OPINION:
The Senate Judiciary Committee hearing last week on the proposed Netflix-Warner Bros. Discovery megamerger reminded me of a lesson in basic marketplace economics.
A few years ago, my family spent some time visiting a friend in his small town. There were two gas stations — I’ll call them the Green Station and the Red Station — right across the street from each other on the same intersection. They were the only stations for miles around.
I began to notice that every day, no matter what the price per gallon was at the Green Station, the Red Station was always a penny cheaper.
“Oh, yes,” the friend we were visiting explained to me with a chuckle when I brought it up. “That’s our local gas war. Those stations are always keeping an eye on each other. As long as they’re both here, we’ll always have some of the cheapest gas in this part of the state.”
My friend recently mentioned that the Green Station had finally closed, and “gas prices are through the roof” at the only remaining station.
No surprise.
Consumers benefit from competition. That’s true when it comes to the cost of gas, as well as every other product and service. The same goes for streaming and media.
Media mergers have become all the rage in recent years, including Disney and Reliance/Viacom18 and Amazon and MGM. Every time a new company is formed by a merger, it means there’s one less company and therefore less competition and fewer choices. Less competition means higher prices for consumers.
When Netflix began the transition from a mail-order DVD service to a streaming subscription service, it was exciting. Customers began subscribing to Netflix at $7.99 a month when its streaming service officially separated from its DVD service in 2011.
Today, just 15 years later, the service costs 100% to 200% or so higher, depending on which tier you’re signed up for. That’s far above the rate of inflation.
The only thing keeping Netflix pricing from ballooning even more is the fact that it faces competition from other streaming services and content producers. That’s exactly why Congress is right to act.
As it stands, every time a media giant ponders another price hike for a streaming service — or, conversely, considers cutting production costs for its next movie or series — it has to ask, “How far can we push until customers and clients go elsewhere?”
Here’s a more daunting question: How many more megamergers until the last company standing doesn’t have to ask the question anymore?
MIMI WALTERS
Former member of Congress, 45th Congressional District of California
Laguna Niguel, California
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