No Mercy / No Malice: The Streaming Wars and Affordability

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0:01:22 Is it the matcha, or am I this energized from scoring three Sephora holiday gift sets?
0:01:26 Definitely the sets. Full-size and minis bundled together? What a steal.
0:01:30 And that packaging, so cute. It practically wraps itself.
0:01:35 And I know I should be giving them away, but I’m keeping the Summer Fridays and Rare Beauty by Selena Gomez.
0:01:36 I don’t blame you.
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0:01:53 I’m Scott Galloway, and this is No Mercy, No Malice.
0:01:55 The fate of Warner Brothers is unclear.
0:02:02 What’s clear is that consolidation and concentration are bad for consumers and affordability.
0:02:07 Streaming Wars and Affordability, as read by George Hahn.
0:02:28 Netflix’s $83 billion deal to buy most of Warner Brothers would unite Stranger Things and K-pop demon hunters with Game of Thrones and the White Lotus, creating a streaming powerhouse.
0:02:37 With Netflix’s Ted Sarandos and Greg Peters at the helm, the combined company would also be led by the smartest team in the entertainment industry.
0:02:41 I know Ted, and like most who meet him, admire him.
0:02:52 I don’t know David Ellison, and I find kids of billionaires trying to reshape the culture with a 12-figure jackhammer a bit gross.
0:03:01 But the Paramount boss, who’s trying to thwart Netflix with a hostile $108 billion bid for Warner Brothers, is right.
0:03:10 A Netflix takeover would likely be bad news for consumers at a time when many are facing an affordability crunch.
0:03:21 The fight over the century-old studio is also a great example of the cronyism and head-up-your-ass economics of the Trump administration that adds fuel to the crisis.
0:03:31 Ellison argued on CNBC that allowing two of the biggest streaming services to join forces is anti-competitive.
0:03:44 As the son of Larry Ellison, the world’s third richest person, Paramount’s CEO has close ties to Donald Trump and access to a seemingly bottomless pool of capital.
0:03:53 It’s obnoxious, listening to a guy raised in a gravity-free financial environment warning others about the dangers of market distortion.
0:04:00 After giving that interview, did he go into the kitchen of the restaurant and lecture the line cooks on the dignity of minimum wage?
0:04:02 I digress.
0:04:12 After giving the elder Ellison a significant role in his plan to transfer TikTok’s U.S. operations to a group of American investors,
0:04:18 Trump is pledging to get involved in the regulatory fate of a Warner Bros. takeover.
0:04:25 This is straight-up socialism, the state controlling the means of production.
0:04:31 Everyone knows we’re sliding into a stew of autocracy kleptocracy,
0:04:37 so Sarandos also wooed Trump in the lead-up to announcing his agreement on December 5th,
0:04:40 securing a secret White House meeting with the president.
0:04:45 But before unveiling his rival offer two days later,
0:04:49 Ellison reminded his adversary who has the political edge.
0:04:54 The Silicon Valley scion was spotted beside Trump at a ceremony in D.C.
0:05:00 Who the president or podcasters believe is the rightful owner shouldn’t matter.
0:05:01 It’s simple.
0:05:08 It should be whoever shows up with the biggest check and passes regulatory reviews.
0:05:13 Concentration of power in streaming might corrupt the market,
0:05:20 similar to the corruption the country endures when a few people can reshape media, tech, and Washington.
0:05:22 Anyway, back to streaming.
0:05:26 With more than 300 million subscribers,
0:05:28 Netflix already has a leading position.
0:05:31 Netflix, Amazon Prime,
0:05:35 and Disney control over 60% of the market.
0:05:39 Acquiring Warner Brothers would give it even more power,
0:05:44 with one of the largest libraries of premium scripted content
0:05:47 and some of the most valuable entertainment franchises.
0:05:52 Combining HBO, the gold standard of television,
0:05:55 with Netflix, the streaming superstore,
0:05:59 is like fusing LVMH and Walmart.
0:06:03 If Netflix captures HBO Max,
0:06:05 the streaming war,
0:06:07 ad-free original content,
0:06:09 is over.
0:06:10 The upshot,
0:06:13 despite Netflix’s assurances
0:06:16 that the combo will create greater value for consumers,
0:06:18 is fewer choices.
0:06:20 At some point,
0:06:23 as concentration intensifies,
0:06:25 all the company’s stocks will fall,
0:06:29 as there are fewer people who can afford to buy their stuff.
0:06:31 This trend is well underway,
0:06:37 with the top 10% already accounting for 50% of consumer spending,
0:06:39 making the economy more fragile.
0:06:44 One-tenth of the population can crash the train.
0:06:49 A paramount deal also raises competition concerns,
0:06:52 given the two companies have rival film studios
0:06:54 with theatrical releases
0:06:56 and overlapping streaming services.
0:06:59 But there’s a reason Paramount
0:07:02 would probably face an easier regulatory path.
0:07:05 And that’s not just the support it would receive from Trump.
0:07:09 It boils down to market share.
0:07:11 Streaming prices are climbing,
0:07:13 along with the cost of groceries,
0:07:15 gas, and housing,
0:07:17 as the industry consolidates.
0:07:20 The average subscription price
0:07:21 for the top 10 U.S. platforms
0:07:25 has risen 12% this year,
0:07:27 far outpacing inflation,
0:07:30 following double-digit increases since 2022.
0:07:35 U.S. households spend an average of $70 a month
0:07:36 on streaming services,
0:07:38 a significant sum for people
0:07:41 whose grocery bills have climbed 30%
0:07:43 over the past five years.
0:07:47 The companies say they have to raise prices
0:07:50 to pay for the premium content they provide.
0:07:53 But what the increases really signal
0:07:57 is a transfer of capital from consumers and labor
0:07:58 to shareholders.
0:08:02 Adding the studio and streaming assets of Warner Brothers
0:08:05 would give Netflix even more leverage.
0:08:09 If Netflix wins,
0:08:11 the most critical question
0:08:13 will be whether it’s competing
0:08:15 with premium streaming platforms
0:08:19 or virtually all digital video content
0:08:20 vying for attention.
0:08:23 Netflix isn’t nearly as dominant
0:08:25 if you factor in Alphabet’s YouTube
0:08:26 and ByteDance’s TikTok,
0:08:28 as Kara Swisher,
0:08:29 my pivot co-host, points out.
0:08:31 But regulators should adopt
0:08:33 the narrower market definition.
0:08:36 Otherwise, it’s akin to chicken producers
0:08:38 defending their control of the market
0:08:40 by suggesting their competition
0:08:41 extends to cattle ranchers
0:08:43 and pistachio farmers.
0:08:47 Also, consolidation won’t stop
0:08:49 with Netflix or Paramount and Warner Brothers.
0:08:52 The deal will only put more pressure
0:08:55 on rivals, including Comcast,
0:08:57 to follow with their own transactions
0:08:59 to scale their streaming platforms.
0:09:02 Streaming subscriptions
0:09:05 are just one part of a wider debate.
0:09:07 Everyone from Donald Trump
0:09:10 to New York Mayor-elect Zoran Mamdani
0:09:12 is talking about affordability.
0:09:16 However, the country is long on indignation
0:09:18 and short on ideas or programs
0:09:20 to actually bring prices down.
0:09:23 The president has insisted
0:09:25 that tariffs will boost the economy
0:09:27 when in fact they’re pushing prices higher
0:09:29 and fueling concerns
0:09:30 over the cost of living.
0:09:33 Trump, who once vowed to
0:09:35 make America affordable again,
0:09:38 now calls concerns about increasing prices
0:09:41 a hoax perpetrated by the Democrats.
0:09:44 Americans know this is bullshit.
0:09:47 The use of buy-now-pay-later services
0:09:49 is rising to record levels
0:09:50 this holiday season.
0:09:53 Yet they’re also not buying the message
0:09:54 from Democrats,
0:09:56 who highlight the need
0:09:58 to curb health, housing, food,
0:10:00 and energy costs,
0:10:02 but resort to stoking outrage
0:10:04 and throwing money at people
0:10:07 versus implementing concrete structural change.
0:10:11 Here are four ideas that aren’t sexy,
0:10:14 i.e., they will take work.
0:10:22 Housing should be at the top of the agenda
0:10:24 as it’s the primary culprit
0:10:26 driving the lack of affordability.
0:10:29 Half of renter households in the U.S.
0:10:31 are cost-burdened,
0:10:34 meaning they spend 30% or more
0:10:35 of their income on shelter.
0:10:39 Higher expenses curb labor mobility
0:10:40 and productivity,
0:10:43 deter families from seeking medical care,
0:10:45 contribute to anxiety and depression,
0:10:47 and fuel homelessness.
0:10:50 While rent control is tempting,
0:10:53 it suppresses development longer term,
0:10:55 only adding to the problem.
0:10:57 Higher costs of labor,
0:10:59 building materials,
0:11:01 and regulatory compliance
0:11:03 exacerbate the housing shortfall.
0:11:06 We should have tax credits
0:11:08 to unleash private development
0:11:10 to build 8 million to 10 million homes
0:11:12 in the next decade.
0:11:14 YIMBY laws,
0:11:14 yes,
0:11:15 in my backyard,
0:11:18 and cost-effective building
0:11:20 are also part of the solution.
0:11:22 Manufactured homes,
0:11:23 built in factories
0:11:25 and finished on-site,
0:11:29 are 35% to 73% cheaper
0:11:31 than homes built entirely on location.
0:11:38 the U.S.
0:11:39 The U.S.
0:11:40 health care system is broken
0:11:43 for the bottom 90%.
0:11:46 Many Americans are one medical expense
0:11:48 away from sliding into debt.
0:11:51 More than 30 million citizens,
0:11:53 especially Black and Hispanic adults,
0:11:56 borrowed money to pay for health care last year,
0:11:59 accumulating $74 billion
0:12:00 in medical debt.
0:12:01 Enough.
0:12:05 Let’s take Medicare
0:12:06 and lower eligibility
0:12:08 by two years
0:12:09 every year
0:12:11 for the next decade.
0:12:13 That would bring the age
0:12:13 of eligibility
0:12:14 to 45
0:12:16 in 10 years.
0:12:18 What is that called?
0:12:20 Nationalized medicine.
0:12:23 We can help younger people
0:12:24 in other ways.
0:12:25 They aren’t the ones
0:12:27 accounting for the vast majority
0:12:28 of surging health costs.
0:12:30 Number three,
0:12:33 impose tuition caps.
0:12:36 We also need tuition caps
0:12:37 based on income.
0:12:40 As a freshman at UCLA,
0:12:42 I benefited from an annual tuition
0:12:44 of just $1,350
0:12:48 and an admissions rate of 74%.
0:12:52 A degree from a prestigious school
0:12:53 opens doors
0:12:54 and potentially quadruples
0:12:55 the income a person
0:12:57 can expect to make.
0:12:59 But the ROI has declined
0:13:02 as costs have ballooned.
0:13:05 If your family is middle class,
0:13:07 the tuition should reflect that.
0:13:09 Colby last year
0:13:10 announced a program
0:13:12 to cap the cost
0:13:13 of tuition, room, and board
0:13:16 at $10,000 a year
0:13:17 for families who earn
0:13:19 up to $100,000
0:13:22 and $15,000 a year
0:13:24 for those with incomes
0:13:25 ranging from $100,000
0:13:28 to $150,000.
0:13:30 That compares
0:13:31 with a net price
0:13:32 of as much
0:13:34 as $53,000 a year.
0:13:36 If universities
0:13:37 with endowments
0:13:38 greater than $1 billion
0:13:40 aren’t increasing
0:13:41 freshman enrollment
0:13:43 faster than the population
0:13:44 is growing,
0:13:45 they should lose
0:13:47 their tax-free status.
0:13:49 They’ve decided
0:13:50 they’re Birkin bags,
0:13:51 not public servants.
0:13:54 And number four,
0:13:56 trust-busting.
0:13:59 Concentration of power
0:14:00 harms consumers
0:14:01 and workers
0:14:02 with the benefits
0:14:04 flowing to shareholders.
0:14:06 It’s up to regulators
0:14:07 to break up
0:14:08 or block
0:14:09 harmful oligopolies
0:14:10 that stifle competition.
0:14:13 The nation’s regulators
0:14:15 are supposed to enforce
0:14:16 antitrust law
0:14:18 based on guidelines
0:14:19 about market share
0:14:20 and other standards,
0:14:21 but giving the president
0:14:23 the ability to engage
0:14:25 in post-hoc manipulation
0:14:28 undermines the rule of law,
0:14:29 as Herbert Hovenkamp,
0:14:31 an antitrust scholar,
0:14:32 told the New York Times.
0:14:37 The pursuit of Warner Brothers
0:14:38 is more than just
0:14:39 a transaction.
0:14:41 It’s a microcosm
0:14:43 of a wider emergency.
0:14:45 We can’t complain
0:14:47 about surging costs
0:14:48 while ignoring
0:14:49 the factors behind them.
0:14:51 We need to have
0:14:52 an adult conversation,
0:14:54 saying no
0:14:55 to harmful deals
0:14:56 and yes
0:14:57 to policies
0:14:58 that spur competition
0:15:00 and rein in
0:15:00 health,
0:15:01 housing,
0:15:02 and education costs.
0:15:04 It’s telling
0:15:06 that the loudest objection
0:15:08 to this nascent monopoly
0:15:09 comes from
0:15:10 a Hollywood mogul
0:15:11 who’s never lived
0:15:12 outside one.
0:15:14 But we should listen
0:15:14 to him.
0:15:16 Consolidation
0:15:17 is a tax
0:15:18 on the young
0:15:19 and the poor
0:15:20 levied to protect
0:15:21 the old and the rich.
0:15:24 Affordability
0:15:26 begins with a simple idea.
0:15:28 More firms,
0:15:30 more competition,
0:15:32 more oxygen.
0:15:37 Life is so rich.
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