Tuesday, July 3, 2018

Come to think of it, I'll bet we can find a venture capitalist who'll go for the discounted twenties plan

As bubbles go, the glut of video content is in many ways fairly benign. It means lots of work or people in the industry and a ton of often very good shows for viewers (so many that the main complaint is the inability to keep up). Furthermore, with the exception of Netflix (which may have some very unhappy investors at some point in the future), most of the money seems to be coming from companies with such deep pockets that a few billion here are there can go relatively unnoticed. Apple, for instance, could set up a line of street corner kiosks that sell $20 bills at 50% off and it still wouldn't make a dent in the company's profits.

But though the content bubble is probably nothing to get upset about, it is still worthy of study as an example of the mentality. In particular, this story nicely illustrates how the bubble mania and the fear of missing out of the next big thing creates its own kind of dream logic that overrides normal rational concerns.

As previously mentioned, even before the bubble the amount of content available was probably growing faster than the market, especially when we focus on the United States (more on that later). The introduction of smart phones and to a lesser degree tablets did significantly increase the potential hours of purview or consumption, but that was a one time bump and we are probably seeing it leveling off by now.

Content accumulates. It is true that programs tend to lose audience appeal with time, but the drop off is often quite slow. Numerous movies and TV shows maintain a shockingly stable viewership over the years. I Love Lucy and Perry Mason have maintained a following for over 60 years now. Blocks of MASH run on at least a half-dozen basic cable channels and show up in local syndication in pretty much every market. Some shows even have a resurgence. Golden Girls (no, I can't explain it either) has gone from obscure, to retro, to ironic, to genuinely cool, a status it didn't even achieve in its original run.

Even if the production of new programming had remained steady, there would be real concerns about oversupply, but instead it has exploded with more and more programs featuring bigger and bigger budgets. With each year, the unsustainability of the model has become increasingly obvious and yet the idea that you have to be producing your own content to survive has become an ever more closely held item of faith.

A couple of interesting assumptions get baked into these discussions. One is that you have to have your own content. The other is that the future of online video is the subscription all-you-can-the model. Both are highly suspect. As for the first, there is reason to believe that, while almost all of the hype and marketing center on the Netflix originals, much if not most of their viewership comes from licensing existing programs like blockbuster movies or old shows like the aforementioned Golden Girls.

As for the second, this is basically just the old cable TV bundling strategy (which everyone hates) dressed in 21st century drag. With both models, you are paying for programming you have no interest in ever watching. With streaming services, this has been momentarily obscured by a willingness to just break even or even lose money, but that is not likely to go on indefinitely.

The Apple programming slate suggest something close to peak bubble mentality. They are spending obscene amounts of money on big-name talent, most of which has extremely limited international appeal. They have no idea how these shows fit into their existing business plan. They have no need to be producing original content at all. They are doing this strictly because of the extraordinary popular delusion that not being part of this bubble will mean being left behind in the new economy.

From the Verge:

That’s an impressive roster, but it’s important to remember that Apple is building its catalog from the ground up. It has to catch up to streaming companies that have had years-long head starts and are currently producing hundreds of titles. And while we have dedicated platforms from heavy hitters like Amazon Prime, Hulu, and Netflix, as well as exclusive systems such as Stargate Command and CBS All Access, Apple has yet to announce exactly where any of these announced shows will debut.

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