Monday, August 9, 2021

Amazon’s Flywheel, Streaming Wars, and Antitrust Battles

Amazon’s Flywheel, Streaming Wars, and Antitrust Battles

 

Barak Orbach

University of Arizona

Abstract

Low prices are one of the key benefits of competition although they periodically devastate less-efficient businesses. Criticism of low prices is a prerogative of the wealthy and the privileged. Grandiose proposals to reshape capitalism in a quick maneuver are the brainchildren of intellectuals with political ambitions. In our time, attacks on low prices and outlandish trustbusting ideas married with the blessing of a populist surge. This Article explores how this genre might affect the race for dominance in the video streaming sector, commonly known as the “streaming wars.” It explains why the populist thread of the present antitrust impulse jeopardizes the institutional capacity of the United States to reinvigorate antitrust enforcement.
Pioneered by Netflix in 2007, in the second decade of the 21st century, the video streaming industry became one of the most dynamic and most competitive sectors in the US economy. Streaming companies have invested hundreds of billions of dollars in streaming technologies and content. To compete and remain relevant, streaming platforms must keep their rates low and persistently expand their content libraries and offerings of live shows. This competition is not sustainable. It would inevitably lead to the exit of some or most rivals, heavy losses, consolidation, and integration. This trend is already here.
Amazon, arguably the world’s most powerful digital ecosystem, is one of the key players in the video streaming sector. Responding to the streaming wars, Amazon’s appetite for content has been growing persistently. But, while Amazon’s rivals sell video subscriptions, Amazon sells a membership plan whose benefits include access to the company’s streaming platform. In effect, Amazon’s video streaming arm is a perk designed to lure consumers to join its digital ecosystem and retain the loyalty of existing customers. The company’s participation in the streaming wars illuminates the challenges that Amazon’s business model presents for antitrust law and policy.
Amazon’s guiding principles are “customer obsession . . ., passion for invention, commitment to operational excellence, and long-term thinking.” Its flywheel architecture is the company’s most admired and most feared feature. Every element in Amazon’s ecosystem intends to drive growth momentum in other elements. Integrated efficiently, the elements have persistently accelerated the spinning of the flywheel building a seemingly unstoppable growth momentum. This organizational strategy defines Amazon’s identity and corporate culture. Its success has enormously benefitted American consumers but has also devastated numerous industries and contributed to the elimination of jobs. Alarmed by the company’s growth and impact, some Big Tech critics have concluded that Amazon’s low prices, customer service, and operational efficiency are nefarious, predatory, and exclusionary strategies. The simplicity and populist flavor of this thesis have popularized it among politicians and commentators. Against this background, this Article examines why the United States has failed so far to develop antitrust policies for the Digital Age. It shows that, historically, every generation of aspiring antitrust reformers—both progressive and conservative—has used a few insightful observations to attack or defend big business while largely neglecting the protection of competition. Among other things, this inquiry explains why aspiring trustbusters tend to be the preferred toy of antitrust offenders and their defenders.

https://lawprofessors.typepad.com/antitrustprof_blog/2021/08/amazons-flywheel-streaming-wars-and-antitrust-battles.html

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