House of Cards, artificial markets, and the Netflix effect

I wonder if it’s time to re-think what we traditionally call a “regional market”, thanks to what I’m dubbing “The Netflix effect”.

In fact, is there such thing as a regional market any more? Currently, state borders or economic unions define regional markets, and the products and services available in these markets are exclusively defined by what that sovereign country allows to be imported into that market, regulated by the amount of duties imposed on these imports. Duties are an effective means to regulate a market and protect local industry.

But what if there was no such thing as a border? What happens when there is no “tollgate” between countries or economic unions? What does it mean when everything  produced is instantly and ubiquitously available — worldwide?

That’s what Netflix just did with House of Cards, a TV series about Washington, D.C.’s political scene. Critics are raving, but the finer points of plot, acting, and direction are not my concern here.

Rather, I’m interested in the implications for the media industry—and, quite frankly, any other kind of industry, as well.

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The Netflix effect: Netflix has become a producer, distributor, and seller – all in one entity

This model debuted by Netflix is a trend we see elsewhere, too, in discrete manufacturing.

Manufacturers are increasingly becoming producer, distributor, and seller all in one, as the internet renders the old structure of separate manufacturing, wholesale, and retail useless.

With ‘House of Cards,” Netflix has done the following:

1. Netflix appears to care about local markets: The series was released everywhere on the same date, meaning that there was no artificial creation of a local market in a medium (the Internet) that knows no borders.
2. Netflix demonstrates its understanding that piracy is partially a result of the traditional way we think about markets, especially media: There’s no reason why a movie is released in Europe many months after it was released in the US, and the marketing machine runs globally anyway. It’s about creating desire, which is good and will certainly drive sales – but only if that desire can be satisfied rather sooner than later.

Unsatisfied desire –especially in combination with consumers seeing that others already have access to what they want – creates impetus to fulfill that need, and as consumers, we’ll go to great length to do so.

I don’t know if what’s happening will end up being called the Netflix effect, but I’m certain that we’ll look back to this point in time in a few years and wonder how we could not have seen it before.

Artificial markets are a relic of the 20^th century. Today, there’s only one market — and it’s a global one. That’s the market you are selling to.