To understand the true power of disruption that streaming media leaders like Netflix NFLX -0.63% and Spotify have brought to their respective markets, you need to follow the money.
True, industries as diverse as DVD rentals, commercial radio, and cable television have all felt the impact of such disruption – but the brunt of the changes have largely fallen on the content producers.
The pittance that Spotify doles out to the artists whose music it streams is now a well-trodden controversy. Lesser known, however, is the impact that Netflix’s business model has on the producers of the content it delivers.
While Netflix produces some of its own content, it licenses the vast majority of what its customers see – and it uses its influence in the marketplace to get access to content at bargain basement rates.
Insiders are all too familiar with Netflix’s model. “Netflix tends to license lots of product in bulk for discounted rates,” explains Gary Elmer, Director of Photography, Matchbox Pictures and Eye Line Cinematography. “Unlike pay per view, Netflix only pays once and after the initial payment no more funds are passed on no matter how many people watch the movie.”