinion, but my general intuition is often that the American market has all sorts of hidden corners and niches, many of them stupid, so often there are especially high returns to “selling out.” In Britain, maybe it is more the case that “the TV customers you see are the TV customers you get”? This hypothesis, while it can lead to cultural dumbing down, is also consistent with the U.S. market as especially good for new product introduction, and not just because population is high. Any opinions on the TV issue?
U.S.A. fact of the day
According to one recent measure, ninety-three of the top one hundred American television programs watched live across a single year have been sports related. More people watched the Super Bowl than the Oscars, Emmys, Grammys, Golden Globes, and Tonys combined.
It is for this reason that I find it puzzling when some people simply are not interested in sports at all. I find the “sports are just stupid” attitude defensible (though it is not my view), but that would in turn seem to make sports all the more interesting.
That is from Jonah Lehrer’s Mystery: A Seduction, A Strategy, a Solution, just published by Simon and Schuster.
Elon on SNL
He started by declaring that he speaks in a monotone and “has Asperger’s,” was funny and self-assured during the rest of the introduction, brought his mom on stage, and later played a variety of roles, including murderer, awkward guy at a party, a Mario character (Wario), and an Icelandic TV producer. He played a financial analyst repeatedly asked to explain “What is Dogecoin?” (Dogecoin was down significantly during the evening). The final skit was a gold-mining motif, something like “why are we panning for this gold when we can just invent our own currency?” Elon’s plan was to dig a tunnel to get at the bad guys. I enjoyed his line: “And I like self-driving horses, which are just…horses.”
He was funnier than any of the professional comedians.
Is there anything in American business history even vaguely comparable to this event?
Who is the best-known, non-political American married couple?
With Bill and Melinda Gates divorcing, and Kanye and Kim doing the same, America now has a paucity of very well-known married couples, at least outside of politics, where Barack and Michelle Obama reign supreme.
Who is the Lucy and Desi of our time? The George Burns and Gracie Allen? The Sonny and Cher?
George and Amal Clooney are in the running, but is she so well known to most Americans? Could they tell you her name from scratch, or cite what she is known for?
Kurt Cobain has passed away, as has Kobe Bryant, Larry and Laurie David split some time ago, and John and Yoko and Paul and Linda (an honorary American couple, for media purposes) are distant memories. Movie stars barely still exist these days.
Perhaps Elon Musk will marry Grimes, who is a musical star of some renown.
Woody Allen and Soon-Yi Previn have been married for 24 years, and they are pretty well known.
Harry and Meghan maybe are becoming an American couple, at least for media purposes?
Who else?
How rational was Spock?
[Julia] Galef was curious to see exactly how often these predictions pan out. “I went through all of the Star Trek episodes and movies—all of the transcripts that I could find—and searched for any instance in which Spock is using the words ‘odds,’ ‘probability,’ ‘chance,’ ‘definitely,’ ‘probably,’ etc.,” she says. “I catalogued all instances in which Spock made a prediction and that prediction either came true or didn’t.”
The results, which appear in Galef’s new book The Scout Mindset, are devastating. Not only does Spock have a terrible track record—events he describes as “impossible” happen 83 percent of the time—but his confidence level is actually anti-correlated with reality. “The more confident he says he is that something will happen—that the ship will crash, or that they will find survivors—the less likely it is to happen, and the less confident he is in something, the more likely it is to happen,” Galef says.
Spock’s biggest weakness is his failure to understand that other people don’t always behave “logically.” He also makes no attempt to update his approach, even when his mistakes get his crewmates killed.
Here is the full Wired story, and here you can buy Julia’s new book. I wonder if he is more rational in the Star Trek movies than in the TV shows, or how about in the fan fiction? Exactly where is the demand for dramatic irrationality highest, and why?
My Conversation with the excellent Dana Gioia
Here is the audio, transcript, and video. As I mention in the beginning, Dana is the (only?) CWT guest who can answer all of my questions. Here is part of the summary:
Dana and Tyler discuss his latest book and more, including how he transformed several businesses as a corporate executive, why going to business school made him a better poet, the only two obscene topics left in American poetry, why narrative is necessary for coping with life’s hardships, how Virgil influenced Catholic traditions, what Augustus understood about the cultural power of art, the reasons most libretti are so bad, the optimism of the Beach Boys, the best art museum you’ve never heard of, the Jungianism of Star Trek, his favorite Tolstoy work, depictions of Catholicism in American pop culture, what he finds fascinating about Houellebecq, why we stopped building cathedrals, how he was able to effectively lead the National Endowment for the Arts, the aesthetic differences between him and his brother Ted, his advice for young people who want to cultivate their minds, and what he wants to learn next.
And here is one excerpt:
COWEN: Why is Olaf Stapledon an important writer?
GIOIA: It’s not a question I expected.
COWEN: How could you not expect that?
GIOIA: Well, first of all, I hope people know who Olaf Stapleton was. Tremendously influential, rather clumsy, visionary, early science fiction writer who wrote novels like Odd John and the First and Last Man. What Olaf Stapleton did was I think he was the first really great science fiction writer to think in absolutely cosmic terms, beyond human conceptions of time and space. That, essentially, created the mature science fiction sensibility. If you go even watch a show like Expanse now, it’s about Stapledonian concerns.
COWEN: He was also a Hegelian philosopher, as you know. My friend Dan Wang thinks Last and First Men is better than Star Maker. Though virtually all critics prefer Star Maker.
GIOIA: Michael Lind, the political writer, and historian, Stapledon is one of his formative writers. Star Maker is kind of an evolution of the Last and First Men. Odd John is kind of the odd, the first great mutant novel.
Definitely recommended. And I am very happy to recommend Dana’s latest book (and indeed all of his books) Studying with Miss Bishop: Memoirs from a Young Writer’s Life.
LBRY in NYTimes
Last week I wrote about Elrond, yesterday another one of the blockchain firms that I advise, LBRY, made the NYTimes. LBRY is YouTube on the blockchain and it’s not just a White Paper but a working product and potentially serious competitor to YouTube. The piece by Nathaniel Popper, however, is swarmy with a lot of bullshit innuendo like this:
Minds, a blockchain-based replacement for Facebook founded in 2015, also became an online home to some of the right-wing personalities and neo-Nazis who were booted from mainstream social networks, along with fringe groups, in other countries, that have been targeted by their governments. Minds and other similar start-ups are funded by prominent venture capital firms like Andreessen Horowitz and Union Square Ventures.
Get it? Without exactly lying, Popper associates venture capital with supporting neo-Nazis. Garbage reporting. It’s like saying last year 75% of neo-Nazis ate at McDonald’s, their favorite all-American restaurant. Or, neo-Nazis have been known to use Apple phones to arrange their rallies. Or neo-Nazis often pay for their purchases using a private, untraceable means of payment marked by strange symbols and widely used to illegally purchase drugs, guns, and prostitutes.
Surprisingly, the real story is in the sub-head, “companies inspired by cryptocurrency are creating social networks, storing online content and hosting websites without any central authority.”
And do check out LBRY, a platform from which you cannot be deplatformed.
*The Shield Penetrators” — some further Star Trek viewing
Not many people know this obscure episode, because it was shot during the third season as an “extra,” to be used in a fourth season that never materialized. But here is the basic plot line. Kirk and the Enterprise visit a planet that, by mistake, received errant TV transmissions of “The Beverly Hillbillies” centuries ago. The inhabitants of that planet, being highly impressionable, have since organized their society along those principles and with Appalachian clothing, albeit with less couth manners. These creatures are mostly backward, but they have two special powers. First, neither Vulcan neck pinches nor phasers “set on stun” affect them, and second they have the ability to just walk through the otherwise protective shields of the Starship Enterprise.
In the episode, these “Penetrators,” upset at the backward state of affairs on their own planet, and encouraged by a nearby Klingon commander, attempt to take over the bridge of the Enterprise, using pipe bombs, chemical irritants, and Molotov cocktails, throwing one of the latter at Chekhov. Their motives are varied, but their manner is undeniably hostile and they arrive in a great swarm. Kirk issues orders to respond vigorously, and the intruders are stopped. This is, after all, the bridge of the Enterprise.
It is protected by a single, sliding door.
One member of Starfleet Command, an enemy of Kirk’s since they were classmates together at the Academy, attempts to have Kirk tried on charges of authorizing excess force against the Penetrators. But neither the Starfleet admirals nor the television audience side against Kirk. It was, after all, the bridge of the Enterprise that was being stormed. The Command also issues a statement recognizing the red-shirted Enterprise security guards for their (usual) valor in such extreme and perilous circumstances.
The Klingon commander escapes unscathed, though a well-aimed phaser shot cripples the communications ability of the Klingon ship.
Addendum: You won’t find this episode in the Star Trek DVD box, or on streaming, but recently they have put parts of it on TV. And here are my previous Star Trek posts.
The Best Movies and Television Shows about Invention
Anton Howes, author of the excellent Arts and Minds: How the Royal Society of Arts Changed a Nation, asked on twitter about the best movies and televisions shows about invention. Here’s the collated list.
Anton started watching Pad Man, which is on Netflix and loved it. It’s based on the true story of a man who invented a cheap way of making sanitary pads for women in India which I was familiar with, from the TED talk, but I didn’t know about the movie. It is excellent! Great story, especially strong on the costs of innovating when the inventor must overcome social ostracism and ridicule as well as the difficulties with creating the invention itself. Also some great shots of Maheshwar India.