Streaming Content: Scattering Vs Dumping

Like a good millennial, I don’t have cable. Instead I have Netflix, Amazon, Hulu, Disney+, YouTube, and a free trial of Apple TV. And before you say that I’m spending just as much as I would have spent on cable, just – no. First, I am not. Second, I have way more capability and discretion than I ever had with cable. Each of these streaming services now has their own studio(s) and competition is causing them to produce some content of exceptional quality. And, they differ in their decisions scatter vs dump. Amazon and Apple TV scatter their new episodes on a weekly schedule. You can still watch the episodes whenever your heart desires once they’re released. But if you are up-to-date, then you must wait 7 days until new episodes are available. Netflix, on the other hand, dumps out a new series all at once. You can spend the afternoon (or morning, or night) watching an entire season of the newest content from a high-end studio.

If we take a look through the way-way-back machine, then we can observe must-see-TV on NBC in the 1990s. Networks followed the scattering model. Most people didn’t own a DVR and on demand wasn’t really a thing except for pay-per-view. VCR (video cassette recorders) were ubiquitous, but people enjoyed watching their shows as they were released rather than later watching a recording. The 90s and early 00s were a special time for NBC in particular: Friends, Seinfeld, Frasier, 3rd Rock from the Sun, and ER were all a part of the weekly line-up – with Will & Grace and Scrubs soon following the finale of Seinfeld.

New weekly episodes that were released during a literal ‘season’ of the year had been the model for as long as television signals had been broadcasted. Several of today’s streaming services still adhere to the 80-year-old practice.

Why?

I’ve got 3 reasons for why streaming services still scatter new releases. The first is the one I that have the least to say about: Buzz. It’s good marketing for a show to be released over a longer period of time. In a world of social media, the longer the time that a show is salient in your life, the greater the opportunity for you to share the show with your friends or for critics to acclaim (or pan, as the case may be). It’s a marketing tactic. If all of the episodes in a season were released all at once, then a show would be in-and-out of your life like a stray ice cube that goes rogue from the refrigerator ice-dispenser. You care for a bit. But soon, it’ll evaporate and never be a concern again. I’m not an expert in marketing. So I’ll just leave it at that.

The second reason is due to the time value of money. The sooner that we can enjoy revenues and the later that we can push costs, the better. It’s true for multiple reasons. Financially, every day sooner that you receive a dollar is an additional day during which you can earn a return by investing it elsewhere. For ease, let’s hold the schedule of costs constant and just worry about the revenues. If a streaming service releases episodes weekly, then episodes can start dropping before the season finale is even completed. There’s nothing that says that the whole season has to be ready by the time the first episode is released.  And, when episodes are released earlier, would-be viewers are sooner willing to sign-up and become paying customers. Releasing episodes weekly allows a studio to increase revenues before the whole product has finished production.

The 3rd and final reason for streaming services to release on a weekly schedule is due to the subscription structure of marginal revenue. Streaming services earn *no* additional revenue per episode viewed by customers. The marginal revenue earned from paying customers comes from subscriptions. That is, each month of a subscription is revenue for the streaming service provider – no matter how many episodes a subscriber watches. Therefore, if a season is released piecemeal, then it increases the number of weeks during which the streaming service receives revenues from the customer. Of course, people could just wait until all of the episodes are released and then subscribe for a single weekend of lethargic binging. But that can only happen when a viewer is comfortable with forsaking the frontier of new video content. That would mean that a viewer is out of fashion and out of the conversation that their friends and co-workers are having. And if this sounds like small potatoes, then keep in mind that such conversations are often about signaling belonging, comradery, and cultural sophistication. Many people are inclined to stay up-to-date on TV, the news, and sports and therefore have a greater willingness to pay.

There you have it. The 3 reasons for streaming by scattering over weeks rather than dumping all at once are 1) More persistent saliency among viewers and potential viewers, 2) Sooner rather than delayed revenues, and 3) More periods for which streaming service can charge their customers for new content.

I only have one explanation for why some streaming services do in fact dump an entire season at once. Netflix does it on the regular and Amazon started doing it in the past several years too. I suspect that they do it as a means of attracting a particular market segment: binge-watchers. There being two players who compete on this margin may make either provider appear less attractive for consumers who desire new, binge-worthy content. But, luckily for Netflix, streaming content providers aren’t in a perfectly competitive market. That content an imperfect substitute means that it’s monopolistically competitive. And, for the moment, that means higher profits. The keen reader will recognize, however, that zero long run economic profits are also implied.

Penny-Pinchers Gonna Pinch

Text books say that there are two major problems with the Consumer Price Index (CPI). First, accounting for changes in quality is difficult. Second, the CPI is calculated by assuming a fixed basket of goods is consumed over time. For both of these reasons, the rate of inflation that is implied by CPI is typically considered to be about 1% overestimated.

Imperfectly accounting for quality improvements causes higher measured inflation because the stream of services that a product creates for the consumer has increased – even though the product is nominally the same product. For example, the camera on my smart-phone is now good enough to record a high-quality Youtube video, whereas it was of mediocre quality on my previous phone.  My life is better-off with the better camera. But the increase in my quality of life isn’t measured by the CPI. The CPI does, however, make note that I paid a higher price for a phone.

Further, people don’t consume a fixed basket of goods over time. Even if we stopped the introduction of all new products and maintained the quality of all current products, people would still change the composition of their consumption due to price changes among related goods.

When people get hot and bothered by inflation, they often appeal to people who are of less means and who would find higher prices more burdensome. For that reason, below is a graph of some calorically dense and roughly comparable food staple prices (from the PPI).  You can put a protein on top of any one of these and call it a meal: pasta, flour, potatoes, & rice.

Let’s say that a consumer consumed equal parts of these in January of 2020. The CPI assumes that the consumption basket remains constant and plots a weighted average. In such a case, price rose 2.3% through July 2021. But in real life, penny-pinchers gonna pinch. If our consumer is particularly Spartan, then he will always consume the cheapest option – he treats the different foods as perfect substitutes. The Spartan price of consuming *fell* 22.3%. To be clear, the CPI assumes that the consumption composition remains unchanged, while the consumer’s actual basket is responsive to price changes.  Even if a consumer considers these goods to be imperfect substitutes and is willing to cut any particular type of consumption in half in favor of the cheapest alternative, then the price fell by 10%. In fact, a consumer who is at all responsive to prices will always have a cheaper basket than the headline CPI, all else constant.

In conclusion, be careful with your money. Spend it well and seek out alternatives. Your flexibility determines how much money you’ll have at the end of the month. The headline CPI number impacts only the most passive consumer – and even then, budget constraints gonna constrain.

Air Fryer: Redundant, Self-Indulgent Counter-Space-Waster?

While we were all imprisoned at home in 2020, we turned to eating food, and preparing food to eat in order to occupy and comfort ourselves. People baked bread for the first time in their lives. When yeast in the stores ran out, the internet was alive with tips on how to get sourdough cultures started. And a lot of air fryers were marketed and bought.

The premise of air fryers seems unassailable: quickly circulate very hot air (up to 450 F/230 C) to get that delicious fried crispiness with minimal oil, and get it in minutes with minimal fuss and cleanup. Since we had an offer of getting an air fryer at a discount, I consulted my wise friend, the internet. I wanted to love air fryers, but it seems they don’t cook much differently than a modern countertop convection toaster/oven (“turbo broiler”). There are some space-age-looking air fryers with a more slender, curvaceous profile which has a somewhat smaller footprint than a rectangular turbo broiler, but the capacity is typically only enough for one person or a couple with modest appetites.

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Write Repeat

We at EWED hope that we are creating quality ungated content to make the world a better place. This blog is also a commitment device to write more.

Everyone expects that the only way to get better at running is to run. Not everyone realizes that writing more makes you a better writer.

As a reminder for myself to write, I created an EWED design line in the same store that I posted about yesterday.

Black T-Shirt

Tote bag for all your pens and notebooks.

There a a few other styles and iterations at the store.

The Epsilon Delta Sorority

When I was a first-year graduate student in an economics Ph.D. program, I was taking a class we called Math Econ (taught by Dr. Omar Al-Ubaydli, at the time). I also was lucky to be renting a house along with several other women in the same program. For a few weeks, our group study sessions featured epsilon and delta.

Like many aspiring economists, I had taken Real Analysis at my undergraduate institution to bulk up on math skill and impress the admissions committee.*  

I never had a chance to join a sorority as an undergraduate student. It does look fun to walk around wearing a Greek code that is only fully understood by other members of a club. So, in grad school, I wanted to make shirts for what I called our “epsilon delta sorority”. We had Greek letters and a sisterhood (brotherhood). There are lots of women and men who are in the epsilon delta sorority.

It only took a decade for me to realize my dream. I have created shirts and shipped them to the girls I lived with. So more people can join, I created a store: https://shop.spreadshirt.com/economist-writing-every-day/

Here’s me wearing a t-shirt for women

Here’s a version for men

We have accessories, too. Why not? Life is too short to not put this on a mug. Someone already told me they want to give this to their daughter, so I added kids’ sizes.

I pulled out an old paper from my Math Econ course binder for this post. Here is something I had written for the class:

*If you are looking for an introduction, try Khan Academy. Taking Real Analysis before you get to an economics Ph.D. program is helpful, although not always necessary. Multivariable calculus is more practical than Real Analysis and used on a more routine basis for economists. Some subfields require more formal proofs than others.

The Role of Prices in an Emergency, Winter Storm Edition

When natural disasters and other emergencies strike, two things are certain. First, many essential goods will run out of stock at stores. Second, economists will complain that if only prices would rise in response to the increase in demand, shortages could be avoided.

Let’s take the current winter storm passing through much of the center of the nation, importantly including the southern US where both individuals and governments are unprepared for major winter storms. Here is a sign up at Home Depot in Arkansas:

I can verify that many people in Arkansas don’t have snow shovels. I’ve seen folks using dust pans and leaf rakes to try and clear their driveway. This video is a few years old, but I have no doubt that someone in Arkansas right now is strapping a widescreen TV box to their lawn tractor to clear snow.

So why no snow shovels in Arkansas at Home Depot? The common answer: it doesn’t snow much here, so the stores don’t stock many, and then when it does snow everyone rushes out to buy them.

Simple enough, but the economist says: WRONG! The reason Home Depot doesn’t have any snow shovels in Arkansas is because they didn’t raise the price. Why do economists insist on this?

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Charities will pick up used stuff but not businesses

There are reality TV shows dedicated to the spectacle of Americans drowning in their own material goods. What a year to be alive. Household income is rising around the world, as will clutter issues.

For now, I’m abstracting away from irrational hoarders. Lots of people have items that they would happily sell at a small price if only a buyer would come to their home. I see people posting items for sale all the time online, with the condition that the buyer come to them. (Most of these items are “used”, but some are brand new in the box.)

Why is there not a truck circling every American neighborhood offering to haul away unwanted stuff in exchange for a small payment?

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Complacency and American Girl Dolls

Two recent books warn Americans that our society stagnated after the moon landing: The Decadent Society and The Complacent Class. Both imply that the 2000’s are running on the fumes of the Saturn V rocket. We have barely altered our physical world in decades, improvements in cell phones notwithstanding.

This has launched an interesting debate (you could even call it a game) where people look for counterexamples. Here’s the most recent one I’ve seen

This week I saw a reinforcing example of stagnation.

In the 1990’s I used to read the American Girl doll catalogue from cover to cover every year. Everything is terribly expensive but also delightful to look at. I had the Molly doll and I read a few AG books about how she was inconvenienced on the homefront during World War II. She complained about having to eat turnips from a Victory garden, but she was encouraged to be patriotic and support a cause greater than herself. Her father is away with the U.S. Army Medical Corps.

I was a little dismayed when I saw that you can now buy a mini Molly doll for your 80’s doll. My life is now “historical”, so I am officially old. Great.

It’s not lost on me that American Girl is playing on nostalgia to sell more product. Millennials like myself might buy this mini Molly doll so we can re-live memories of childhood vicariously. However, I’m going to use this to illustrate “the great stagnation”.

You can be inwardly focused or outwardly focused. The WWII war effort was a time when America was dynamic and focused on achieving great things.

“Courtney” the 80’s doll is pictured next to a Pac-Man arcade machine. Her goal is to keep herself sufficiently entertained. She can listen to her Walkman if Pac-Man gets boring.

Today, 40 years later, people are still starting at screens just like Courtney the 80’s doll. The reason we are buying a mini 1940’s doll to gift to a 1980’s doll is because so little has happened since 1980.

You can make jokes about an infinite recursion of American Girl dolls. It’s funny because it won’t happen. You can be inwardly focused or outwardly focused. Molly’s America is outwardly focused, and that makes her exciting.

I don’t think anyone is going to give a 2050 doll a mini Courtney 80’s doll. I’m even more certain that no 2050 doll is going to get a mini 2010 doll complete with tiny 2010 iPhone.

Maybe by 2040, there will be something new to ignite the imagination.

Incidentally, LEGO seems to think humans will be on Mars soon.

EWED Recommends Gifts for 2020 Holidays

For the past two weeks, several of us have been describing books and items we enjoy. I’ll summarize all of these potential gifts for both adults and children here. We’ve got everything from what goes in a perfect cocktail to gifts under $20 for toddlers. Hopefully this helps you cross someone off your holiday shopping list.

Things for Adults

Lined pants for cold weather (Joy’s review)

The gift blog that has the most reader traffic to date is Jeremy’s blog on cocktail ice. The True Ice mold is going to transform your home bar.

Along the same theme, Doug suggests ingredients for an Old Fashioned.

More light will make you happier. For example the Day-Light Sky Lamp (Scott’s review)

Scott reviews camping tents. The Ozark Trails 9-Person Instant Cabin is fun and huge and easy to set up.

Books for Adults

Jeremy says Werner Troesken’s book The Pox of Liberty is a great book for understanding the current pandemic. Interestingly, it was published in 2016! We have been vulnerable to a disease outbreak for a long time.

Doug recommends The Sabbath. Doug made a great point in his review that people in quarantine might not be getting any rest even though their schedule might look empty. A quote from Doug’s review: “genuine rest — not diversion — seems necessary in the tensions of our present moment.”

Review of How the Scots Invented the Modern World. I’ll borrow from the book’s own tagline “How Western Europe’s Poorest Nation Created Our World”

Doug reviews The Ancient Christian Commentaries on Scripture (a set of books).

Undergraduate students review Tyler Cowen’s excellent The Complacent Class. Review #1 and #2.

for Kids

Joy suggests several different toys for kids. See the blog for a bike and a tablet game. A fail-safe mid-budget present for a 4-8 year-old is this remote control car ($25). For the even younger crowd (I suppose geared toward girls) is  Minnie Wooden Magnetic Dress-Up ($10).

Joy reviews several books for kids. Most recently, I have been reading The Voyage of the Dawn Treader with my elementary-aged son and I can’t recommend it highly enough. It’s important to read fiction together. We are having great talks about these vignettes on the sea voyage.

Gift for adults in cold weather

It can be hard to shop for adults. I received a GREAT adult Christmas present last year: fuzzy pants. You might already have pants, but do you have fuzzy lined pants?

As far as I know, Eddie Bauer is the best brand for this. https://www.eddiebauer.com/s/men-s-lined-pants?keyword=Men%27s%20LIned%20Pants will get you started. They have lined pants for men and women.

This makes a good Christmas present because, for many people, it’s cold at Christmas time. These pants are a game changer for being happy in cold weather.

Something to be aware of is that these pants are not good for hot weather. If you have a long hot season where you live, then these pants can go into storage for a bit.