A few weeks ago, I watched Scavengers Reign, a Sci-Fi, adult animated series. I went to YouTube to hopefully rent a copy of the show or, if necessary, buy the season, as I had done a couple of years ago with Succession. Unfortunately, I wasn’t given the opportunity to do this. The only option would have been to start a free trial with HBO Max. No thanks. I found another way to watch the show. 
Why do companies do this – why do they give up the guarantee of money for the possibility that someone will sign up for a free trial and, once they’ve experienced a streamer, will willingly sign up for a $15-$20 a month recurring payment?
From a 2023 article entitled, With Subscription Fatigue Setting In, Companies Need to Think Hard About Fees, writer Jay 	Fitzgerald notes that “The average US consumer last year spent $273 a month on 12 paid subscriptions… With its attractive recurring revenues for companies, the subscription model has grown so popular that nearly 75 percent of companies that sell directly to customers have some sort of subscription offering, according to a new industry and background note coauthored by Harvard Business School Professor Elie Ofek.”
This trend is unlikely to decrease anytime soon. From the same article, “A recent analysis revealed that subscription-based companies have grown 3.7 times faster than the S&P 500 over the past decade, according to coauthor Amy Konary, senior vice president of the Subscribed Institute & Marketing Strategy at Zuora. Consider companies like the cloud storage provider Dropbox; Apple, which charges monthly for cloud storage, music, and more; and Facebook parent Meta, which offers subscription services for creators and virtual reality gamers.”
The situation is perhaps even most drastic when examined through the lens of legacy media. 
The daily newspaper is dying and is, for all but a few prestigious national papers (WSJ, NYT, US Today) almost assuredly not going to survive another 10 years. Digital media is cheaper to produce (no need to deal with printing presses or paper costs), timelier (it doesn’t need to wait 24 hours for a news update or correction to a story), and convenient for the readers (it’s only a click [and sometimes vocal command] away). The problem for legacy media is that the lifeblood of the industry, advertising, has been hoovered up by tech giants like Facebook and Google.
In a Forbes article entitled, “Why The Future Of Media Is Subscription-Based, Falon Fatemi looks at how the media landscape is shifting: “While the subscription model is often framed as an alternative to an ad-based model, these days, this is rarely the case. The New York Times has always has ads and still does; at nearly ten million subscribers, it also has the most paying digital customers of any publisher. Neither Twitter, Meta nor Snapchat’s subscription services boast “ad-free” as one of their key offerings...While the subscription-model has many benefits, and not needing to rely on advertising is certainly one of them, that is not the main reason that the future of media is subscription-based. Customization, privacy and security controls, and a reliable revenue stream are the key reasons that we are seeing—and will continue to see—this business model boom.”
Or will we?
Subscriptions make sense when customers see value – especially when that value continues to increase every month. A few episodes back I talked about Chris Dixon’s book Read Write Own and his concept of the Attract – Extract cycle. Cory Doctorow described a similar process on his blog in a post from January 2023: 
Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.
Commenting on Doctorow’s Blog in a Mother Jones article entitled, “Why Reddit Is Destined to Turn to Crap”, Ali Breland writes, “In their beginning phases, Doctorow elaborates, new platforms need users. So they create a situation that’s advantageous for them. He recalls how Amazon initially offered cheap, accessible products, but, as competitors were swept aside or died, Doctorow says the company entered a less user-beneficial, but presumably more profitable, phase, as it made it harder for customers to find the best products by prioritizing sellers who paid Amazon the most for ads.
You can see the same trend at Facebook, where its feed went from being a useful tool to keep tabs on people around you, to a slightly less useful tool boosting the content of business that the company wanted on the platform, to a chamber of emotional incitement designed to maximize user engagement. At Uber, after subsuming the taxi industry, trips became more expensive and paid out less to drivers.”
Will we see the same thing at the streaming services? Almost definitely.
From a 2024 article from Quartz called “Hulu and Disney+ are losing subscribers as the streaming industry struggles to turn a profit”, Bruce Gil writes, “Only three U.S. video subscription services have managed to turn a profit in the 17 years since Netflix launched the streaming revolution: Netflix, Hulu, and most recently Warner Bros. Discovery... One reason is that video streaming services have done a terrible job at keeping subscribers. In the last four years, the weighted average churn rate for U.S. streamers has almost tripled to 5.5%, according to a new report from the streaming analytics firm Antenna.”
This is despite billions of dollars spent on customer acquisition and dozens of entries into the streaming world. There are at least 10 US based streaming services with at least 10 million subscribers, not mentioning several gloriously short-lived failures (CNN Plus and Quibi probably being the two most memorable). 
Gil doesn’t see the situation improving for consumers: “Recent trends in the industry — such as a crackdown on passwords, price hikes, and additional advertising — has turned off consumers and has led to a rise in visits to piracy websites. Netflix, Disney+, Hulu, and Spotify all increased their rates in 2023, with Netflix and Disney+ adding ad spots to some of their formerly commercial-free plans in late 2022. Some streamers have already lost net subscribers this past year. Subscribers to Disney+ fell 7% to 150 million in the three months ending Dec. 30, from 160 million, while Hulu’s subscribers in the same time period fell 3% to 48 million.”
To increase the value proposition, it’s likely that there will be additional consolidation in the years to come. Per a Motley Fool article from earlier this year that surveyed 2,000 Americans, “Sixty-two percent of respondents who have a video streaming service subscription believe there are too many streaming options, Forty-seven percent of respondents spend more than $30 per month on video streaming services, 43% spend less than $30 per month, and the remaining 10% don't know how much they’re spending. 46% of respondents said they’re subscribed to more video streaming services than they were a year ago, down from 54% in 2022. And 37% said they’re subscribed to fewer services, up from 13%.

It’s quite possible that the “Golden Era” of streaming is over and that we are now, per Dixon’s definition, entering the extract part of the cycle. The one thing that could keep customers happy, quality entertainment, may also be in decline. 
From an NPR Fresh Air interview from earlier this year, writer Daniel Bessner talks about the conflicted feelings that Hollywood has with Netflix and how they have changed:
It's a great point because initially, people welcomed streaming, very much so, particularly Netflix, because what Netflix would do is that they would oftentimes, I think, actually always, guarantee creators that if the show was purchased and green lighted after, you know, several stages of development, they would make an entire season of the show, and you didn't have to worry about things like Nielsen ratings. For example, I talked to a couple of producers, and they were like, yeah, we'd wake up and we'd look at the Nielsen ratings, and at first, when we were dealing with Netflix, it felt so freeing to not have to do that. So there were significant benefits to Netflix initially, not only in the fact that they didn't focus on ratings, but they greenlighted quite adventurous shows and not only Netflix, but other streaming services. Netflix famously had "BoJack Horseman," but other services had things like "I Love Dick" or "Dickinson," a show based on a 19th-century poet, which probably would have been greenlighted in the 1980s or 1990s. So there were some benefits. However, over time, and as often happens in gold rushes, gold rushes aren't good for working conditions because a lot of people are trying to strike that gold vein and get rich quick. So it created, for a variety of reasons, downward pressure, first on writers' wages, and then on writers' working conditions. In particular, people have spoken about mini-rooms, which are basically writers' rooms that are convened before the production of a show as the show is being developed. Usually they don't last very long - about eight to ten weeks. I spoke with someone whose writers' room actually lasted only four weeks.
in the 1940s, the studios were vertically integrated. In other words, exhibition and production were integrated, were held by the same company. The exhibition then was only, of course, theaters, which meant that they could choose the movies that they would show. They could choose a combination of movies that they would show in theaters, they could prevent theaters that are not part of the integrated entity from showing movies. The artists in the 1940s were in long-term contracts and they were tied to a studio. So they basically worked for a studio regardless of how successful they were and only [at] the end of the contract, they were able to renegotiate the contract with a studio [or] move to another studio.
So basically, the studios made all the money from both the production, the success of films – to be fair, also if film a failed, it was theirs – and also from the exhibition of the movies. And they were able to push movies that were less successful as part of the package to theaters as well. That ended in the Paramount decision in 1948, which separated production from exhibition. In 2020, this decision was reversed in court. But it was reversed in a very narrow sense. In other words, studios can now, I guess, own theaters, but theaters are no longer the only or even the leading way of exhibition. So we’re now back to where we were, in the sense that the leading form of exhibition, which is streaming, is owned by the same people who are producing the shows. All the studios except for Sony essentially have streaming services.


In 2006, John McCain tried to pass the Consumers Having Options in Cable Entertainment Act, the goal of which was to introduce more a la carte options for consumers, which would have possibly reduced prices by roughly 15%.
The bill failed but highlighted consumer frustration with cable – the bundle required you to pay for channels whether or not you actually watched them. This can be extremely lucrative for some channels. Famously, ESPN’s cable rate is sky high; Per a 2014 article from the Wrap, the ESPN cable rate, the amount of each cable bill that ESPN is apportioned, is roughly 6% of a basic cable bill. This may be a great deal for sport’s fans but terrible for everyone else.
McCain’s objective, to give consumers choice in what they watch without having to buy a bundle of stuff they don’t want, hasn’t been achieved. The gatekeepers have changed – now streamers, not cable companies, lock their content away in their own self-controlled fiefdoms, barred to anyone not willing to pay a monthly fee. 
Before we go on, a word from our sponsor. 
From a 2023 article from The Guardian entitled What the Tech are walled gardens?, “A walled garden is a closed platform or ecosystem that confines its technology and user data to its own network of owned properties. A walled garden typically does not share its data with anyone — not even with the advertisers that leverage the data. These Big Tech platforms typically control everything, from the terms of engagement to what products must be used in campaigns to what data is released. Walled gardens also have authority over which third-party solutions can be used as verification in their platforms. Advertisers trade transparency for the rich profiling and targeting capabilities they receive in return because, well, these platforms are popular among consumers.”
In an article entitled, “Will the DOJ Lower the Walls of Apples’ Walled Garden?” from The Wake Forest Law Review, Maeve Hickey writes, “On March 21, 2024, the United States Department of Justice (“DOJ”) and sixteen states sued Apple, claiming the company has monopolized or attempted to monopolize smartphone markets. The suit is the latest in a series of antitrust actions against the “Big Tech giants.” The Federal Trade Commission has spearheaded enforcement efforts against Meta and Amazon, while the DOJ has taken on Google and Apple. In addition to two state-law claims, the Complaint against Apple brings four claims under Section 2 of the Sherman Act, which prohibits “monopoliz[ing], or attempt[ing] to monopolize” a particular market. The Complaint defines two relevant markets: the smartphone market as a whole and the narrower “performance smartphone” market of upscale, more expensive devices.
Many of the allegedly monopolizing practices at issue involve Apple’s cultivation of a walled garden with one market for applications (the App Store),one digital wallet (Apple Pay), smartwatches (Apple Watches) that only pair with one type of phone (iPhones), and a messaging platform (iMessage) only available on Apple devices. A walled garden is a closed system of products or services over which a single entity—here, Apple—maintains significant control. Within the walled garden, “[e]verything plays well together,” but users can encounter obstacles when they purchase non-Apple devices, or even when they communicate with someone outside of Apple’s system. The DOJ argues that these difficulties are a feature, not a bug, pointing to an Apple executive’s statement that the company’s long-held control over iMessage stops “iPhone families giving their kids Android phones.”
I think the reasons’ for the walled garden are likely more insidious - Data, in a late capitalistic society, is vital – it allows marketing to tailor their (often times) expensive ads to try to reach potential, indifferent customers drowning in information. 
The days of broadside advertisements have long ago ceded marketing dollars to niche campaigning, those that use microtargeting to reach vanishingly small demos and, in some cases, individuals.
It’s also important to note that we are at the beginning of an AI revolution. Due to the heightened concern about the upcoming US election (and the deepfakes that have flowed from political campaigns), there has been less focus on the long-term effects of advertising campaigns, powered by AI and the individualized data that the walled gardens generate. It’s possible that this will be seen as an unwelcome level of intrusion by some; however, there will also be those that will exchange privacy for lower monthly costs – what better place to test the effectiveness of AI-powered ad campaigns than with the platforms themselves?
One of the benefits touted by so many streaming services, ad free programming, is starting to recede – Netflix, after vowing it would remain ad free for years, recently reversed this. Why would a company reverse a long-standing central tenet of their company? Money. 
Charlie Warzel, from an Atlantic article entitled, “Streaming Has Reached Its Sad, Predictable Fate”, writes, “The first question plaguing omnivorous, content-hungry humans with a spare hour or two is this: What should I watch? In recent years, a second question has come to dominate our evening streaming rituals: How do I watch it? Drenching your eyeballs in sweet television can be surprisingly tricky, requiring some amount of research to determine which streaming platform has whatever you want to watch and, crucially, whether you pay for it already.”
The media’s attention to the recent bankruptcy of Redbox’s parent company, Chicken Soup for the Soul Entertainment, has focused on its kiosk business, which allowed customers to rent physical copies of DVDs and Blu-Rays. Gizmodo had a take typical to most media reporting on this story: “Chicken Soup for the Soul Entertainment, a spinoff company named after the popular self-help books, racked up almost $1 billion of debt and had issues paying employees and covering their benefits. The company went public in 2017 and began acquiring some of the lesser-known digital services such as Popcornflix, Crackle, and then Redbox in 2022 for $375 million…. In its heyday in the early 2010s, Redbox had more than 43,000 locations. The company’s site says it still has more than 34,000 kiosks doling out DVDs and Blu-Rays, but some machines have been reported as being unplugged with credit card slots having tape over them.
Redbox’s demise is another indicator that physical media is becoming a thing of the past. Best Buy and Target announced in the past year that physical stores will no longer sell DVDs and Blu-Ray discs. Netflix started its business by sending out DVDs via mail and discontinued its physical media service last year. In its 2023 report, Media industry analysis group Digital Entertainment Group said physical media made up 3.6% of the U.S. home video revenue for the year, a drop of 25% from the year before.”
The vanishing physical media market is certainly part of this story. The bigger part, the part that is getting much less attention, however, is the demise of a “neutral arms dealer” by that I mean a service that is vendor-agnostic that will rent or sell you movie outside of its own internal ecosystem. While admittedly the service has gotten worse over the years, Redbox was still the number one site I used to stream movies. Why? I didn’t have to worry about whether or not something was “native” to the platform – I could safely assume it wasn’t. While there were some high-profile absences – A24, for one – I could use Redbox to stream major movies without having to sign up for *gulp* another subscription. This dearth of ala carte options is what started the revolt from cable in the first place. 
One of the main evils of cable was the inability to cancel your service in a hassle-free, reasonable manner. It looks like streamers have brought that experience back. From a recent article in the Hollywood Reporter entitled, “Streaming Services Beware: A Crackdown is Coming on ‘Cancellation Trickery’”, Ashley Cullins writes, “From long hold times on the phone because there’s no way to cancel online, to high-pressure pitches from customer service reps, or having to click through a labyrinth of discount offers and “are you sure?” messages, each year thousands of people complain to the Federal Trade Commission that they can’t get out of a recurring subscription service they want to cancel — or, even worse, one they didn’t realize they’d signed up for.
‘Subscription models have proliferated in recent years, especially during the pandemic. In the age of lockdowns, work-from-home and goods shortages, ordering a product or service online via auto-renewal was an easy and painless way for consumers to get the items they need,” says David Nahmias, an attorney with the Center for Consumer Law and Economic Justice at UC Berkeley School of Law. ‘Businesses learned quickly that they could use deceptive and manipulative techniques to keep consumers hooked. Our research found examples of such techniques across a wide range of industries, from the well-known like cable and satellite radio, to the more niche like businesses that send new athletic clothes or kids toys every month. One study we cited found that consumers spend an average of $133 a month on subscriptions they no longer want’”.
At a time of high inflation, where many Americans see their credit card and other consumer debt grow, $133 a month is a lot of money. 
Why is the marketplace for the non-vertically integrated, unwalled garden, important?
The switching costs are high. 
The rise of AI is dependent on Big Tech – see the MIT Tech Review article titled, “Make No Mistake – AI is Owned by Big Tech”, which I’ll have linked in the show notes – which means that, in the future, we will most likely see an increase in paywalls, as these companies are able to produce every kind of software you will ever need – either because they bought out competitors or they have trained an AI system to create it. What will this look like? Think of a village in a snowglobe. Now imagine, inside that snowglobe, the police department is in its own snowglobe, and the post office inside its own too, and the best park in town, off in the corner, in its own (slightly larger) snowglobe (with a swingset inside a snowglobe (inside a snowglobe, inside another snowglobe). 
This begs the question – if all the tech companies do this (and the big ones all do), is it still considered a monopoly? 
The last time that a major, high-profile tech company was determined to have engaged in monopolistic practices was in 1998 when Microsoft was determined to be a monopoly and ordered to be broken up, which was later overturned on appeals. It’s hard from my vantage point in 2024 to believe that this case ultimately did very much, though there are people who would argue that it had some significance in forcing Microsoft to diversify its business, though its business practices today (forcing people to subscribe to Microsoft 365 to use the Office suite for every new computer they buy [which you should be able to do for free if you owned the underlining software package by simply copying your own software to a new one] leave a lot to be desired).  
It's too soon to tell whether or not the antritrust suits (of which there are many, both in the US and the EU) currently ongoing will make a dent in the business practices of Big Tech. If they do, there will be reverberations for a long, long time. 
Maybe, just maybe, some of these changes will benefit the consumer. Maybe, just maybe, we’ll have fewer snowglobes.
Thank you for listening to this episode of Elegant Ramblings. If you’ve enjoyed what you’ve heard, please consider liking and subscribing to the channel on iTunes or YouTube. You’ll be able to find show notes there. Hope you enjoyed. Bye for now.