What do Netflix, iTunes, Steam, and Spotify have in common? They’ve all achieved astronomical success, and all for the same reason. They made it more convenient to pay for content than to pirate it.
Remember Blockbuster? It was a game-changer, letting us experience media at home on our own terms. Before that, we were at the mercy of showtimes and airtimes, unless you wanted to buy every piece of media. Blockbuster offered freedom, albeit limited, at affordable prices.
Then came the internet, promising even more freedom and convenience. Blockbuster missed the boat, but Netflix didn’t. For a flat monthly fee, instant, unlimited access to thousands of movies and TV shows, all from your couch. You could finally skip the trip to Blockbuster, and pay even less. No wonder Netflix took over the world.
Steam did the same to gaming. iTunes to music, with their 99 cent tracks. Spotify then disrupted iTunes with their service, eliminating the need to own music. Apple Music and others have been trying to copy the Spotify model ever since, to variable success.
“Piracy is almost always a service problem and not a pricing problem. … If a pirate offers a product anywhere in the world, 24x7, purchasable from the convenience of your personal computer, and the legal provider says the product is region-locked, will come to your country 3 months after it’s released in the US, and can only be purchased at a brick and mortar store, then the pirate’s service is more valuable and to the customer, and that’s why people buy there.” – Tim Sweeney
Convenience had won. Consumers chose with their wallets. Then the streaming wars happened. Copyright holders, wanting a bigger slice of the pie, pulled their content from Netflix to launch their own services. Netflix started bleeding subscribers and reacted by raising prices and introducing ads. Meanwhile, competitors struggled to break even, leading to price hikes across the board.
We’re back to the cable TV days, juggling multiple subscriptions for different content. No more “Netflix and chill” for $7.99 a month. And just like with cable, piracy is making a comeback. Isn’t competition supposed to drive prices down and foster innovation? What went wrong here?
Well, as it turns out, convenience is king.
The Paradox of Convenience
The world isn’t black and white. Sometimes, two contradictory ideas can be true. In Netflix‘s case, the market was better for consumers when it was a monopoly. Unlike Spotify, competitors don’t offer the same content. This biforkation of content is what harmed the consumer.
We’ve seen this in gaming too. There was a time when every publisher had their own game launcher, on top of Steam and GoG and Epic. Today, publishes are putting their games back on Steam. They must have felt the drop in sales from no longer being discoverable by Steam users.
This is a very complex issue, but the key takeaway is this: monopolies are not always bad. Netflix serves as a cautionary tale about disrupting a beneficial monopoly. It highlights the importance of considering convenience and affordability when evaluating market competition. Let us not allow our anger with capitalism make us hasty, lest it cost us YouTube. Like we lost Netflix.