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Comment by danijelb | Hacker News Reader

Problems for Netflix started when they started competing against other content providers with their own original content. If they didn't produce their own content and just provided a distribution platform for others I think we would still have everything on Netflix

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I wish it could be that way, but the content providers started to jack up their prices and withhold certain content a long time before Netflix started their own content factory. Hulu, owned by one of the largest content providers out there, was the turning point. In retrospect it might have been a good time for government to step in and declare that content providers and streaming services must be separate for the good of consumers.

Interestingly, the same thing almost happened with Spotify, but most artists eventually came back instead of defecting to other services. I know there are some exclusive artists on each platform, but we've somehow dodged that same bullet with music streaming. Maybe because there are 3-4 relatively popular services, and artists have a little more sway over their distribution? Of course, Spotify is currently commiting this same sin in the podcast space so it's not like their hands are clean.

This is a huge point that I bet there will be many business case studies around: why didn't what happened to Netflix happen to Spotify?

I thought Tidal was going to be that. Remember their first promo video [0]? Full of A listers pretty much declaring that they're making an artist collective? It had every reason to occur...except it didn't. Why?

[0] - https://www.youtube.com/watch?v=cYYGdcLbFkw

Was it not that Spotify let record companies in on ownership, making it a joint venture of sorts?

Reason #1: if your work is still available on a cheaper, bigger platform, people are not likely to switch to the the more expensive, smaller platform.

If your old work is still available on the cheaper+bigger platform, but the new work is only on the more expensive+smaller platform, maybe the true fans will switch, but A-listers don't make money just from the true fans.

It is my understanding - and correct me if I'm wrong - that a-listers have the leverage to move their entire catalogue over if they wish.

Could they have, en masse, done this over to Tidal? Would that have broke Spotify?

Spotify is not exactly a shining beacon on the hill for a successful company. They aren’t profitable and they are total beholden to the record labels. They are forced to give 70% of their revenue to record labels. Their fixed cost go up in lockstep with their revenue - not exactly the model of a successful tech company.

Netflix paid a fixed amount to license content and then could spread that cost as it gained customers. It’s the same with their own content. They never have to pay the content producers again for the content they fund.

...until Netflix's licensing agreements expire, which they do regularly. Then the networks demand twice as much money and they have to either keep growing to outpace the cost of licensing or jack up subscription fees, or both.

Or they “become HBO before HBO becomes them”. That was the entire reason for them doing their own content.

I would argue they are in a much more stable position vs Netflix. They are the one stop shop for every kind of audio. Retention will be the true barometer here.

How is a company that is not profitable and will never make more than a 30% gross margin on a customer in a more stable position?

They are also suffering from the “DropBox problem”. Streaming music is not a product. It’s a feature. Their largest competitors don’t have to make money on streaming music. Streaming music for Apple and Amazon are just features to sell hardware.

Is this were the case, why is Amazon's and Apple's pricing the same as Spotify's?

Spotify isn’t profitable. Apple and Amazon don’t need for their streaming products to be profitable as stand a line services.

Just like Microsoft doesn’t need for OneDrive to be profitable by itself - hence the “Dropbox problem”.

https://www.inc.com/will-yakowicz/why-dropbox-founders-said-...

Do you think AppleTV+ is profitable as $7.99 stand alone service?

Is that how it happened? My memory is more: Content started disappearing so Netflix started producing original content as a safety net.

Doubtful. The studios were always going up launch their own competing service and not license their content to Netflix. HBO plainly refused to even entertain that conversation and then the race was on - could Netflix become HBO faster than HBO could become Netflix.

Nope. That's the fast lane to getting ground down by content owners; they'll determine how much profit you're allowed to make. See also: Pandora, Spotify.

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