Vertical and Horizonal Market Segmentation with Movies

Around the 2005, there wasn't really an online streaming market. Movies and series would be distributed via movie theaters, DVD or TV networks. Usually cable networks had stuff earlier. But for movies one would always have to wait until it was done in theaters in the USA. Then it should be shown in theaters in Germany and eventually it would be sold on DVD. And even later it would be aired on TV. With series it was usually that a whole season was shown on cable TV in the USA, and once that was done it would be started in Germany. I remember that when CSI NY season 2 was finished in German TV, I was really stoked for season 3. But they started airing season 1 again as the third season was not done in the USA yet.

So basically one had a market segmentation like this, where there are various horizontal layers and the segmentation is done vertically:

The studios would produce stuff, there was a bunch of licensing stuff in between and eventually one could just see the stuff on German TV. One could watch everything with the same TV, just had to wait rather long.

And then Netflix came and was a channel which was available in every country. Due to those pesky licensing restrictions, they could not directly show everything in every country. For instance “The Expanse” season 3 was produced by the SyFy channel in the USA. Then it was aired there on their network. In Germany the rights were given exclusively to some cable network, so Netflix could not distribute it in Germany although they already had the previous two seasons.

To work around these restrictions, Netflix started to produce their own things. They had the global rights and could show it on Netflix right away.

This was such a success for them that they eventually started pushing their own productions more and more. They even started to thin out the licensed offering from the other studios as that turned out to be a bigger hassle for them than just producing their own stuff. Over time Netflix became a “full stack” movie thing which only had a few productions of other studios.

Finally the other players and studios saw the pattern and started to do the same thing. Instead of licensing the expensive movies that all the other services also offered, they started producing themselves. And now we have a horizonal market segmentation, where companies do the full stack themselves.

The end result is that we are back where we have started: If you want to watch series A, you have to get a Netflix account. Series B is only available on Amazon Prime, so you have to get that. Oh, and you want to watch a Disney, Star Wars or Marvel movie? Go to Disney and pay for a subscription there.

And shows even change their owner. “The Expanse” was produced by the SyFy channel up to and including season 3. They could not produce enough income with the show and were going to cancel it, just before Amazon decided to continue it. The third season had just finished airing in the USA, but it never made it to Netflix in Germany. The first two seasons were also taken off Netflix, such that one has to watch them at Amazon.

The availability of movies and shows has become so complicated that I use a third party index where one can check which streaming service actually has it in their portfolio. Netflix doesn't allow searching its database without being a paying customer (or on a trial subscription). Of course they just want to lure the people in and then drown them in their own productions. Watching something specific is now as cumbersome as it was decades ago.

With music I feel that Spotify basically has everything that is available. There is little exclusive content, and I feel that I could easily switch to a service like YouTube Music or Apple Music and have the same selection of stuff. Incidentally the illegal downloading of music has basically died out, whereas for movies and series it is very much still alive. I see a connection, but apparently the movie industry still makes enough profit with treating their customers this way.