Streaming wars

Exclusive content and platform competition in Brazil.

Media streaming platforms, such as Amazon Prime Video, Claro Video or Netflix, are finding an increasing need to fight over new subscribers. This is the case in large markets, such as Brazil, and has been a feature of the global lockdown where consumers are inevitably focused on digitally distributed media.

The competition is extremely tight for online platforms, which means they’re all wanting to differentiate themselves. One key way they’re doing this is by offering exclusive content, some of which they’re even producing themselves.

This approach to platform competition, however, can have key disadvantages for consumers and for the industry as a whole.

Our research sheds light on the potential drawbacks from insufficient platform competition and evaluates the copyright and antitrust policies that can help remedy this.

Is exclusive content negatively affecting consumer behaviors? Does the current competition model affect the industry’s investment in quality content?

Let’s sit down, grab the remote and take a look.

What we asked

Does exclusive content increase piracy?

In order to understand consumer behaviors, we started our research by creating a large-scale dataset of movie titles available over the last few years from most of the active platforms in Brazil.

We worked from the assumption that any consumer’s wish list of exclusive content is likely to be spread across a variety of platforms. Many different points of access can quickly become prohibitively expensive, especially as subscription services with entire movie catalogues turn more of their focus towards the distribution of exclusive content.

It’s possible that as content becomes more fragmented it results in more online piracy. Consumers may decide to limit their subscriptions to one or two streaming services and then pirate the rest.

But how much online piracy is actually happening in Brazil? Do people stop pirating content when it's readily available on multiple platforms?

Does distribution on fewer platforms mean less financing for individual movies?

It is often argued that investment in premium content will grow and become more lucrative when it is distributed on a single platform as exclusive content, with higher pricing for this early access.

Because platforms want to differentiate themselves by hosting more exclusive content, a single platform may be willing to pay studios higher fees for content when they commit to exclusive licensing.

Alternatively, more powerful platforms may force studios into exclusive deals or create content themselves because of their direct access to large, online audiences.

Whichever scenario holds true, for certain markets exclusivity is on the rise. Some platforms – particularly subscription-based ones – are powerful enough to focus their efforts on differentiating themselves with exclusive content.

  • A platform may pay higher fees to studios for content when they commit to exclusive licensing.
  • Alternatively, more powerful platforms may force studios into exclusive deals.
  • Subscription-based platforms are currently powerful enough to focus on content driven differentiation.

When it comes to movie financing, it’s possible that exclusive distribution deals and platforms paying higher fees to studios may make up for some of the losses from licensing to fewer platforms. Sometimes, this might even help studios’ investment in film.

In the alternative scenario, however, investment in content might be lower because distribution across multiple platforms might be more favorable. In the case of a powerful platform, however, studios may fail to reach this type of agreement.

How are the decisions around investing in films affected by their distribution and competition online?

Pirating decreases once movies are online and multi-platform.

Our results clearly show that once content is made available online, the corresponding piracy searches decreased in Brazil by approximately 6 percent per year.

Once movies are available via multiple platforms then piracy decreases even further.

% decline in online piracy searches based on the number of platforms with the available content

1 platform
2 platforms
3 platforms
4 platforms
-6%
-10%
-12%
-15%
0%
-4%
-8%
-12%
-16%

People are pirating because either they’re unable to find a legal service offering their favorite movie or they simply can’t afford to pay for another content platform.

Even when considering different business services models – both subscription-based services or on-demand purchases – the findings are similar. The greater the availability of content across multiple legal platforms, the less likely people will be pirating that content.

Exclusive distribution doesn't always mean higher investment in content development.

Decisions regarding investment are important for studios and media companies as part of their product lifecycle. We might expect that copyright protection and exclusivity would guarantee higher investments, but market forces play their part.

We found two patterns of investment. When the content will end up being exclusive on a subscription-based service such as Netflix, the average movie budget is higher. In this case the platforms’ push for more exclusivity does not appear to diminish investment levels.

Looking at on-demand purchasing services such as Amazon Prime Video, however, this is not the case. Average budgets are lower when content ends up being exclusive on on-demand platforms. Although this could be due to having fewer financing opportunities because the content will be available on fewer platforms, there may be other factors involved.

  • Investment in content is an important decision for studios and media companies.
  • Average production budget is higher for exclusive content in subscription-based services.
  • But budget is actually lower for exclusive content in on-demand purchasing services.

What this means for policy

Consider both copyright and the content availability to decrease piracy.

If we consider that the availability of content can reduce piracy, some of the costs of legal enforcement could be redirected towards increasing rights transfer, licensing activity and online availability.

Because copyright rules are territorial, it would also be necessary to further investigate institutional barriers and cost factors surrounding intellectual property (IP) markets and content availability.

Today’s copyright frameworks for the audiovisual market may or may not incentivize an increase in the licensing of titles to multiple platforms and territories.

  • Increase rights transfer, licensing activity and online availability.
  • Investigate institutional barriers and cost factors surrounding IP markets and content availability.
  • Copyright frameworks for the audiovisual market don’t clearly incentivize licensing to multiple platforms and territories.

For example, some jurisdictions have decided to ease rights clearance around audiovisuals via specific copyright rules because audiovisuals often involve a larger amount of co-creators and subsequently a larger amount of potential rights owners.

Even though this could help increase the legal certainty around rights transactions and incentivize content licensing for both studios and platforms, this approach is not widespread.

Coordinate copyright and competition policies.

Copyright and related rights strike the balance between giving access to content and recouping investment.

The incentive to invest in new content will not only depend on the provisioning of rights but also on the level of market competition. In Brazil’s case, it seems the corresponding economic incentives in the fast-evolving audiovisual market have increased only in some segments, while they have decreased in others.

In a dynamic market, the best approach for antitrust authorities and platform regulators may depend on developing joint policy objectives and coordinating interventions with the policymakers in charge of copyright frameworks and instruments.

Beyond that, regulation of digital markets might be improved by developing antitrust rules that take better account of innovation and future market prospects, given that platforms tend to focus on long-term growth strategies rather than short-term pricing power.

Monitor market power and the future.

Platforms are heavily investing in the creation of their own exclusive content – particularly TV series – so it seems likely that exclusive content will dominate future market strategies.

This appears all the more probable when we consider the arrival of large companies such as Disney and Apple in the streaming marketplace.

If a few platforms start to dominate the market, this may lead to unbalanced negotiations and film producers agreeing to undesired exclusivity conditions and reduced initial investment.

And as new platforms are launched by major studios and others, the market will become even more fragmented, with content that can’t be licensed by competing platforms at reasonable fees. These offerings of new content might win some new subscribers, but its reduced availability will also make it more prone to piracy.

Photo by Glenn Carstens-Peters on Unsplash

In a nutshell

Four considerations for policymakers

  • 1
    Legal availability across multiple platforms effectively deters online piracy.
  • 2
    Policies can encourage rights transfers, licensing and online availability while still keeping markets open and competitive.
  • 3
    Alongside the copyright system, regulation of digital markets and platforms might be improved by developing antitrust rules that take better account of innovation and future market prospects.
  • 4
    More exclusivity does not necessarily translate into higher average investment in content, as investment decisions are also dependent on the level and type of competition in online markets.