While today streaming is a common means of sharing all different kinds of media, services like Netflix, Hulu, HBO, etc. have digitized in a revolutionary way the manner in which we watch movies and television.
Let's take a look at Netflix...
Streaming gives you the ability to watch television shows and movies any time you want, irrespective of when a television show is being aired or a movie is playing in theaters. On Netflix, we can watch, at any time of day or night, shows like M*A*S*H (right), which originally aired in the 1970's. Netflix's ability to provide content from various time periods and at all times of day eliminates the constraints of television programming's specific timetable.
Netflix, which, like television, provides movies and shows aimed at audiences rather than individuals, has the same sort of poly-directionality as physical television sets: one-to-many. However, on the digital scale, Netflix's "many" is even more far-reaching, especially as people are beginning to forgo cable services for streaming content providers like Netflix.
Netflix, like many other information technologies, exhibits positive network externalities, because its value increases as more people use it.
The more people use Netflix, the more television and movie providers are willing to sell rights to Netflix. The more content on Netflix, the more people want to use it, and so on and so forth...
“When the value of a product to one user depends on how many other users there are, economists say that this product exhibits network externalities, or network effects" (Shapiro and Varian, Information Rules).
Economies of Scale
Economies of scale refer to the idea that the more you produce, the cheaper it gets to do so. With digitization, the sharing of media content on sites like Netflix is incredibly cheap to reproduce, as after the initial fixed cost of securing the rights to the content and programming its place on the site, an individual show or movie can be streamed again and again by any user at no additional cost to Netflix.
Netflix makes frequent use of algorithms, replacing even the need for human decision-making by showing us suggestions on what to watch, calculated by algorithms based on what we enjoyed previously. The "Netflix Prize" was a competitive search for a successful algorithm open to the public in hopes of providing a content filtering and recommendation service to users.
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Public - 7/13/16, 5:49 PM