The difference between a monopsony and a monopoly (and why it matters to your favorite TV show)

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You’ve probably noticed that your favorite streaming giants like Netflix, Hulu, and HBO Max, once a haven for creators lured by the freedom to make shows that would never air on broadcast TV, are increasingly turning to tactics like the subscription price. hikes and a switch to cheaper, more formulated content (also known as “safe”). Some are even adding ad breaks. Why is this happening? The root cause could be described as monopsony in action.

That’s not a typo: a monopsony is a different economic concept than a traditional monopoly, and it helps explain what will happen to streaming services in 2022. Here’s what you need to know about how a monopsony works and what it means for the economy. way you watch your favorite TV Shows.

The difference between a monopsony and a monopoly

Both a monopoly and a monopsony refer to situations where a single entity controls a so-called free market; the difference is who is in control, the seller or the buyer. A monopoly is one seller and many buyers, while a monopsony is one buyer and many sellers. When a monopoly controls a market by preventing competitors from selling a product, in a monopsony the buyer has all the power.

A textbook example of monopsony is a milk processor that becomes the only option for dairy farmers trying to sell their product; this forces those farmers to sell for less. In more topical terms, Investopedia presents the case of Amazon as a monopsony as it has become the largest and often sole buyer of certain products that it then sells on its platform. Amazon could also easily be explained as a monopoly; the two terms mutually engender each other.

What does a monopsony mean for broadcast TV

Understanding how a monopsony works helps us put words to a trend that has been shocking viewers: As corporations continue to consolidate, from Amazon buying MGM, Disney acquiring 20th Century Fox, to the recent merger of Discovery and Warner Bros. , fewer people are making more of the decisions about what shows get made. Meanwhile, streaming services, feeling the pinch of plummeting stock prices Y overwhelming debtthey are pulling out, canceling shows more quickly, and making fewer big bets.

Suddenly, the “sellers” (the people who make the programs) face a market with fewer and more reluctant buyers. As comedian Adam Conover, who has created shows for both cable and streaming services, explained, washington post, “the only people who will benefit at all are the few CEOs at the top who make the deals happen, but everyone else is losing.” Creators are getting paid less, fewer ambitious projects serving diverse audiences are getting off the ground. Meanwhile, buyers, streaming services,seem increasingly inclined to prefer cheaper, unscripted faresfurther narrowing down the options for creators.

You may not care much about television creators are paid less, but the impact goes further. When a handful of executives have all the buying power for streaming content, then they can determine what kind of content they think viewers want, control the price, and set the terms. The result, according to washington post: previous catalogs be scoured without warning, programming that assumes less risk and higher prices for subscribers. In short, a monopsony doesn’t exactly foster creativity or provide the resources needed to make innovative television.

In many ways, this is nothing new. Actually, bringing a show to the screen has always been a very high bar. But briefly, the explosion in demand for content to fill a host of new streaming services created a bubble market that operated primarily on speculation, as networks competed for prestige talent, hoping subscribers would follow. As economic uncertainty continues cut billions of streamers’ market caps, they feel much more selective—and they are the only ones who know the data that determines whether a program is considered a success or canceled after one season.

The bottom line

The semantic differences between a monopsony and a monopoly are less important than the big picture: There’s no guarantee that the shows you really care about will stay on the service you’re paying for, or that streamers will continue to greenlight innovative kinds of shows. that attracted your attention in the first place.

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