Streaming Platforms: Cheap Content Is More Likely to Be Recommended
Research
22.08.2023
Streaming Providers Incentivised to Promote Content with Low License Fees
Streaming services are shaping consumers’ content choices through their algorithms. The recommendation systems of streaming platforms can steer users towards content that is cheaper to stream, since platforms have the incentive to favour content with the lowest licensing fees. This enhances the visibility of cost-effective content, as shown by a theoretical study carried out by ZEW Mannheim.
“Streaming platforms curate a mix of content offerings to capitalise on consumer interests. They pay producers fees for the use of the licensing rights. To maximise profit, it makes strategic sense for streaming services to spotlight content with particularly low licensing fees in their recommendation lists,” elaborates Jacopo Gambato, a researcher in ZEW’s “Economics of Innovation and Industrial Dynamics”. “Conversely, algorithms might curtail recommendations for pricier productions, as these usually come with higher licensing costs. This, in turn, would dampen their visibility,” adds Luca Sandrini, a postdoctoral researcher at the Budapest University of Technology and Economics.
Algorithms shape competition and consumption
Algorithms possess the capacity to steer competition within streaming platforms and, consequently, influence consumers’ choice of content. At the same time, streaming services have a vested interest in guiding consumption towards cheaply produced content. This creates an incentive for streaming services to influence competition on these platforms. However, this incentive cannot be empirically confirmed because the streaming providers' algorithms and personalised recommendations to consumers are not publicly available. If researchers had access to the algorithmic data, considerably more insights could be gained in this regard.
Platform bias impacts user behaviour
There is a wealth of evidence demonstrating that algorithmic recommendations impact users’ consumption behaviours. The demand for high-quality and costly productions might decline as consumers increasingly gravitate towards free or more budget-friendly content over alternatives that they might prefer if made aware of them. On the producers’ side, this shift could lead to inefficient investments in quality, especially if costly experiments and enhancements are riskier and less rewarding.
