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this post was submitted on 29 Oct 2023
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what a shitty take. Well, anyone who has better memory than only one month back can realize that the reason the people turned to piracy was that they raised their prices. There is no loss caused by piracy. They only missed potential gains. And the reason they raised their prices were not because they were loosing money. Was because they needed to "grow infinitely". If the free market evangelists are right, the free market will self regulate and the prices will go down in order to attract back the lost customers lol
I'm not disagreeing with you—the conclusion these services have taken are indeed not logical ones based on historical trends—but I'm curious how you know these services didn't need to raise the fees? Why have you assumed that it's to "grow infinitely"?
From my understanding, almost all streaming video providers except Netflix have been operating on a loss. That can only be sustained for so long before the parent company will need to see it begin to generate a positive revenue stream. The most straightforward way to do that is to increase subscription fees. Furthermore, the number of subscribers of Paramount+, MGM+ or even Disney+ is certainly not trending towards "infinite growth."
I'm not justifying anything, because with five monthly services that have been hiking prices I'm looking at what to slash myself, but I was eager to encourage a bit more discourse on this topic.
then their model is flawed. They sell something at loss in order to attract customers because they know that if they sell it at higher profit margins customers will not come. Customers are willing to buy it as long as it is in a price that they are willing to compromise at. So, when they raise their prices, customers realize that now it is above the price they are willing to pay and step out. Their model is based on hoping that the customers will forget or be bored to cancel a subscription that they cannot afford anymore. However it is a subscription that they wouldn't had been willing to buy in this price in the first place.
So, their initial market share and adoption rate was what it was because of the price of the subscription and the rate of price/value-of-product. Customers are not willing to pay double price and they wouldn't had paid it in the first place. They are not loosing customers. They are not loosing potential profit. They are basing their numbers in a faked artificial audience that opted in only because it was a good deal in the initial price.
And while the free market evangelists would argue that the market would self regulate, you know what will they in reality do? Ask the government for stricter enforcement of anti-piracy laws because huge loss . Loss based on nothing but their imagination of imaginative potential profit based on "if everyone was continuing buying our product with the same adoption rate we would had X billions. So since we don't have X billions, this is a loss". Great math skills and applying of logic.
There are certainly consumers out there with this kind of mentality, but it's a common sales strategy to lure new customers with a reduced subscription fee for the first months only. It evidently works, because businesses have been doing this long before SVOD services, or even the internet for that matter, existed.
I expect that indeed, a significant number of customers cannot be bothered to cancel a subscription once they begin to use it, or, put another way, perceive the value of it to be justified against the increased price. I don't think it's fair to call this a fake audience, because these are real users of which a certain percentage will be retained.
Another factor that probably weighs into this is the competitive race to the bottom among the many SVOD offerings that are available today. Users like you and me perceive a certain dollar amount as the maximum that we are willing to pay, but where does that figure come from? If you are a new player in this space, you are effectively capped to the current market price for subscription fees, whether or not that covers your costs.
The free market effect will gradually resolve this as services that are all currently operating at a loss will correct their price models, which is what I believe is currently happening.
Your claim that this is a tactic happening since for ever doesn't take into account the differences between subscription model and traditional businesses. In traditional businesses, yes, a business may decrease the prices in order to lure customers, but this was never their business model. This was limited time "get to know us". I don't think there was for example any supermarket operating at loss for 5 years before they decide to "ok, lets put the real prices on the shelves now".
of course it is a fake audience. The fact that some users will be retained doesn't make the 100% of the audience real. And also by fake audience it doesn't necessarily mean that the whole 100% of the audience is fake. However, when they present their numbers, and they claim that "because of piracy we lost 5 million subscribers" this is based on the 5 million subscribers who potentially would never be subscribers if they had their "real" price upfront, instead of a price in which they operate at loss.
However, when people are charged for piracy, they are charged based on imaginative loses who are based on a potential profit which would had been achieved if their 100% of customer base had been continuing paying a subscription which they would had never agreed paying if the price was not faked in order to attract them.
the free market will turn to the government to cover their losses and they will push for stricter anti piracy law enforcement. The free market evangelists just want a free to control market. I don't think they will be "ok, customers are leaving after our latest increase in price, then let's just decrease the price to get them back on board"
I am pretty sure they know how many accounts they will lose for every dollar they increase the price. It should be a net positive for them because otherwise they would not do it.
Enforcing terms and conditions that they previously did not is just another price increase in the grey area that is not directly perceived that way.
I agree that "Lost x amount to piracy" does not even make sense in that context. They know exactly what they are doing.
With regards to discounts to lure new customers, I was thinking about conventional subscription based services like newspapers or cable providers. It doesn't seem unreasonable to me that in a sector with heavy competition, such services might be offered at an initial loss if data suggests that retained memberships can recoup it.
I misunderstood what you were referring to with a definition of "fake audience." I wasn't giving any merit to their claims about how it all ties to piracy, clearly that's nonsense. I'm not completely following your train of thought with a "fake price," though.
It's possible this might result in a harsher stance on piracy again, that's true. Realistically, though, I think it's more likely that three things will happen: we as consumers will gradually recalibrate our cost expectations for streaming services, production corporations will cut costs with more reality type content, and smaller companies will either be bought up or go out of business as users settle on a deliberate few services to subscribe to.
you said that they now needed to correct to the "real price" in terms that it is a price that will allow them not to operate at a loss. So the previous one was a "faked" (artificial) price, that they knew was below cost, however they chose to go with it in order to lure customers.
I'm not implying that they tried to scam anyone with "fake prices" if this is what you understood.
I see. Whether or not the price covers costs, businesses will often invest into attracting new customers, for instance through marketing campaigns or incentives to switch from a competitor. In such cases, the cost isn't visibly calculated through to the consumer.
However, since the cost is a main factor for purchase decisions, companies might similarly invest in growing their customer base by offering a pricing tier below cost. This doesn't necessarily mean that the service as a whole is operating at a loss, because there might be higher cost tiers that offer premium content or family plans. Different plans might also have degrees of underutilization that reduces service costs. Finally, cohorts of service tiers might change based on external factors like economic recession or competitive offerings.
All this is to say that pricing models are complicated, and breaking even with a SVOD service is extremely difficult in an industry with extremely high production costs, aging licensable content that viewers are losing interest in all while being overrun with complex, regional licensing agreements that affect both. Especially when this is further compounded with macroeconomic factors including inflation and interest rates that affect both corporations operating at a loss and consumers looking to tighten their belts or user decline due to subscription fatigue, an argument could be made that some middle ground needs to be found to simply remain in business.