Monday, October 02, 2023
I learned a new word today, "enshittification". New word, as in the word having been only invented this year, in a Wired article by Cory Doctorow. The word describes an increasingly common experience of people using various tech platforms, that the cost of using the platform goes up dramatically, while the usefulness of the platform is going down. For example I just got an email from YouTube telling me that my subscription to YouTube Premium Lite is ending at the end of this month, because they simply remove that product. If I want to continue watching YouTube without ads, I need to pay for the more expensive full Premium product, despite me not needing or wanting the added features it has. Anyway, I recommend you reading the Wired article on what enshittification means for platforms, because I am going to swivel this post over to a bunch of thoughts that accumulated in my head over the last few weeks regarding the general state of the entertainment industry. How is that related? Glad you asked!
Enshittification is clearly a product of a Silicon Valley venture capitalism tech startup culture, in which these tech startups mostly created platforms that weren't profitable. Thus users get a lot of useful stuff for free, the platform grows exponentially, and after a few years of such growth the platform is so large that it becomes basically a monopoly. Then the venture capitalists want a return on their investment, and the platforms starts squeezing their customers and business partners. A lot of those platforms are in the entertainment industry. There is the whole "creator economy", with platforms like YouTube and Twitch, but also streaming platforms like Netflix, and gaming related platforms like Steam. The recent Unity debacle was another example of enshittification. Platforms are increasingly using their monopolistic powers to extract a larger percentage of our entertainment dollars.
Now I would like to zoom out, and have a look at those entertainment dollars. From 2020 to 2022, mostly due to Covid, the overall amount of these entertainment dollars, global spending of people on entertainment, has gone up a lot. 2023 and beyond is different. General inflation and a cost of living crisis is forcing people to spend a larger part of their money on necessities, and thus less on entertainment. The global housing crisis redistributes wealth from younger renters to older home owners, but the entertainment industry is mostly focused on the younger audience. And in-person experiences, like eating out with friends or traveling, are quickly growing back to their pre-Covid levels, taking entertainment dollars away from at-home entertainment channels.
That all adds up to a pretty ugly picture, economically speaking. On the one side entertainment companies saw immense growth due to Covid, and reacted by spending more. The average cost of making a triple-A movie or game has gone up dramatically. On the other side the overall sum of entertainment dollars, and especially that of at-home entertainment dollars not only has stopped growing, but is going down. Time spent playing games or watching streams at home is going down, and people need to watch their spending more. Too many too expensive entertainment products are chasing too few entertainment dollars from customers, and enshittification means that intermediaries are trying to get a larger piece of the pie too.
As a result we had a never-ending stream of news this year about movies and games failing to be profitable. Increased monetization of games is meeting larger resistance now, with actions like the review bombing of NBA2K24, or players opting out of "games as a service" models, with Diablo IV losing players much faster than previous games. That is leading to a vicious cycle, in which entertainment companies are making less money, and react with actions that make them even less popular, like price increases, releasing unfinished products, or Netflix cracking down on password sharing.
I mentioned in my previous post that I am watching the money I spend on subscriptions more closely, and that is all entertainment dollars. As part of that, I have also unsubscribed from most content creators I supported on Patreon, Twitch, or YouTube. As sad as it is, in the end the larger content providers like Netflix and Microsoft Game Pass are giving me more entertainment value for my dollars than supporting a single Twitch or YouTube channel. I suspect that I am not the only one in this situation, which doesn't bode well for the creator economy, even if the situation is certainly not their fault. The last creator on Twitch I supported, I went out of my way to first switch from my iPad, on which I usually watch the content, to my PC, because the same subscription on iPad costs 30% more due to the cut Apple takes.
My prediction for the future would be that the entertainment industry will need to do some shrinking, because of the current oversupply of entertainment products chasing a shrinking pool of entertainment dollars. We hear a lot of companies that put out a reliable stream of successful entertainment products, like Disney or Blizzard, now increasingly failing to do so. And we hear a lot of layoffs from various participants in the entertainment industry, from game studios to large tech companies (who are in my mind often a part of the entertainment industry). The consolidation will frequently be painful, and will often be perceived as unfair, with the "nicer" market participants losing out to the more aggressive ones. This isn't going to improve the quality or value for money of our entertainment products. Unless we are lucky and enshittification actually leads to some of the shittier platforms dying, as Doctorow predicts. The world would probably be a better place without Twitter/X and TikTok.