Streaming TV Prices Double As ‘Enshittification’ Takes Root, Likely Driving Users Back To Piracy

Overhype

from the here-we-go-again dept

Amazon is now charging Prime customers an extra $3 a month to avoid ads that didn’t used to exist. Netflix is charging password sharers extra for sharing passwords, in addition to yet another looming price hike. Apple just doubled the price of Apple TV on the heels of price hikes by Disney, Hulu, and ESPN. HBO Max just announced it would be charging users more money if they want to enjoy content in 4K.

As the streaming market has saturated and growth has slowed, companies in the streaming space have turned toward nickel-and-diming users at an alarming rate in order to deliver Wall Street its sweet quarterly returns (at any cost). Streaming service prices have more than doubled since the technology came to market, and there’s really no sign of it slowing down.

One interesting wrinkle in this march towards consolidated annoyance is the streaming sector’s interest in driving more users toward ad-based tiers, where profits can continue to skyrocket:

“Why? Unlike a paid subscription, which brings in a fixed amount of revenue each month, there is no ceiling to advertising revenue. The number of ads displayed and the rates a streaming platform can charge marketers for the ads are constantly fluctuating, offering unlimited revenue upside.”

Higher prices, more restrictions, more ads (in Amazon’s case, even if you’re already paying $15 a month for Prime). At the same time, just like cable did, you’re going to see a renewed push for mindless consolidation as the “only solution” to the pesky problem of too much competition and not enough profits:

“With so many streaming services, and no end in sight to price hikes, something will have to give at some point. The streaming industry is on the verge of losing some of its major players, analysts agree. “The macro, high-level view is that there are too many streaming services losing too much money, and someone is going to raise the white flag,” said Rich Greenfield, analyst at LightShed Partners.”

As the sector consolidates, it will look for additional options to cut costs, whether it’s via layoffs or offshored, lower quality customer service. Again, this precise trajectory was how the U.S. public ultimately got stuck with hugely unpopular giants like Comcast, and there’s absolutely zero indication that anybody in the video entertainment industry learned anything from experience.

As we saw with traditional cable, streaming giants seem poised to try and push their luck, driving frustrated customers to other options, including piracy. At that point, as we saw with traditional cable, the companies involved will blame absolutely everything but themselves for the shift.

Filed Under: ads, competition, enshittification, password sharing, piracy, price hikes, streaming, tv, video
Companies: amazon, apple, disney, netflix

Netflix’s Idea Of Innovation: Two Big Price Hikes In A Row

(Mis)Uses of Technology

from the thank-you-sir-may-I-have-another dept

So we’ve been talking a lot about how as the streaming video market matures, it’s increasingly behaving a lot like the old, shitty cable companies the sector once disrupted. Instead of innovation and risk taking, we’re seeing endless price hikes, lower quality catalogs, strange new catalog gaps, labor issues, ethically flimsier policy positions, annoying new surcharges, and more and more arbitrary restrictions.

Enter Netflix, which says it’s once again raising prices after implementing a password sharing crackdown (aka raising prices):

“The streaming giant said in its third-quarter earnings report that its premium ad-free plan in the United States will increase by $3 per month, to $22.99, starting Wednesday. Its one-stream basic plan will rise to $11.99 in the United States.”

Over the last year or so, Netflix has made a lot of noise about how it’s cracking down on password sharing; something the company used to encourage. We’ve noted how these new restrictions are effectively double dipping, given that Netflix already limited account simultaneous streams, and already charged users more money if they want higher simultaneous stream limits.

Netflix consistently claims that their password sharing crackdown has been a smashing success. But while press outlets parrot those claims, we’ve noted they’ve provided no hard evidence proving it. And, in fact, a new survey of 18,000 people by a Wall Street research firm found that the password sharing crackdown remains in its infancy, and most users aren’t sharing passwords anyway:

“A full 77% of respondents say they only use their own account, while 8% sometimes lean on somebody else’s subscription (the report doesn’t get into why), and 14% only watch on other people’s accounts.”

The study showed that the lion’s share of folks doing the sharing (42%) are kids on their parent’s account, who probably aren’t buying their own subscriptions anytime soon. It also found that only 23% of password sharers had received warnings about their usage, suggesting Netflix is still ramping up the effort.

The study also found that most users confronted with sharing passwords would likely just leave for another service:

“MoffettNathanson’s report also suggests that most viewers busted for account borrowing will take their eyeballs elsewhere. Only 32% of people who borrowed a subscription and got blocked said they would either get their own account or already had.”

Yes, Netflix will make more money by being annoying about password sharing, though we’ve noted how many of the estimates of how much Netflix stands to make aren’t rooted in reality either.

But with organic streaming growth saturated, Wall Street’s demand for improved quarterly returns at any cost starts to nibble away at product quality and customer satisfaction. You start to see a sort of self-cannibalization. Get too pushy, and users not only flock to other subscription streaming alternatives, but free services such as YouTube and TikTok. But short term-focused investors don’t care.

Right now, subscribers clearly still see value in the prices Netflix is charging. But with Netflix executives very keen on pushing their luck and with zero financial incentive to remain disruptive and innovative, it’s just a matter of time before that luck runs out.

Filed Under: cable tv, competition, price hikes, streaming, tv, video
Companies: netflix

Netflix Eyes Yet Another Price Hike As It Slowly Devolves Into Comcast

Failures

from the more-money-for-a-shittier-product dept

Clearly keen to not miss another opportunity to show how they’re slowly turning into Comcast, Netflix this week indicated they’d be pushing yet another price hike in the wake of the recently successful writers’ strike:

“Netflix is planning to increase the cost of its streaming service yet again, according to a report from The Wall Street Journal. The streamer will reportedly issue the price hike a “few months” after the Hollywood actors strike ends, which could happen in the coming weeks.”

The financial compensation writers were demanding was a pittance compared to Netflix’s ongoing earnings, so this is likely just a lazy opportunity to blame writers for the price hike the company was probably already planning. According to the WGA, the cost of their new contract will amount to just 0.2 percent of Netflix’s annual revenue.

The increase comes on the heels of an unpopular price hike the company implemented last year. It also comes shortly after the company’s decision to start nickel-and-diming users who share passwords with friends and family members, something Netflix openly supported until a saturated market forced the company to start chasing its tail in the never-ending quest to please Wall Street.

The unyielding quest by streaming companies to endlessly jack up prices as their product catalog shrinks and the overall quality deteriorates is the exact doom loop that traditional cable giants have been stuck in for the last fifteen years. Impatient Wall Street wants its improved quarterly returns at any cost, forcing most of the streaming companies to start nickel-and-diming their users at every opportunity.

Amazon recently announced it would be charging Prime users (who already pay $140 annually) an additional $3 a month just to avoid ads. Disney recently announced it would be following Netflix’s heels and cracking down on password sharing. Then there’s whatever nonsense the jumbled mess of detritus created by the pointless Time Warner Discovery merger is up to on any given week.

There’s still a bit of runway for these companies in terms of the consumer perception of value, but it’s becoming pretty clear they’re just going to keep pushing their luck until that relationship ultimately breaks. That will open the door wider for the streaming industry to be disrupted by Twitch, YouTube, and TikTok in the same way Netflix once disrupted Comcast.

Filed Under: competition, disruption, password sharing, streaming, tv, video
Companies: netflix

Disney Joins Netflix In Harassing Password Sharers As The Enshittification Of Streaming Continues

Overhype

from the being-annoying-cheapskates-isn't-a-business-model dept

We’ve noted a few times now how as the streaming sector consolidates and grows, it’s becoming more and more like the traditional cable industry it disrupted. This enshittification includes a lot of endless price hikes, a steady degradation of product quality, pointless mergers that cause endless layoffs, and the implementation of new restrictive efforts to nickel-and-dime customers.

Like Netflix’s recent crackdown on password sharing.

Netflix spent years encouraging the practice as a form of free advertising. But as the streaming market’s growth saturated, Netflix turned to more creative ways to give Wall Street its improved quarterly returns at any cost (including product quality or customer satisfaction). Like charging users even more money for something it already monetized (users were already paying more for more simultaneous streams).

Unsurprisingly, other companies like Disney are now following suit, starting with Canada:

“Disney has not provided many details on how it plans to enforce this policy — its email merely states that “we’re implementing restrictions on your ability to share your account or login credentials outside of your household.” The announcement reads more like a strong finger wag than anything else. “You may not share your subscription outside of your household,” reads the company’s updated Help Center.”

Despite what Netflix and Disney claim, password sharing is not a major threat to these companies’ fortunes. In part because there’s no guarantee that the “moochers” they’re harassing (usually college kids or people who don’t like paying for things) will sign up for their own accounts. Analysts have noted a lot of these companies’ predictions of how much money they’ll make from crackdowns are based in fantasy.

Netflix claims the crackdown has been a smashing success, but there’s no hard evidence that’s actually true so far. These streaming giants aren’t really required to detail where new subscriptions are coming from in earnings reports, so whatever happens they’ll insist it’s all been a smashing success either way.

But nickel-and-diming your users as the streaming market gets more competitive simply isn’t all that bright. Streaming competitors looking to make market inroads can give themselves an edge by simply being less annoying. And should some companies push too hard, they risk increasingly driving paying customers to the next layer of disruptive services like TikTok, Twitch, or YouTube as the cycle continues.

Filed Under: competition, disruption, password sharing, streaming, tv, video
Companies: disney, netflix

Netflix Settles Dispute With South Korean ISP That Demanded Extra Money Just Because ‘Squid Game’ Was Popular

Broadband

from the please-pay-me-extra-for-absolutely-no-reason dept

A few years ago we noted how a South Korean ISP named SK Broadband had sued Netflix, demanding that the streaming giant pay it more money simply because the hit series Squid Game was so popular. It was one small part of a global push by broadband providers to force streaming companies to pay them extra money for no coherent reason.

After several years of fighting, Netflix and SK Broadband have quietly settled their dispute, with Netflix promising to utilize some ambiguous SK AI products in exchange for both sides dropping their lawsuits:

“SK Broadband and parent SK Telecom announced in a joint statement with Netflix that they had agreed on a partnership to release joint products and seek ways to use artificial intelligence (AI) products being developed by SK.”

While the two sides have settled, these sort of feuds are only really heating up.

Big ISPs from AT&T to SK Broadband have tried to argue that because streaming services are driving more network usage, streaming providers somehow owe broadband ISPs even more money. But it’s a ridiculous premise; both Netflix and its customers already pay significant sums for bandwidth (especially here in the U.S. where monopolies abound, competition is muted, and prices are artificially inflated).

ISPs design their networks for maximum potential peak load. It’s completely irrelevant how popular some content traveling over your network is. Your job as a telecom operator is to design networks that easily flex to handle a surge in capacity, regardless of traffic type, because you’re already being paid handsomely by companies and consumers alike (and usually subsidized by government in some fashion).

If you’re an ISP whose network can’t handle the short-lived network traffic boost that comes from a popular TV program, it’s because you’re not designing your network and investing in capacity properly. It’s not suddenly the content company’s job to pay you more money to fix a problem you created through cutting corners or under-investment. Especially in the heavily subsidized U.S.

The problem: regulators and politicians in countries like South Korea have spent too much time listening to greedy ISPs, and constructed a regulatory paradigm that normalizes the quest by broadband providers to get more money for doing absolutely nothing. A similar lobbying effort by telecoms has seen some traction in Europe, and has also long been a dream of telecom lobbyists here in the U.S.

If the telecom industry’s EU gambit succeeds (they’ve proposed forcing companies like Netflix to pay a troll toll directly to big telecoms), it’s going to reheat the net neutrality war here in the States in a major way.

Such efforts have always been little more than monopolies abusing their power to bully and extort others; but monopolies have had good luck convincing corrupt regulators to pretend this is all very serious, above board policymaking altruistically aimed at shoring up broadband access. It almost always involves some claim that companies like Netflix get a “free ride” on the internet (they don’t because nobody does).

It’s all greedy bullshit dressed up as serious policy. The details shift slightly over the years, but the quest is always the same: fool regulators into letting telecoms offload ordinary network upgrade costs onto somebody else. It was greedy bullshit when AT&T demanded that Google pay it huge sums of additional money in 2005 for “riding its pipes,” and it’s still bullshit now.

Filed Under: broadband, high speed internet, korea, net neutrality, squid games, streaming, telecom
Companies: netflix, sk broadband

Netflix’s Foray Into Video Game Streaming Is Getting Slightly More Interesting

(Mis)Uses of Technology

from the don't-be-stadia dept

As a writer of opinion pieces, sometimes you go hard in the paint and the result isn’t precisely what you expected. Almost exactly two years ago, I wrote about Netflix’s announced decision to dip its toe into the video game market. At that point, word had gotten out about it all, though that word can be summed up as vague and without any real specifics as to what any of it meant. As a result, because this was also the era of several other players starting to talk about video game streaming, a la Google’s Stadia product, there had been a bunch of speculation that Netflix was going to get into the game-streaming business as well. Instead, the whole thing turned out to be Netflix developing a few mobile device games that mostly dovetailed with other Netflix properties, such as Stranger Things. It was a big yawn and I wasn’t exactly kind to Netflix about the plan.

But now things are getting at least mildly more interesting. Recently Netflix announced that it is going to start getting into the game-streaming business, albeit in a very limited beta to see how this all is going to work.

In a blog post today, Mike Verdu, vice president for games at Netflix, states that the streaming content company is rolling out “a limited beta test to a small number of members in Canada and the UK on select TVs starting today, and on PCs and Macs through Netflix.com on supported browsers in the next few weeks.”

The first two games available on bigger-than-mobile screens are the visual novel-esque adventure game Oxenfree 2, from Netflix-owned Night School Studio, and Molehew’s Mining Adventure, described as a “gem-mining arcade game.”

Those two games and future titles can be streamed. Those early testers playing on TV can use Netflix’s app-based controller, while Netflix says that members “on PCs and Macs can play on Netflix.com with a keyboard and mouse.” There’s no mention of controller support, Linux, or other systems that have browsers. Given the mess that Linux users encounter with web-based DRM, and Netflix’s peculiar device support, it’s not a likely bet, at least for now.

On the one hand, yes, this is still a very limited release and we have no idea how well it will all perform in the beta test. Two games is not a catalogue and none of this remotely looks like the rollout of Google Stadia. But that might be the point. Perhaps this is Netflix not trying to immediately take on a larger catalogue filled with AAA titles because it watched Google fail so miserably at it. Instead, this dipping its toe in the water might be designed instead to see if Netflix can make this work for a more expanded catalogue. If so, that sounds prudent to me.

And perhaps Netflix will simply be more choosey when it comes to which titles it expands its streaming service to.

The two streaming games announced, and their mobile games so far, lean heavily toward puzzle, casual, party, adventure, and light action (and Kentucky Route Zero). This is not a value judgment, as there are some well-regarded titles in the mix that may make their way to streaming, including Moonlighter, TMNT: Shredder’s Revenge, Laya’s Horizon, World of Goo Remastered, Shovel Knight, Immortality, Desta: The Memories Between, Reigns, and Into the Breach.

Netflix seems to have big ambitions for games, recently investing heavily in its studios and third-party titles. Its latest ploy for even more access could mean the entry of a new, quirky competitor for our already highly sought-after screen time.

As we stated, we have no idea if this will work. But it’s certainly starting to get more interesting than its initial foray would have led us to believe.

Filed Under: streaming, video game streaming, video games
Companies: netflix

Netflix Defeats Spurious ‘Slumlord Millionaire’ Lawsuit

Copyright

from the nah-dawg dept

The gears of justice turn slowly, but they do turn. Late last year we discussed a delightful gentleman named Roland Macher, who goes by “Spanky”, because of course he does. Spanky was a restaurant owner and real estate businessman who found himself in prison for over 2 years because paying your taxes is hard or annoying or something. Either way, he didn’t do it. In jail, he wrote a book about how others should do business and called it Slumlord Millionaire. Some time after that, Netflix released a series called Dirty Money, focusing on bad people doing bad business. One episode that centered on possible real life replicant Jared Kushner was also titled Slumlord Millionaire. And because of that, Spanky sued, representing himself.

Now, as we explained in the original post, this was never going to go anywhere. This lawsuit was always destined for the wastebin. The filing itself was rife with grammar issues to start with, but the merits of its claims that any of this is trademark or copyright infringement were laughable. Titles of works are not copyrightable elements and the content of the creative works were so completely different that no part of the copyright claim could have possibly have held up. As for trademark, here again the content is so different that the mere titling of an episode about completely different subject matter the same as the title of some book somewhere simply isn’t going to create any confusion in the public about source or origin, or the involvement of Spanky in a Netflix series.

And now we learn that the court has agreed, having dismissed the suit for being “deficient in many respects.”

“The episode has nothing to do with Macher or his book,” Judge Thomas T. Cullen said in his July 27 opinion in US District Court for the Western District of Virginia.

The judge noted that even under the “more lenient standard” of review afforded to a pro se plaintiff’s complaint, it “must still ‘allege facts sufficient to state all the elements of [the] claim.’”

Cullen said it has been “well-settled” that titles are not copyrightable, and the works’ differences mean there wouldn’t likely be confusion between the book and the show that would support a trademark claim.

And there you have it. Instead of filing spurious lawsuits he wrote himself and representing himself pro se, Spanky can now go back to… advising others on how to business, presumably without the whole, you know, going to prison thing.

Filed Under: copyright, roland macher, slumlord millionaire, thomas cullen, trademark
Companies: netflix

Netflix Claims Its Password Sharing Crackdown Was A Smashing Success, But…

Wall Street

from the nickel-and-dime dept

We noted how as Netflix growth has stalled internationally, the company has turned to nickel-and-diming its existing customers in order to give Wall Street its beloved quarterly returns at any cost. That has included not only last year’s price hikes, but this week’s decision to eliminate the company’s cheapest ad-free tier in both the US and UK.

Then there’s the company’s password sharing crackdown. For more than a decade Netflix encouraged password sharing to boost growth. Now that growth is slowing and the company is facing greater competition, it has chosen to nag account owners into paying $8 extra per moocher. It’s effectively double dipping, since Netflix already raises rates and charges users more for simultaneous streams.

Plenty of users complained about Netflix’s about face on password sharing. And some early surveys suggested that it was possible that Netflix might lose more subscribers than it gained. But in a letter to investors regarding the company’s Q2 ’23 earnings, the company claims the entire gambit was a smashing success (though I’m not sure they’d be entirely honest if it wasn’t):

“Revenue in each region is now higher than pre-launch, with sign-ups already exceeding
cancellations.”

That single sentence resulted in a lot of headlines like the BBC’s “Netflix Password Crackdown Fuels Subscriber Surge” or the Wall Street Journal’s “Netflix Password-Sharing Crackdown Delivers Jolt of New Subscriber Growth.”

But while Netflix does breakdown subscriber totals in earnings (it saw 1.17 million new members from April to June in the U.S. and Canada, and almost 6 million worldwide), it isn’t required to really detail the how and why of those signups. So it’s possible this revenue boost could be due to a popular new show or organic growth, and not necessarily due to Netflix’s scolding of password sharing accounts.

If you look at global Netflix subscriber growth, it’s about where you’d expect it to be, password sharing or not. Not as solid as Q4 2022, but not as bad as Q1 2023. But again, compare subscriber additions to what Netflix was enjoying just a few years ago, and you can clearly see why Netflix is worried about Wall Street perceptions and looking for ways to squeeze more from existing users:

Netflix saw its net income jump to $1.49 billion from the previous’ quarter’s $1.44 billion (they should probably pay their creatives), but again it’s not actually possible to determine if that had anything to do with the password sharing crackdown or is just ordinary growth.

Most folks still see Netflix as a decent value, especially when compared to traditional, bloated cable TV bundles. But that doesn’t mean it’s a great idea for Netflix to push its luck, especially given the surge in streaming competitors like Hulu, Amazon, Apple, Disney, and everyone else. Not to mention the growing public animosity toward the general dipshittery going on among executives in the streaming sector.

Making your product steadily more expensive with greater restrictions and lower overall quality may please Wall Street bean counters on the short term (see: Cory Doctorow’s enshittification), but over the longer term it inevitably frustrates your customer base, tarnishes your brand, and gives your competitors a path toward eroding your market share simply by being slightly less annoying. You can shovel the tallies around from quarter to quarter to put on a good show, but eventually the check comes due.

Filed Under: cable tv, competition, earnings, password sharing, streaming, tv, wall street
Companies: netflix

Warner Bros Discovery Merger Gets Dumber As Layoffs Continue And Company Licenses Streaming Content To… Netflix

Failures

from the pointless-media-megadeals-are-the-new-black dept

By now we’ve well established that the series of mergers that began with AT&T’s doomed acquisition of Time Warner and ended with Time Warner’s subsequent spin off and fusion with Discovery was some of the dumbest, most pointless “business” exercises ever conceived by man.

The idiotic saga burned through hundreds of billions in debt, saw more than 50,000 people lose their jobs, killed off numerous popular brands (like Mad Magazine), created oceans of animosity among creatives (pissed at a company that can somehow spend billions on merger debt and bad ideas yet is routinely too cheap to pay residuals or writers), culminating in a streaming service full of holes that’s arguably dumber and of lower quality than when the whole thing started.

The fun continues as Warner Bros. Discovery tries to make financial sense of the pointless deal and recoup debt, it continues to fire folks across its cable division.

When the press talks about the layoffs and chaos generated by a series of completely pointless mergers the blame always falls on ambiguities like a “weakening macroeconomy” and not, say, blistering incompetence by the fail upwards trust fund brunch-lords in the c-suite, obsessed with setting their brands on fire just for a tax break and a fat bonus.

But there’s been a new wrinkle as Warner Bros. Discovery desperately tries to regain its financial footing, it’s now planning to license the content it spent billions of dollars to acquire to a chief competitor, Netflix:

According to sources, this is a financial move. We hear HBO veterans pushed back against the plan but corporate financial consideration won out. Insiders stress the deal is not closed and may still fall apart, but regardless, it marks a major strategy shift across the premium pay landscape. The shows are understood to be set to be distributed on a non-exclusive basis, which would still allow them to stream on Max.

Back in 2013, Netflix CEO Ted Sarandos noted that his company’s goal was to “become HBO faster than HBO can become us.” As media reporter Pete Kafka jokes, little did Sarandos know that a series of completely idiotic mergers, culminating in the lobotomization of the HBO brand, would ultimately force the company to shovel their freshly built streaming content back Netflix’s direction:

This will have short term benefits: Warner Bros. Discovery gets a cash infusion to help rebalance itself after a series of dumb mergers, and consumers get access to some HBO content without having to pay for HBO. But that doesn’t make going through all this trouble to build a premiere streaming brand, only to trash that brand and shovel your content over to a primary competitor, any less stupid longer term.

It’s genuinely hilarious to me that you can read through entire articles on this stuff and never once find even the faintest context that any of this was avoidable or that executive incompetence and an obsession with pointless consolidation played a role. Each shoe drops without any causation, and nobody in the c-suite learns absolutely anything from the experience because they were paid handsomely for the failure.

Filed Under: cable tv, competition, layoffs, media, media consolidation, mergers, streaming, video
Companies: netflix, warner bros. discovery

Seven Rules For Internet CEOs To Avoid Enshittification

Say That Again

from the a-few-basic-rules dept

It seems that we’ve had a rash of formerly loved internet services going down the enshittification curve. As coined (brilliantly) by Cory Doctorow, enshittification is the process by which a company gets gradually worse. As he puts it:

first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves.

And the progression down this curve is often driven by the (short term) demands of investors, but too often CEOs themselves embrace this curve. And, really, it’s not difficult to see how it happens.

In the early days, you’re an upstart. You’re building users and fans, and it’s the “don’t be evil” stage of an internet company’s life, where the focus is almost entirely on building users. And you do that by providing a great service, better than anything else out there (maybe even disrupting the business models of what’s out there). This excites everyone, including the media and investors who pour in money, subsidizing the company’s existence and rapid growth.

The second stage, then, is when you realize at some point all of this userbase and goodwill has to turn into some sort of business, so that often involves some “compromises” to make sure that you can actually make money. It may start innocently enough: you add in a few non-intrusive ads, or come up with some more creative business models, such as selling data from your users.

But, then the third stage comes, and the investors, who were so happy to give you that money to subsidize everything early on, start demanding their return. They need to see much more growth, and not just in the size of your userbase, but in how much money you’re able to make. You start learning acronyms like “ARPU” (average revenue per user) and such. And then you’re being measured on how much you’re increasing those metrics, which means you need to squeeze more out of each individual user, and you’re now deep within the enshittification stage, in which you’re trying to squeeze your users for more money each quarter (because now everything is judged in how well you did in the last 3 months to improve that number).

It’s happened to lots of platforms, but we’re seeing it happen in somewhat spectacular fashion with a few these days, mainly Twitter and Reddit, though I’d argue that Netflix could be included as well.

Doctorow has another sentence following the one I quoted above that is important here as well:

Then, they die.

That part doesn’t always happen. And some companies just linger on, dead company walking, for quite some time. But the main thing that the enshittification process does is open up new opportunities for new entrants to come in, and do so at the early stages of the curve, with a focus on delighting users, rather than squeezing them. And that’s where the opportunity is for the original companies to die.

Anyway, I’d like to posit seven basic rules for any internet CEO looking to avoid the enshittification death cycle. Think of these as the rules that Steve Huffman maybe should have learned years ago, rather than whatever the fuck he’s doing now.

1. Tell your investors that you’re in this for the long haul and they need to be too. This was a key part of Jeff Bezos’ success with Amazon. For years he was blatantly, almost obnoxiously, transparent with investors that he was focused on the long-term sustainability of Amazon, and he would not cut off benefits to Amazon’s customers in search of profitability. Among Wall St. folks, the oft-repeated line was “will Amazon ever make money?” When I was in business school in the 90s, a decently successful entrepreneur told me that Amazon was never going to succeed because Bezos was too focused on users, rather than profits. Instead, he suggested PointCast was the internet company that would succeed. How many people actually even remember PointCast? People forget that when Bezos introduced Amazon Prime, Wall St. flipped out, because they insisted that it would cost way too much for too little benefit. But, through it all Amazon survived (and thrived) because Bezos just kept telling investors exactly what his plan was, and never backed down, no matter what Wall St. kept saying to him.
2. Your community is everything. This is too easily forgotten, but your users are everything if you run an internet business. They’re not “the product.” They’re what makes your site useful and valuable, and often provide the best marketing you could never buy by convincing others to join and providing you with all of the best ideas on how to improve things and make your service even better for the users. The moment you’re undermining your own community, you’re beginning to spiral downward.
3. Create more value than you capture. This one is not mine, but Tim O’Reilly’s, and it’s one that constantly sticks with me. As you’re developing a business model, the best way to make sure that you’re serving your users best, and not enshittifying everything, is to constantly make sure that you’re only capturing some of the value you’re creating, and are instead putting much more out into the world, especially for your community. Your investors will push you to capture more and more of that value, but again, when you start chasing that, you’re also spiraling down the enshittification curve.
4. Empower your community, and then trust them. This may sound similar to rule number two, but it’s more about how you make the first rule a reality. Again, your own community is what’s making your service even more valuable, and helping to attract new users. So, make it easier for them to do that. Push the power to make your service better out from the service to the users themselves and watch what they do. Let them build. Let them improve your service. Let them make it work better for you. But, you have to have some trust here. If you’re focused on “Rule 3” you have to recognize that sometimes your users will create value that you don’t capture. Or even that someone else captures. But in the long run, it still flows back to you, as it makes your service that much more valuable.
5. Find ways to make money that don’t undermine the community or the experience. There are ways to do this. If you’ve built a strong community, they want you to survive. But you need to make sure that you’re creating ways to capture the part of the value you’re capturing in a manner that doesn’t harm the overall experience. Google did this in the early days with its non-intrusive contextual ads, but lost the plot on enshittification when it started sucking up as much extra data as it could to target you (and then seemed to cut off competitive routes for alternative ads to work). There are ways to monetize that don’t need to overwhelm, that don’t need to suck up every bit of data, that don’t need to rely on taking away features users relied on. Focus on adding more scarce value, and figuring out ways to charge for those new things which can’t be easily replicated.
6. Never charge for what was once free. This is a corollary to rule number five. If you’re charging for something that was once free, you’re taking away value from your community. You’re changing the nature of the bargain, and ripping away the trust that your community put in you. Instead, always look for something new that is worth paying for above and beyond what you already offered. Make it so that it’s worthwhile for people to pay, rather than acting like they need to pay you for the things they got for free until now. Give them a reason to pay gladly, don’t try to pressure them into coughing up money grudgingly.
7. Don’t insult the intelligence of your users. All too often, this is what it comes down to. When investors get on your case about how you have to squeeze more money out of each user, bad CEOs start trying to justify the clearly “bad for users” decisions that they’re making as actually being good for the users. Some, like Reddit’s Huffman, are so far gone that he just assumes that Reddit’s userbase wants him to make more money, rather than even trying to couch the borked API plans in some “it’s better for users” language. But, either way, be upfront with the community (remember, it’s the most important part of your site). If you need to make more money, rather than acting petulant about how unfair it is that you’re not making money, explain why you’re creating new services that provide new value, and why they’re priced as such. Be up front, transparent, and honest. Don’t talk down to them, and treat them as if they owe you. They don’t. They made your service what it is, and you should act accordingly.

There’s obviously a lot more to all of this, but keeping those seven principles in mind can create a path for CEOs of internet companies to continue delighting users and avoiding extreme enshittification. Of course, no one’s perfect, and every company is going to make mistakes. But if investors are pushing you to make more money now, figure out ways to do that by adding even more value to the world, rather than trying to squeeze your existing community, ripping away the things they love, and telling them you’re doing it for their own good. And, also, tell those investors that you’re doing this for the longer term health of the service, rather than just trying to get a quick buck out of the people who made your service so successful in the first place.

Filed Under: elon musk, enshittification, rules, steve huffman
Companies: amazon, google, netflix, reddit, twitter