Currently, Netflix is on the verge of acquiring the Warner Brothers catalog. When this merger goes through this will be the combination of the biggest streamer and arguably the best film catalog in Hollywood. A business that built is wealth on streaming movies and series to our homes is acquiring a film studio that gave us a reason to leave the house and sit in a packed house with hundreds of others to stare at a screen in the dark while stuffing our faces with popcorn before the trailers got done. On the home front, streaming has been getting ever more convenient. The average household in the US now boasts a screen upwards of a 50″ and sound system with a subwoofer. Not as great as in the movie theaters but personally speaking, a 60″ plus subwoofer and soundbar will keep me cozily at home for what would have previously had me at the movies powering through popcorn during the trailers. What could go wrong? If there are more people like me out there then a main revenue driver for the movie business could now be on life support. There is a ripple of ramifications that is yet to unfold.

OpenAI (ChatGPT) has been in the news a lot lately looking to expend revenue streams for the most popular language model A.I on the market. A service that started out as free now charges upwards of almost $200 month for a subscription to use services any where from general searches, image generation and graphics. ChatGPT offers what previously required a public library subscription, a penchant for research and reading and an Adobe subscription amongst others. As efficient as ChatGPT is, the level of efficiency it provides for the user is non-pareil, accuracy notwithstanding.

However, what becomes of industry when efficiency is at an all time high? There is a reduction of cost of production and a reduction of price for the consumer. Low cost of labor, low price point for the consumer. Where then does the cost of maintenance come from? The investors? How do they generate revenue? Businesses often use cost of labor and process to sell the consumer on the value. When labor and is greatly filtered and process is invisible or incomprehensible, price is only justifiable by immediacy of access. However, immediacy of access is not that special when there is seldom novelty to what is being brought to market. It becomes the standard. Novelty is expensive because it involves risk. But risk comes with trial and error. Trial and error means it comes with the need to allow for failure. Failure is expensive. Failure is necessary when seeking innovation thus, it is expensive. Someone has to pay for it or there has to be treasure chest to cover it. When revenue is slow, cost of failure once more falls on the investors which means thinner profit margins.

Movies and series thrive on novelty and the viability of AI in our industrial process requires an accommodation for novelty. Netflix (as well as other streamers) has a subscription model which is a great way to generate revenue and capital. But every Netflix subscriber has gotten used to the “Netflix” look of a series or movie. We love it for Netflix. Not sure we want our studio films to invoke the same level of visual familiarity. While Netflix has their revenue coming out its subscribers’ pockets, without novelty subscriptions will soon decline. Nothing makes novelty less likely than decreasing revenue or diminishing capital. But Netflix deserves a lot of credit for creating a revenue stream with subscriptions. It is very efficient form of revenue. Streaming is a very efficient form or content delivery. But novelty is never an efficient process and most likely should not be. It requires the consideration and accommodation of variables that change with societal needs, cultural taste and artistic development.

If profit relies on novelty while capital generation and utility depend on efficiency. How does an industry scale? Has efficiency finally cost industry its scale? Has efficiency become the enemy of industry? How good is convenience for business?

by Julian Michael Yong