Streaming Services Are Dying, and Are Taking Conventional Economics With Them.

Streaming services suck.

They suck for the producer and the consumer. The consumer doesn’t own anything, no matter if they think they own it or not. The producer is crippled by how little streaming services pay them. The current system is broken from the top down, and needs a dramatic overhaul. That means changing the way we look at how the consumers and producers of content need to interact. So what needs to change?

  1. The Illusion of Ownership: Nowadays, we don’t own the vast majority of the digital content we pay for. Users can be locked out of streaming services for any number of reasons, and it can be only one minor flaw that can prevent someone from accessing content they own. Furthermore, even if they might think they own it, restrictions on their actions like DRM mean that they can’t do whatever they want with it, and thus, by definition, don’t own it.
  2. The Abuse of Content Producers: I’m not talking about the Taylor Swifts of the world. If you want to make music, and your music isn’t available for consumers to easily access for free (or nearly free), you can’t compete. Services like Spotify and YouTube effectively allow consumers to consume as much as they want, for next to nothing, while the content producers receive mere shavings off the top. Infrastructure must be put in place where those middlemen services aren’t needed.
  3. Pricing Models: The market has yet to find a nice equilibrium on where the hell we charge consumers for content. For TV Shows, it’s somewhere between free with ads (Hulu), and $15/month (HBO Now). For music, it’s free, unless you consider the time to click through a five second ad a quantifiable cost. And even then, do you own that content, or are you just paying for temporary access?

All of these ideas do point to one idea at their core: the current model is giving us the wrong product (content we don’t own), at the wrong price.

I think like an economist (or to paraphrase my idols Levitt and Dubner, “like a freak”). I think that this shift is signaling something bigger than just changing the way we think about how we pay for music. Instead, it’s fundamentally forcing us to rethink the way we consider supply and demand in a market economy.

If supply and demand held true, then Radiohead wouldn’t have made millions of dollars selling In Rainbows at whatever price consumers wanted to pay. If supply and demand held true, sites like Humble Bundle wouldn’t even exist, let alone generate tremendous revenue for game developers and charities alike.

It signals a move that Daniel Kahneman foretold in his classic of behavioral economics, Thinking Fast and Slow: humans are not “economatons”, and don’t perfectly fit models of market equilibrium.

This isn’t to say that what you were taught in Macro 101 is wrong. Ceteris paribus, they work pretty well. But the difficulty the market is having in finding a way to distribute content to consumers is defined by the current way it clings to these ideas. I’m not a master economist (yet). So I leave you with the potentially billion dollar question: How do we deliver content to consumers in a way that satisfies the demands of consumers and producers?

Figure that out, and then go tell Jay-Z before he and Winn Butler make it rain all over the black hole that is Tidal. I’m sure they’ll appreciate it just as much as the rest of the market.

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