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.
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Note: Countries with at least 15 movies appearing on Netflix
Note: Countries with at least 15 movies appearing on Netflix
Note: Countries with at least 15 movies appearing on Netflix
Note: Countries with at least 15 movies appearing on Netflix
Note: Countries with at least 15 movies appearing on Netflix
Notes
Geo-blocking is a commercial practice that prevents online consumers from accessing a website or purchasing content based on location. See, for instance, https://epthinktank.eu/2015/05/13/digital-single-market-and-geo-blocking/. These commercial strategies are based on the principle of copyright territoriality. See Renda et al. (2015) for a more detailed description the relationship between territorial licensing and EU copyright law in the audiovisual sector.
At the time of our data collection, Netflix was distributed into 243 sales territories, most of which were countries, but some of which were areas within countries. Hence, the number of countries exceeding the world’s total despite not including China. In the paper, we use the term “country” loosely, to refer to Netflix distribution territories at the time of our data collection. See https://media.netflix.com/en/press-releases/netflix-is-now-available-around-the-world and the list of countries at https://help.netflix.com/en/node/14164. Also see http://www.nytimes.com/2016/01/07/business/media/netflix-expands-its-streaming-service-worldwide.html?_r=0.
That is, \(\frac{(100 + 50 + 0)}{3}=50\).
That is \((\frac{1}{2} \times 100) + (\frac{1}{4} \times 50) + (\frac{1}{4} \times 0) =62.5\).
We include countries for which we have box office revenue 2008–2014. The countries include Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Bulgaria, Chile, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Germany, Ghana, Greece, Hong Kong, Hungary, Iceland, India, Italy, Japan, Latvia, Lebanon, Lithuania, Malaysia, Mexico, Netherlands, New Zealand, Nigeria, Norway, Peru, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Thailand, Turkey, Ukraine, UK, USA, Uruguay, and Venezuela.
This concern is reminiscent of the issues raised in George and Waldfogel’s (2006) study of the impact of national New York Times (NYT) distribution on the positioning of local newspapers in the USA. In that context, national distribution of the NYT into local markets diverted demand from local to the national product and caused local products to reposition.
Note that preventing price discrimination across countries could also lead to a reduction in welfare levels if the unique price charged ends up being higher than the willingness to pay of consumers from lower-income countries.
One might worry that reliance on US-based IMDb would lead to a US-biased list of underlying movies that might miss non-US-origin works distributed by Netflix. Yet, virtually all of the movies appearing on Netflix are also in the IMDb data.
For background, we also provide some data on the Netflix catalog of television series by country.
Netflix is famously tight-lipped about its subscribers’ usage tendencies. Cary Fukanaga, the director of the Netflix-distributed film Beasts of No Nation made precedent-setting news by getting Netflix to tell him how many people had watched his film on the platform. See http://www.businessinsider.com/netflix-streaming-giants-deals-with-studios-2015-12.
See footnote 10 for the full list of countries included.
One may be concerned about the fact that IMDb is mostly a US-centric platform, which could potentially bias users and their rating in favor of US-products. Note, however, that we look at the relationship between box office revenue and user ratings within each origin country of production.
While our analysis below will focus exclusively on movies, we still present descriptives on the TV series available on Netflix as they are informative of the works’ origin carried by the platform.
Note that the average rating given to each movie is only relevant to the users who see the movie, but does not allow us to measure the total volume of interest in a specific origin’s catalog.
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Disclaimer The views expressed are purely those of the author and may not in any circumstances be regarded as stating an official position of the European Commission.
We are grateful for comments from seminar participants at the Institute for Prospective Technological Studies, and at Harvard Business School.
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Aguiar, L., Waldfogel, J. Netflix: global hegemon or facilitator of frictionless digital trade?. J Cult Econ 42, 419–445 (2018). https://doi.org/10.1007/s10824-017-9315-z
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DOI: https://doi.org/10.1007/s10824-017-9315-z