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The first one is from how money works
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and it's called online piracy's great
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comeback. I like how money works because
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they left a comment on one of my videos.
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Actually they put me in a video and then
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when I reacted to that video they said
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this. Big A reacts to a video featuring
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Big A. This is what we call the circular
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economy.
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It seems like when you guys talk 99% of
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you are frequent pirates.
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Seems like maybe this will be relevant
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to you. The 2010s were the golden age of
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piracy. True. Bit Torrent accounted for
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a third of all internet traffic.
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Limewire had more monthly users than
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Facebook and the Pirate Bay was the only
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video store in town. [ __ ] love the
00:00:38
Pirate Bay in college. I got textbooks
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on it. I got every movie that I couldn't
00:00:43
afford on it. I got music on it. It's
00:00:45
still going. Yeah, but it's just a pain
00:00:47
in the ass now. Piracy is not convenient
00:00:50
enough. Plus, every day I think like,
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how am I helping a CEO's bottom line?
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And if I don't do enough, I feel shame.
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So some days if I do pirate a show, I'll
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just mail a check to like Universal
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Studios CEO or something. Actually, I'll
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tell you what I pirate. I pirate the NBA
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because the [ __ ] of the NBA haven't
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figured out the basic truth that you
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have to make it at least somewhat easy
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to watch your product. I'll pay. I'll
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even [ __ ] pay. But you make it so dog
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[ __ ] difficult and confusing and have so
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many loopholes and rules that I have to
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go to Stream East cuz I can just click
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and watch it. So annoying. Figure it
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out. My god.
At its peak, 95% of all
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music downloads were pirated because it
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had become cheaper and above all else,
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an easier way to fill up large digital
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libraries that were being made possible
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by cheap digital storage.
Bro, getting
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your first iPod and filling that [ __ ] up
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with pirated music. You'll never
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understand. You never understand how it
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felt like I was a god.
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I felt like I cracked the system. I felt
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like I had just beat the wholeing
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Matrix. No one could stop me. Man, that
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was a rush. Instead of having to ask
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your parents for money to buy a CD and
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getting songs you didn't even like, you
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could get all the songs you wanted on an
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iPod Go Anywhere and download them for
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free. It was insane. The only problem
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was I remember people would just label
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everything wrong. You'd be on a Torrent
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website or you'd be on Lime Wire and
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you'd be like, I want to download the
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new Eminem album. It would be something
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it would be Britney Spears or something.
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It would just be something different.
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They would just always And then I'd
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listen to Britney Spears. cuz that [ __ ]
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was
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every illegal torrent or file would name
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it wrong. They would spell the band name
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wrong or they would spell the song name
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wrong and you'd have it all in your
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thing and you'd have to go through if
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you cared you'd have to go through and
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like rename and yeah it' be like perk
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and you'd download different albums at
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different times. So like on your iPod
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you'd be like scrolling to find Lincoln
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Park. But if I wanted to listen to numb
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well that's under Lincoln Pork.
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Like I'd have four different Lincoln
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Parks in my iPod cuz they were named
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different from different torancets that
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I downloaded.
Since 2015, peer-to-peer
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file sharing has collapsed in
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popularity. And you might think you
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already know why. Streaming services
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like Spotify, Netflix were just a
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better, easier, and safer way to access
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content. And now, as these services have
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become marketkedly worse and
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simultaneously more expensive, piracy is
00:03:13
making a comeback.
Yeah. I mean, it was
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never going to last. The early 2020 2021
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2022 was the streaming wars, right?
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Every big tech company was trying to win
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the streaming wars. So, they were
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offering a ton of [ __ ] at low prices and
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they were burning hundreds of millions
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on brand new shows that didn't make
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their money back. Like, they were doing
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all this prestige TV. They were throwing
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money at everybody. They were they just
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wanted to win the war. And so, as a
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consumer, you got a good deal. You got a
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ton of stuff for a low price. And then
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they realized, wait a minute, we're a
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business. We're all just lighting money
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on fire so that millennials can watch
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more TV. So, they all started cutting
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back and now everyone's going back to
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piracy because they realized that like
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there is no free launch on this.
A
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survey coming out of Australia at the
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peak of online piracy found that people
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who pirated content were actually more
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likely to pay for it if it was
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available. In a finding that really
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ages,
okay, I'll say this is one area
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where I would not trust the survey.
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People will say whatever the they want.
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That's you know what I'm saying? Like
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that's that would need I wouldn't even
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see hard data on that. It could be true,
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but people lie about [ __ ] like that all
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the time. And like I'm sure it makes a
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pirate feel good to be like, "Yeah, I
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would pay for it."
Then came along the
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streaming sites that thanks to faster
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internet speeds could let users watch
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content on demand without granting them
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direct access to digital files which
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could then be copied and shared
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illegally. The big thing was that these
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options were just so easy compared to
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piracy and so cheap compared to buying
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songs or movies one by one that it just
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didn't really make sense to bother with
00:04:45
anything else.
I mean, people remember
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early Netflix before the rest of
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Hollywood figured out they were getting
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ripped off. Netflix hading everything
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and it cost nothing. Netflix had every
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show and was dog [ __ ] cheap is because
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no one understood like Hollywood didn't
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fully get it.
Music streaming by
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comparison is decent. There are multiple
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services, but almost all of them have
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almost all of the music that you would
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possibly be looking for. Yeah. As a
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result, nobody really bothers to pirate
00:05:12
songs anymore.
Any of you still pirate
00:05:14
songs? I certainly do not. Spotify has
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got me covered. I do not pirate songs.
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And that was what I it was the main
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thing I used to pirate. But it just
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feels like a waste of time. I feel like
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even if you're a Spotify, I'm not going
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to pay for it person. You probably just
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watch the song you want on YouTube and
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have a small music taste. I can't
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imagine people are straight up pirating.
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But from its very first days of online
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streaming, they knew they would
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eventually lose people back to piracy.
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They just really didn't care. And to see
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why, I'm sorry, but you are going to
00:05:43
have to look at some financials. Last
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year, it made $8.7 billion in net income
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after taxes, which is extremely
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impressive. But it still makes it hard
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to justify the valuation of more than
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half a trillion. At that rate,
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shareholders would need 57 years for
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their investment to pay off, which is
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not a reason. We don't care about
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valuations,
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it's 2025. I own Netflix and Tesla and
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uh Palunteer. I just like the stock when
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it goes up. I don't care about
00:06:12
valuations. I don't care about the math
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if I can get my money back. I just want
00:06:16
to buy Green Line up. It only goes up.
00:06:19
The vibes are good and you're harshing
00:06:21
the [ __ ] vibe. Companies don't make
00:06:23
money anymore. That's a old idea. Okay?
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They do something better than that. They
00:06:27
make the stock go up. They don't need to
00:06:28
be profitable because I'll always find
00:06:30
somebody else willing to pay me more for
00:06:32
this stock. I prefer the Isaac Newton
00:06:34
tra trading strategy. Isn't the Isaac
00:06:36
Newton trading strategy to uh buy a
00:06:38
stock, make some money, sell it, feel
00:06:41
good about yourself, then it keeps going
00:06:42
up, you get FOMO, buy in with your
00:06:45
entire net worth, it crashes, you are
00:06:47
broke forever.
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That's a dope That's a dope strat.
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Netflix's cost of revenue adjusted for
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inflation has actually been stable since
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2022 despite adding almost 100 million
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new users in that time. Included in
00:06:59
those costs are the affformentioned
00:07:01
servers and network infrastructure. But
00:07:02
it also includes the cost to license and
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produce their own movies, TV shows, and
00:07:06
games. Another big reason their costs
00:07:08
have been improving is because they just
00:07:10
aren't licensing as much content as they
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used to. And that's for two reasons. The
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first was a business decision to cut
00:07:16
down on a cost, especially for content
00:07:18
that wasn't drawing in new users. The
00:07:20
second reason is simply because they
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mean Netflix has gotten way way almost
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ruthlessly data dependent on cancelling
00:07:28
shows, cutting shows, and letting shows
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go. If people aren't watching it, or
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they're the type of watchers that only
00:07:34
come in, watch one thing, and leave,
00:07:36
they just let the show go or they they
00:07:38
cancel it after one season or they
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they're very algorithm pill. Now, I
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think there's an argument to be made
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that long term that that reduces
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people's trust, brand value of the the
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name. you know, if every time they make
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a show you like, they cancel it
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instantly. But it has worked for them.
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They're the only streaming service
00:07:53
that's profitable. They're the only one.
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So, they're doing something right. You
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know, their data shows that after two
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seasons, a show does not bring in new
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users. So, like House season 1, okay,
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people are watching. House season 2,
00:08:05
people are watching. House season 3,
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it's only house fans now. There's nobody
00:08:09
new is like checking it out in season 3.
00:08:10
So, they usually just cancel it. They
00:08:12
have almost no shows make it past two
00:08:14
seasons. What about Game of Thrones?
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Again, a smash mega hit like Stranger
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Things or Game of Thrones, they have let
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that go. Game of Thrones is not them,
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but I mean, Stranger Things, you know,
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for the average show, first two seasons
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is all that matters. They've been
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canceling it. I think Netflix is trying
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to play the odds and thinking it just
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won't work out, so just cut it. That
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might backfire on them, but it's working
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for now. Yeah. Also worth mentioning,
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someone made a great point. A huge part
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of that is like the longer a show goes,
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the more they have to pay residuals. I
00:08:38
think there's a specific thing about it
00:08:39
might be three plus seasons. Oh, it's
00:08:41
100s. It's 100. Exactly. It's 100 Fs.
00:08:43
That's okay. Perfect. I knew that. Yeah.
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Okay. 100 apps. After a certain number
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of episodes, they have to pay a higher
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percentage of residuals to the writers,
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actors, directors, everyone. And so,
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they just cut it off first. They cut it
00:08:52
off early.
A 2023 paper in the Journal
00:08:54
of Economic Behavior and Organization
00:08:56
titled Pirating Chill found that when
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movies moved off Netflix to another
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platform, piracy of that content
00:09:01
increased by more than 20%.
I mean, this
00:09:03
goes, we said this a long time ago when
00:09:05
we were doing marketing Mondays about
00:09:07
the streaming wars, but if you look at
00:09:08
consumer behavior generally, and this is
00:09:11
could be different now, but at the time,
00:09:12
this is what it was. People treated
00:09:14
Netflix like a like a tax, like I have
00:09:16
to pay the water, the heating, and the
00:09:18
Netflix. It was like universal. You just
00:09:20
have to do it. And they treated
00:09:21
everything else like a luxury. So like
00:09:24
for HBO, they would buy HBO, but only to
00:09:27
watch the show they wanted, then they
00:09:29
would cancel it. But Netflix was like a
00:09:31
a mainstay. You know, what he's saying
00:09:33
here really ties into that where it's
00:09:35
like, I think many people have one
00:09:37
streaming service. It's Netflix, and if
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it's not on that, they pirate it. It
00:09:41
showed why Netflix hasn't been too
00:09:43
concerned with online piracy. In a now
00:09:45
infamous quote from the company's chief
00:09:46
content officer, they said that in order
00:09:48
for Netflix to be successful, we need to
00:09:50
become movie studios faster than movie
00:09:52
studios can become us. Piracy that
00:09:54
disproportionately hurt legacy movie
00:09:56
studios and their libraries of content
00:09:58
was not something that Netflix would
00:09:59
encourage. But behind closed doors, they
00:10:01
certainly weren't too sad it was
00:10:03
happening. Another way to think about
00:10:04
this is that obviously Amazon isn't
00:10:06
encouraging shoplifting. But it's a
00:10:08
problem that hurts their competition far
00:10:10
more than it hurts them.
You're saying
00:10:12
Jeff Bezos is the guy looting.
00:10:16
He puts on a ski mask and starts looting
00:10:18
in order to make retail stores seem
00:10:20
unsafe. How else do you afford that
00:10:22
wedding? He's a reverse Batman.
00:10:26
Jeff Bezos is the billionaire who makes
00:10:29
the city worse so he can make more
00:10:31
money. That's hype. Okay, so Netflix
00:10:33
doesn't care about the rise of piracy,
00:10:35
but what about the actual Hollywood
00:10:37
studios?
Hollywood weird, I call it.
00:10:38
They obviously do, and they crack down
00:10:40
on IP theft with furious anger. In the
00:10:42
past, poor box offices wouldn't matter
00:10:44
as much because mid-budget movies could
00:10:46
make a lot of their money back through
00:10:47
DVD sales, but obviously that's not
00:10:50
really a thing anymore. So, studios have
00:10:52
put even more effort into pushing their
00:10:53
streaming services to eventually make
00:10:55
back the difference. It's a bold
00:10:57
strategy, and there are hundreds of
00:10:58
billions of dollars in market cap at
00:11:00
stake. So executives really want to
00:11:02
pretend that eventually it'll work out,
00:11:04
but if it doesn't, there are some
00:11:05
lessons.
Dude, that is uh that is the
00:11:07
statement of so many industries right
00:11:09
now. We're losing hundreds of billions
00:11:12
of dollars, but it'll eventually work
00:11:14
out. What if it doesn't, bro? So much is
00:11:17
propped up on like it'll work out. Well,
00:11:19
this will this will make sense. We're
00:11:20
not crazy. What if it doesn't? I get
00:11:22
paid 300k a year every CEO. Bro, you're
00:11:25
talking to some broke CEOs.
00:11:28
It's almost sweet that you said that.
00:11:30
That makes me think highly of you as a
00:11:32
person that you thought what's the
00:11:33
craziest thing these greedy CEOs could
00:11:35
be making. I would be your friend off
00:11:38
that comment. I think that was really
00:11:39
nice of you to say. No, it's way more,
00:11:41
bro. It's way look ating um Bobby Kodc
00:11:44
walked away with $400 million at the
00:11:46
buyout. Yeah, that's right. I think if
00:11:48
Netflix doesn't want to go along with
00:11:49
it, the only thing Well, the problem is
00:11:52
Amazon wouldn't go along with it either
00:11:53
cuz Amazon doesn't care and Apple
00:11:55
doesn't really care about making money.
00:11:56
Like Apple TV is just a little side
00:11:58
project to make Apple more valuable.
00:12:00
They don't care if they lose money on
00:12:01
it. And Amazon Prime's the same way,
00:12:03
Prime Video. But ideally, every company
00:12:05
other than Netflix would team up to
00:12:07
create one subscription, a Spotify like
00:12:10
thing, and they would just split based
00:12:11
on contribution to production. We're
00:12:13
definitely entering into the mergers
00:12:15
phase of the streaming war because
00:12:16
they're going to start burning out.
00:12:21
[Music]
