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.
Such a dynamic isn’t just a problem in terms of a more arid artistic world, but is a political and national security problem. We learn a lot from our movies and TV shows, including about politics and geo-politics.
The U.S. military tends to subsidize movies that make them look good; with fewer producers of movies, such subsidies will have more impact, and perhaps make it less likely artists criticize the state or powerful corporations. But the free expression problem imports overt government censorship into America and the entire West.
The Slow Death of Hollywood