The Difference Between Monopsony and Monopoly (and Why It Matters to Your Favorite TV Show)
You may have noticed that your favorite streaming giants such as Netflix, Hulu and HBO Max, which were once a haven for creators seduced by the freedom to create shows that will never air on broadcast television, are increasingly resorting to such tactics like subscription fees. hiking and switching to cheaper, more formulaic (also known as “safe”) content. Some even add commercial breaks . Why is this happening? The root cause can be described as monopsony in action.
That’s not a typo – monopsony is an economic concept different from traditional monopoly, and it helps explain what’s happening with streaming services in 2022. Here’s what you need to know about how monopsony works and what it means for the way you watch your favorite TV shows.
The difference between monopsony and monopoly
Both monopoly and monopsony refer to situations where one entity controls the so-called free market; the difference lies in 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. Where a monopoly controls the market by preventing competitors from selling a product, in a monopsony all power is held by the buyer.
A typical example of a monopsony is a milk processor that becomes the only option for dairy farmers trying to sell their products; this forces these farmers to sell cheaper. In more current terms, Investopedia portrays Amazon as a monopsony because it has become the largest and often the only buyer of certain products, which it then sells on its platform. Amazon, too, can easily be explained as a monopoly; the two terms give rise to each other.
What Monopsony Means for Streaming TV
Understanding how monopsony works helps us put into words a trend that is affecting viewers: as corporations continue to consolidate, from Amazon’s MGM purchase to Disney’s acquisition of 20th Century Fox to the recent merger of Discovery and Warner Bros. – Fewer people are making more decisions about which shows are accepted. Meanwhile, streaming services, sensing falling stock prices and huge debts , are pulling back, canceling shows faster and making fewer big bets. All of a sudden, the “sellers” (the people who put on the show) were faced with fewer and more reluctant buyers in the market. As comedian Adam Conover, who has created the show for both cable and streaming services, explained to The Washington Post , “The only people who will make any profit are the very few executives at the top who make the deals but everyone else loses.” Creators are paid less, fewer ambitious projects targeting different audiences start from a standstill. Meanwhile, buyers – streaming services – seem to be leaning more towards the cheaper no-scenario plan , further narrowing the options for creators.
You may not care that TV show creators get paid less , but the impact goes beyond that. When a handful of executives own all the purchasing power of streaming content, they can determine what content they think viewers want, control the price, and set terms. As a result, older directories are being removed without warning , less risky programming, and higher prices for subscribers, according to The Washington Post . In short, monopsony does not encourage creativity or provide the resources needed to create groundbreaking television. In many ways, this is nothing new. In fact, bringing the show to the screen has always been a high bar. But in short: the explosive demand for content that has filled many new streaming services has created a bubble in the market that has been driven largely by speculation , as networks compete for prestigious talent, hoping that subscribers will follow suit. As the ongoing economic uncertainty slashes streamers’ billions of dollars, they’re feeling a lot more choosy – and they’re the only ones familiar with the data that determines whether a show is considered a hit or canceled after the season .
bottom line
The semantic differences between monopsony and monopoly are less important than the big picture: there’s no guarantee that the shows you’re really interested in will stay on the service you pay for, or that streamers will continue to green-light the kinds of innovative shows that caught your attention in first turn.