Friday, July 12, 2019

Is Netflix killing the movie biz in order gain market share and capture investment? [#5999]

Matt Stoller has a very interesting article on the fate of movies in the streaming era, The Slow Death of Hollywood, July 9, 2019. He notes, among other things, that comedy is dying, if not dead, "There effectively have been no comedy smash hits for nearly a decade." Power is consolidating:
Today, Netflix, Disney, and every would-be streaming service are tossing money at producers to create content for them. And YouTube seems to be a surfeit of endless content. But these are largely mirages. Peak TV is a bubble, which will pop when the winners shake out. YouTube has been fighting over copyright for a long time, because copyrighted content is very important to the service. Moreover, the artists doing well are at the very top with everyone else left behind. [...] In fact, without significant public policy changes, it is far more likely that the future of Hollywood much more closely resembles the sterile movie cineplex than, and less the temporarily abundant surplus of content on streaming services.
It's back to the old days (1920-1950s) of the integrated studios:
Netflix, aside from losing money, has also slowly reconstructed the old vertically integrated studio system. The company is an integrated production and streaming service; if you want to distribute through Netflix, you work increasingly on Netflix’s terms, and vice versa. And Netflix pushes whatever content it wants at Netflix users, based on whatever algorithm it chooses. This is a similar story as Amazon, which spends large amounts of money on content, with content being a mostly minor part of its otherwise massive business. These are long-term predatory pricing plays, with predatory pricing meaning selling below cost to acquire market power, a practice that used to be illegal prior to the 1980s. Of course, these rules are not absolute; powerful creatives still have leverage, but the broad middle of creators do not.

Netflix and Amazon are driving what I call “Concentration Creep” across the industry. Concentration Creep means that consolidation in one part of an industry causes consolidation in other parts. Disney, for instance, is trying to mimic Netflix by launching what may be a below-cost streaming service. It also bought Fox’s media assets, so it can bulk up and gain market power. And Trump’s Antitrust chief, Makan Delrahim, is considering getting rid of the Paramount Consent Decrees, which might prompt Amazon or Netflix to simply buy a movie theater chain.

It’s becoming increasingly clear that the only goal now in Hollywood is to gain market power in distribution or must-have content production, and then use that monopoly power to reduce the quality of output and reduce the bargaining leverage of artists. Even the agents, who are supposed to represent artists, are getting into the vertical integration game. The net effect is higher prices, less pay to artists, a less creative industry, and ultimately, the death of the Hollywood ecosystem of storytelling.
What to do?
But there’s no reason we have to build a highly concentrated storytelling industry on top of the internet, which used to be the most decentralized communications technology ever imagined in human history. The answer to the question of whether Hollywood can be saved is a resounding YES. Fundamentally, streaming is a commodity service; Netflix isn’t anything special, it’s just a good infrastructure service which has morphed into a monster attempting to control our access to content. Disney is just trying to become a monopoly studio of branded must-have content, and reproduce Netflix’s power. Movie chains are too big. And so on and so forth. These are all just political choices.

In other words, we should aim to restore open markets for content again. This means separating out the industry into production, distribution, and retailing. We should probably ban predatory pricing so Netflix isn’t dumping into the market. And we should probably begin a radical decentralization of chains and studios.

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