Netflix and the Prisoner’s Dilemma

During this weekend, the blizzard did not really allow people to be out and about, but instead many were inside watching their favorite shows and movies on Netflix. Popularity for this company is high and ever growing. An article states that Netflix is economically at the top of the television industry with more people subscribing to it daily. In the past, television networks would first run the pilot and if that was successful, then they would purchase the rest. However, Netflix broke out of that pattern and buys shows in complete two season packages at a time.

This is putting pressure on regular networks since they can either sell to Netflix and receive more money, or not sell to them and make less. The article describes this as being a prisoner’s dilemma. The prisoner’s dilemma for the media companies is that they can either continue selling to Netflix in order to gain short term profits, or stop selling to help preserve the industry in the future.

The company who stops selling to Netflix first will be cutting their revenue and they would not know if the rest of the networks would end up following them or not. This classic example of the prisoner’s dilemma is one of the things that we will be discussing in this weeks lectures. It is described as being a scenario where two people act or pick a strategy which is benefiting themselves instead of picking the strategy which will benefit them both. They end up not getting the best outcome if they had chosen otherwise.

The article went on to talk about how Netflix has millions of people subscribed “to an unsustainable model.” I am interested in seeing how other media companies deal with Netflix and how long it can stay at the top of the industry.

http://www.theguardian.com/media/2016/jan/24/netflix-us-television-investors-revenue-streaming-service

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