Netflix and libraries and #hcod

Netflix changed their pricing structure. The reaction from librarians (and people, in general, but specifically librarians) online is really bothering me. I thought about it all day, and here’s what I came up with as to why.

In short, as information professionals, during the whole HarperCollins and OverDrive debate, did we learn nothing?

But I’ll back up. That’s the conclusion, so how did I get there from Netflix?

Fact: Netflix has, for many consumers, been a great deal — from-the-comfort-of-your-home DVD rentals, legal streaming of tv shows and movies, all at a relatively low price, particularly when compared to cable TV.
Fact: Movies are information content. They’re what we consider “entertainment”, but it’s all part of the information economy governed my market forces, intellectual property law, copyright, licensing, etc.
Fact: Studios are the equivalent of publishers in this corner of the economy, Netflix is a broker akin to Overdrive in that they repackage and make accessible the content of others, and we, the public and libraries, are consumers.
Fact: Studios (and book publishers) have been slow on the uptake regarding what the online information environment would mean for their profits and revenue streams, continuing to scream ever more shrill-ly about copyright and BUY BLURAY (or hardcovers) rather than investing in new digital projects (though I’m more charitable toward publishers than studios, but only by a small margin).
Fact: Everyone has finally clued in. Book publishers, movie studios, the consumer.They’re all clear: in the current era, savvy customers want their digital stuff as cheap as possible, preferably free, and definitely on-demand. Welcome to the new market reality.

So. In our current economy, there is a direct link between the services we are provided and our costs.  We pay, someone provides. In this case, we pay, and Netflix provides.  Much like we pay, and Overdrive provides. But Netflix, like Overdrive, has to buy the stuff we’re asking for from the people who own the rights to it — book publishers and movie studios.  And since those content owners were pretty blase about what they appeared to see as “that streaming nonsense”, Netflix and Overdrive got pretty good deals when they started. And we, the consumer, loved it. We ate it up. It was cheap, it was cool, it was on-demand and pretty close to free. Win-win, right?

Well, yeah, right up until someone NOTICED.  HarperCollins noticed, and decided they wanted in on the revenue stream they had so foolishly given up. And the studios have noticed, and want in on the revenue stream Netflix has been pulling in hand over fist. Netflix is going to have to negotiate hard, and pay considerably more, in order to keep offering consumers the same service. I suspect studios will walk away — see HBO and their No Streaming For You policy, for example — or put awkward and frustrating restrictions on content — see HarperCollins and the 26 checkout rule, for example — and instead create their own independent solutions to content access for consumers. And so Netflix’s costs will go up. Input costs go up… consumer prices, thusly, also go up.

Why is anyone surprised by this? Or outraged? If you’re an information professional paying attention to the information economy, why did you  not see this coming? Why are we doomed to repeat our shock and horror over and over and over again? What is with this naivety we have that somehow The Next Big Corporation won’t actually act like A Big Corporation about their information commodities? This is our world. This is the information economy. Elsevier, Wexis, the American Chemical Society, HarperCollins, Amazon, the RIAA, the movie studios — they don’t love libraries (or the consumer) the way we think that we should be loved. And they sure as hell aren’t looking out for our best interests. No one is. Only us.

Which brings me to my last point.  More important than my personal frustration, I think that libraries have a moment in the next 48 to 72 hours in which someone in our community could draw the line publicly connecting our information brokering challenges and The Netflix Thing. The public is furious about this, and there’s an advocacy moment that we should leap on. “Libraries are in trouble and suffering — just like you are.  This is part of a bigger problem, and we’re feeling the pain, too. Think Netflix and the studios suck? Check out THESE stories about ebooks!” It’s a moment that could be leveraged to turn attention to the issues we think the public should be considering, hinging on something that the public is actually legitimately interested in. The ALA EQUACC. Library Renewal. Someone should be leaping on this chance.

And I’ll bet we are going to miss the boat. Again. We should be better at this. And we should stop being surprised.

6 Comments

  • Suzanne Reply

    Just from personal experience, in the U.K. I use Love Film that allows me to stream movies and keep DVDS for as long as I want then send them in the mail. Our public library charges around $5 per night for DVD rentals. If you can’t return them on time you get calls, emails plus the $5 per DVD per night charges. I only borrow books or audiobooks from them.

  • Tom Reply

    Everything you say makes sense, but Netflix isn’t blaming rising content/licensing costs (despite since announcing a major deal with NBC). They’re blaming the fact that the demand for dvds is higher than they expected. They underpriced their dvd service hoping more people would gravitate to streaming, which hasn’t happened to the extent they hoped.

    Netflix spokesman, Steve Swasey said that the old model was not “sustainable for the longer life of DVD’s…We were not able to fulfill the requests for DVDs at that cost.”

    http://pogue.blogs.nytimes.com/2011/07/14/why-netflix-raised-its-prices/

  • laura krier Reply

    I think you make some great points that are really in line with something I’ve been thinking about lately: namely, that publishers and other content providers are in the business of making money. And not just because they’re greedy but because as for-profit companies they are legally required to make money. They can’t just decide to be generous to libraries because they want to. Perhaps libraries should work with content providers to help them set up non-profit arms that can work with libraries: good PR for them, a more realistic way to build partnerships with content providers.

    I don’t know that it’s entirely realistic, but certainly more so than just expecting them to be generous.

  • Roger C. Schonfeld Reply

    Thanks for this. I really like the efforts you are making to drive comparisons with the Overdrive/Random House dynamics. This entire conversation feels like one that we should be having less episodically and more systematically, so I hope your suggestion can somehow gain traction.

    In actually explaining pricing, economics would suggest we look to consumer demand more than input costs. If consumers walk away from Netflix, cancelling their subscriptions in droves, because the new prices exceeds their demand for the service, I will bet the prices would come down. And, in such a case, Netflix would be taking its lumps out of profits, or renegotiating those studio licensing agreements. But, as you point out, Netflix still feels like a pretty good deal to many consumers compared with the alternatives.

    As for me, I hardly miss having cable at all!

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