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Journal of Cultural Economics

, Volume 42, Issue 3, pp 419–445 | Cite as

Netflix: global hegemon or facilitator of frictionless digital trade?

  • Luis Aguiar
  • Joel Waldfogel
Original Article

Abstract

Trade in cultural products has traditionally been constrained by a combination of law and technology. In Europe, digital sellers based in a given EU country are not always able to distribute across borders. In January 2016, US-based Netflix announced an expansion to 243 countries, accomplishing cross-border distribution through business strategy. Changes in law or technology that facilitate cross-national cultural trade have traditionally drawn the concern of observers worried about the cultural heritage—and products—of small markets. The expansion raises questions about what Netflix is doing. Is it a cultural hegemon, distributing US fare into 243 countries? Or it is a facilitator of free trade, making the products of even small countries more available outside their home markets (relative to traditional distribution)? And how does the curated model—which limits the number of movies the platform wants to distribute—affect Netflix’s function? To shed light on these questions, we develop a new measure of the global availability of a repertoire, the value-weighted geographic reach. Using this measure we find, first, that Netflix makes many of the works from a wide variety of countries available in many other countries. Second, we find that theatrical distribution strongly advantages US-origin fare. Third, the pattern of origin repertoire available through Netflix also favors the USA, although less overwhelmingly. Moreover, many countries are relatively advantaged by their Netflix availability patterns. Finally, we discuss some issues related to the Netflix platform, including horizontal competition with other platforms, vertical struggles with content providers (and its backward integration into production), and we speculate on possible challenges for regulators.

Keywords

Cultural trade Movie industry Online distribution Netflix 

JEL Classification

Z10 Z18 L82 

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2017

Authors and Affiliations

  1. 1.Digital Economy Unit, Joint Research CenterEuropean CommissionSevilleSpain
  2. 2.Carlson School of Management, Department of EconomicsUniversity of Minnesota and NBERMinneapolisUSA

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