In the month of March, Google announced it would be launching an online gaming service called Stadia that will allow users to play games on virtually any device through the cloud. What was curious about the announcement was its deep integration with YouTube where users could buy the game after watching a trailer.
In China, live streaming is turning out to be the the new engine for e-commerce. Alibaba’s Taobao marketplace said that live-streaming generated gross merchandise value (GMV) of $15 billion in 2018. Meanwhile, Amazon began testing out a buy button to order products on their video streaming service, Prime Video, in December 2018. Amazon, which bagged the digital streaming rights to the National Football League (NFL) in the United States, allowed fans to buy merchandise of their favourite teams on their e-commerce platform.
Amazon, which bagged the digital streaming rights to the National Football League (NFL) in the United States, allowed fans to buy merchandise of their favourite teams on their e-commerce platform.
In India, Amazon doesn’t have this feature yet. But, the company’s intention of having a convergence between e-commerce and video streaming was always there. “Prime customers are the best customers,” Tim Leslie, former vice president for Amazon Prime Video had told a panel in 2018. “They come to the website more and they shop more across categories,” he added during the conversation. The company is now looking to funnel in more customers through their streaming service to the e-commerce site.
Like the look of the women in ‘Four More Shots Please!’ (an original show by Amazon Studios)? Shop the look on the website. Watching a cooking show but need to shop for some ingredients? Have Alexa, Amazon’s virtual assistant order it for you. Video streaming applications are said to be a replacement to traditional television. Therefore, it shouldn’t be a surprise that digital streaming applications are moving towards having shop buttons. They are, after all, an extension of television shopping. But, what is different in this case, is the deep level of personalization enabled by digital streaming. Traditional television captures limited data about viewer’s habits. For example, Nielsen Ratings uses set-meters and small devices connected to selected televisions at homes and captures data of a particular time when the show is being watched, and when the television screen is switched off.
Video streaming applications are said to be a replacement to traditional television. Therefore, it shouldn’t be a surprise that digital streaming applications are moving towards having shop buttons. They are, after all, an extension of television shopping.
Amazon excels in this type of vertical integration. But, that comes at a cost to the user’s privacy. Scholar Shoshana Zuboff explains that, ‘we are in the age of “surveillance capitalism” and that this is just another creep as more online platforms start to add more shopping buttons. Google has added a shopping tab for every query a user searches while Instagram has added a shopping buttons on posts which allow users to complete purchases within the platform itself.
Amazon is able to leverage massive data sets of users and enter into new business lines and markets to dominate a business. What really helps them push this integration is the fact that Amazon is a retailer, a marketing platform, a delivery and logistics network, a payments service, a credit lender, an auction house, a book publisher, a producer of television and films, a hardware manufacturer, a fashion designer, and a provider of cloud services, as noted by Lina M Khan, a jurist specializing in competition law.
A question often asked by investors in technology companies: What happens when Amazon, Google or Facebook decides to enter the same business as you? These companies are able to keep the cost of products low and drive out other companies who challenge them. The question then is how is Amazon able to keep cost of products low? It’s a well-known fact that Amazon does not worry about generating profits. Benedict Evans, a venture capitalist at Andreessen Horowitz, explains that a key metric to note is Amazon’s operating cash flow (OCF), a measure of cash which is generated through normal business operations. Amazon’s OCF has been steadily increasing but it does keep investing capital for expansion (which eats into profits). For example, even though a pair of shoes costs lesser on Amazon than a physical store, Amazon still charges sellers for logistics services and platform fees. Thus, it is able to sustain OCF at a high level.
Thus, even though individually Amazon’s other business lines are not able to make a profit, they still feed Amazon’s core retail business. Lina M Khan says that current antitrust laws only measure competition through price and output but ignores larger structural ways that Amazon is able to engage in anti-competitive behaviour. There is now a debate on how data privacy laws can be used to enforce anti-competitive principles. There is now a lingering fear that fines from competition regulators will be co-opted as just as cost of doing business and further non-competition aims. For example, Facebook has set aside $3 billion expecting fines from the US Federal Trade Commision (FTC). In this way, strong privacy laws could act as deterrents for digital monopolies.
Search for different business models
From a business perspective, the age of digital video streaming is an exciting time as it allows creators to experiments with different formats. The challenge however is to find newer monetization models and retain subscribers. A study by market intelligence company Parks Associates, says that the rate of churn and cancellation of over-the-top (OTT) video services in the United States stood at 18% in September 2018.
India, as a market, is notorious for users being very sensitive to price and hence there is a need to develop new business models. Pure subscription services without ads, like Netflix, are exploring low-cost mobile only plans in India. In India, digital video streaming services have to compete with traditional TV where cable and DTH bills average at around Rs 450 ($6.46), while Netflix’s starting subscription starts at Rs 500 ($7.18) and pay for broadband Internet additionally.
Other streaming platforms such as Eros Now, ZEE5, AltBalaji, Amazon Prime Video, and even Netflix have been tying up with telecom operators in a bid to get more subscribers and boost data consumption. For now, Telcos are bundling plans for video streaming with recharges and mobile bills where Telcos would foot the bill for a few months. But this is unsustainable for telecom operators in the long run.
For video streaming platforms, the need to find a new source of revenue becomes more crucial. Shopping buttons and tie-ups with e-commerce companies would certainly help. But for the user, this might amount to mis-selling. Subscription-based video streaming services do not have advertising. Adding a shop button for a product while a video is being shown in a video can amount to advertising. The problem with this sort of business model is that the service is always watching the user while she is watching a video and figuring out ways to sell her more items.
For video streaming platforms, the need to find a new source of revenue becomes more crucial. Shopping buttons and tie-ups with e-commerce companies would certainly help.
The longer-term impacts of these features need to be taken into account as more calls to regulate the Internet and content in various countries are on an emerging spree. But, in the context of the convergence of e-commerce and video streaming, we need to look at the harms, which may arise due to loss of privacy and how making shopping a seamless experience would lead to compulsive buying.
Why is this data being collected?
A common reason companies give for collecting vast amounts of data about users is that- it will help them develop more products for future use. Zuboff argues that the value given to the user by the new products developed is disproportionate to the company. In her research article, she takes the example of Google and says that the company is continuously increasing its creep on users for data by unauthorized means.
“Google understood that if it were to capture more of these data, store them, and analyze them, they could substantially affect the value of advertising. As Google’s capabilities in this arena developed and attracted historic levels of profit, it produced successively ambitious practices that expand the data lens from past virtual behavior to current and future actual behavior. New monetization opportunities are thus associated with a new global architecture of data capture and analysis that produces rewards and punishments aimed at modifying and commodifying behavior for profit,” she says.
There are several studies which are being conducted which are looking at the link between Internet addiction and compulsive buying, as ad-supported platforms are slowly changing user behavior. While regulating online permissions, privacy, and data collection, governments and companies should look at setting purpose limitations i.e. clearly state why particular data about a user is being collected along with clear and understandable language. The Mozilla Foundation’s data privacy principles are a good thumb rule to follow. If there is further convergence of e-commerce and video streaming, there should be an opt-in for users who wish to be a part of this at the time of sign-up.
If we do accept that data is the new oil (a notion which is problematic to begin with), it is worth examining any new monetization model proposed by large tech companies and weigh them against the harms it may cause. Do we want an extractive relationship with our personal data? Or would India and the world be better served by a business model that places a greater premium on “sufficient” consent and fair trade?