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

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You’ve probably noticed that your favorite streaming giants like Netflix, Hulu and HBO Max, once heaven for creators lured by the freedom to make shows that would never fly on TV, are increasingly resorting to tactics like the subscription price. hikes and a shift to cheaper, more formulaic (aka “safe”) content. Some even add advertising breaks. Why does this happen? The root cause could be described as monopsony in action.

That’s not a typo – a monopsony is a separate economic concept from a traditional monopoly, and it helps explain what’s happening with streaming services in 2022. Here’s what to know about how it works of a monopsony and what it means for the way you watch your favorite TV shows.

The difference between a monopsony and a monopoly

A monopoly and a monopsony both refer to situations in which a single entity controls a so-called free market; the difference is in who controls, 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 holds all the power.

A classic example of monopsony is a milk processor who becomes the only option for dairy farmers trying to sell their product; this forces these farmers to sell for less. In more current terms, Investopedia argues for Amazon as a monopsony because it has become the largest and often single buyer of certain products which it then sells on its platform. Amazon could easily be explained as a monopoly as well; the two terms are generated.

What monopsony means for TV streaming

Understanding how a monopsony works helps us put words to a trend that has impacted viewers: As companies continue to consolidate – from Amazon buying MGM to Disney buying 20th Century Fox, to the recent merger of Discovery and Warner Bros. – fewer people win more decisions about what shows are made of. Meanwhile, streaming services, feeling the pinch of plummeting stock prices and crushing debtback off, cancel shows faster and place fewer big bets.

As a result, the “sellers” (the people who make the shows) face a market with fewer and more reluctant buyers. As comedian Adam Conover, who has created shows for cable and streaming services, explained to The Washington Post, “the only people who are going to benefit are the very few CEOs at the top who make the deals happen, but everyone else loses.” Creators are paid less, fewer ambitious projects aimed at diverse audiences are emerging. Meanwhile, buyers — streaming services —seem more and more inclined to favor cheaper and improvised fareswhich further narrows the options for creators.

You may not care much about TV the lowest paid creators, but the impact goes beyond that. When a handful of executives hold all the buying power for streaming content, then they can determine the type of content they think viewers want, control the price, and set the terms. The result, according to The Washington Post: back to catalogs to be rubbed without warning, programming that takes less risk and higher prices for subscribers. In short, a monopsony doesn’t exactly fuel creativity or provide the resources needed to create revolutionary television.

In many ways, this is nothing new. In fact, getting a show on screen has always been a 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 high-profile talent, hoping subscribers would follow. As continued economic uncertainty cut billions market capitalizations of streamers, they feel much more selective– and they are the only ones who know the data that determines whether a show is considered a success or is canceled after one season.

The bottom line

The semantic differences between a monopsony and a monopoly are less important than the bigger picture: there’s no guarantee that the shows you’re actually interested in watching will stay on the service you’re paying for, or that streamers will continue. to greenlight the kinds of innovative shows that caught your eye in the first place.

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