Milton Friedman in his documentary series “Free to Choose (1980)” was insistent when asked what was the best way to fight monopolies: “the free market,” he argued. However, in a series of quite interesting debates, which unfortunately are not repeated today, some of his guests had other positions and considered that government intervention was necessary. The Netflix case has once again proved Friedman right.
On Wednesday, April 20, Netflix shares fell an impressive 35.93 % (about $54 billion) conventional press releases blamed the loss of subscribers as the main cause for the crumbling value of the entertainment company; others, blamed Netflix’s ideological story line, which in recent times has been advocating mainly leftist causes, and yes, no doubt the above mentioned is part of the reasons why its shares in the market are plummeting, but the main reason is: competition.
No one can deny that the founders of Netflix were forerunners, they discovered or created the subscription-based entertainment service, they, far from selling or renting movies, as Blockbuster traditionally did, reinvented the business, and started renting entertainment, an undoubtedly lucrative business, as has been demonstrated over the last few years.
In 2016 an article was published in Business Insider that claimed that Hollywood was terrified of the possibility of Netflix becoming a huge monopoly that would displace them. However, as it usually happens in any nation where there is capital, opportunities and space for free competition, soon other companies began to copy Netflix’s business model and provide better conditions: cheaper prices, shared subscriptions with advertising, other productions, among others, which gradually began to bring down Netflix’s solitary reign.
Currently, the company recognizes it, they argue that the emergence of competitors (Disney, HBO, Amazon, among others), is one of the causes of the loss of customers, and there again we must give credit to the competition: prices, ideology, programming; there are a number of factors that have caused thousands of people to leave Netflix, but the main thing is that, fortunately, people have the ability to freely choose their entertainment service provider.
Now Netflix will have to adjust its rates, plans and programming in an attempt to regain lost customers, and will surely backtrack on its intentions to increase subscription prices; in fact, there are rumors that the company may be considering the possibility of implementing cheaper subscriptions by including advertising.
Regardless of which company ends up being the one that consolidates as the most powerful in the entertainment market, we should all be grateful to have a healthy competition that allows us all to have better and cheaper services, because surely without such competition, Netflix could unilaterally set the prices they see fit and include the programming that their directors establish without thinking about the consumer; most likely this setback will make them rethink the editorial line of programming they have adopted in recent times.
Americans should be grateful to have in the country different large companies competing among themselves to take over a greater number of customers, that is the essence of capitalism and the free market, and it is the reason why the United States has been such a successful nation.
In Venezuela, the country where I was born and spent 27 years of my life, due to the scarcity of products because of the enormous state intervention in the economy, I was forced on many occasions to buy soaps, deodorants, food, and other products of very poor quality and quite expensive because we could only buy what the government hierarchs offered us.
Similarly, I spent years of my life having electricity and water outages that sometimes lasted 48 hours, because the government was the one who managed the basic services companies, with the supposed intention of making it “more accessible” to the entire population, and it turns out that thanks to their intervention, no one in the whole country could enjoy a constant electricity service — something that still happens to date.
Therefore, be thankful and celebrate the consolidation of numerous large companies, because I assure you that if they commit any irregularity or fail to comply with the purposes for which they were created, the market will be quite wise and will put things in their place in a timely manner, something that the government will never be able to do.