Why streaming content keeps vanishing—and how to stop it

Copyright holders have too much control over older video content.
Why streaming content keeps vanishing—and how to stop it
Photo by mohamed_hassan.

Fifteen years ago, you could find almost anything on Netflix, from the latest blockbusters to classic movies to popular television series. In total, Netflix had around 60,000 titles available.

Today, Netflix’s streaming service only has about one-tenth as many titles available. While it has some amazing original content, the back catalog is unimpressive.

What’s changed? Well, the 2006 version of Netflix shipped DVDs to peoples’ homes. That service actually still exists as DVD.com, and it still has a broad selection. But it has far fewer customers than the streaming service.

Content is constantly disappearing from the modern, streaming version of Netflix. Indeed, every month publications like PCMag publish articles with headlines like “Everything Leaving Netflix in October 2021.” This month’s list included some fairly well-known movies and television shows, including Austin Powers, The Karate Kid, and dozens of episodes of Star Trek and its various spinoffs.

PCMag writes that Netflix “needs to make room for all the new content,” but that doesn’t make sense. The cost to store a digital movie is trivial for a company of Netflix’s size. Rather, Netflix is likely de-listing older titles to save money on licensing costs.

Each of these older shows and movies has a copyright owner. Some may be demanding a minimum payment regardless of how many people watch a particular show. Some might have pulled content for strategic reasons—for example, they wanted to move it to their own proprietary streaming service. In other cases, Netflix might just be randomly pulling some content to strengthen its hand in future bargaining sessions.

As a user, it’s annoying enough for content to hop from one service to another. It’s even worse if a show or movie disappears from the Internet altogether. Sometimes licensing frictions or an inability to identify the relevant copyright holder can prevent content from being offered on any streaming service.

None of this would have happened on the old, DVD-based Netflix. Once Netflix had spent the money to acquire a particular movie, it had every incentive to keep it in its vault. The law allowed Netflix to continue renting out a DVD forever—there was no need to periodically re-negotiate with the copyright holder to continue using it.

The streaming revolution provides consumers with unprecedented convenience. But it has had the ironic side effect of leaving many consumers a narrower range of choices and a more fragmented marketplace. And that's not because of technological or economic constraints—it's because the law gives copyright holders more control over streaming of older movies than it did over DVD rentals.

Could copyright law be tweaked to enable streaming services to have back catalogs as broad as the old Netflix did? It’s possible in theory. The question is whether Congress or the courts would go along with it.

Is streaming orphan content fair use?

In a new paper, Stanford legal scholar Mark Lemley writes about the problem of content becoming unavailable from streaming services. And he suggests a possible solution: use copyright’s fair use doctrine to allow third parties to stream videos that are no longer being streamed commercially.

Fair use is a judicially-created legal doctrine that allows re-use of copyrighted material without the permission of the original copyright holder. It’s what allows me to blockquote a paragraph from someone else’s article and offer my own commentary. Fair use is a flexible doctrine; courts apply general principles to new situations and technologies as they come up. In recent decades, the courts have held that fair use applied to search engines showing image thumbnails, YouTubers making reaction videos, and companies copying software interfaces to enable interoperability.

Lemley is suggesting a new way to expand the fair use principle: if a work falls out of circulation, courts could allow anyone to start publishing it free of charge. A key factor in fair use analysis is how a use affects the market for the original work. But if the copyright owner isn’t publishing a work at all, it’s hard to argue they’re being harmed when someone else publishes the same work.

This option would most likely be invoked for older and obscure movies and television shows. Lemley points out that the threat of this happening would give copyright holders an incentive to keep older works in circulation. That in itself would be a win for consumers.

Lemley’s principle might also come into play in cases where a copyright holder was deliberately holding content off the market. For example, in the 1990s, George Lucas released a new edition of the original Star Wars (complete with digitally-generated Jabba the Hut and Han shooting second) and stopped distributing the original version from 1977. Under Lemley’s proposed interpretation of fair use, others could begin streaming the original version of Star Wars—something that’s not currently allowed.

Will this actually happen? Because fair use is a largely judge-made doctrine, they could potentially adopt Lemley’s rule without any prompting from Congress. Still, courts are inherently conservative institutions, and I have trouble imagining them doing this unilaterally. It would create a lot of controversy and could embroil courts in a lot of follow-on litigation. And if Congress did take up the idea, we could expect vehement opposition from copyright holders.

A compulsory license could solve the problem

I think Lemley’s idea would be a step in the right direction, but it wouldn’t solve all the availability problems consumers face in a streaming world. If his fair use principle became the law of the land, we can expect copyright holders to make a token effort to keep their work available for sale somewhere—even if it wasn’t available broadly or at reasonable prices. But video content would still be balkanized across many streaming platforms.

So here’s another potential reform that might be somewhat less frightening to existing copyright holders: a compulsory licensing system for video content.

US law already has multiple compulsory licensing systems in the music industry. If you’re a musician, you have the right to do a cover version of any song that’s been recorded in the US without getting permission from the song’s composer. You simply notify the composer that you’re planning to record the song and then pay royalties at standard rates that are set by the federal government.

US law also offers a compulsory license for “Internet radio stations”—music streaming services that don’t allow the user to select which songs to play. Again, rather than negotiating licenses from the various record labels, Internet radio stations pay standard rates set by regulation. Weirdly, this compulsory license isn’t available for interactive music streaming services that let users pick specific songs, artists, or albums they want to play.

It’s easy to imagine creating a compulsory licensing regime for video streaming. If I were designing the system, I would give copyright holders full rights over their works for the first 10 or 15 years after it is published. After that, anyone would be free to stream video content at a standard per-minute rate.

These rates would be set by the government based on surveys of market rates. One way the government could determine if the rates were reasonable would be by looking at how often market participants made separate deals to license content at lower rates. If this happened a lot, that would be a sign that the standard rate was too high.

The rate might be based on the age of content, with content getting cheaper as it ages. A movie from 1955 might cost a lot less to stream than a movie from 2005.

I asked Lemley what he thought about a compulsory licensing regime, and he said that rate-setting would be the key challenge.

“I worry that the numbers will be so high as to make it uneconomic,” he told me in a Twitter direct message, “particularly for content the original distributor decided to abandon.”

There’s absolutely a risk that the rate could be set too high. But if it were set at a reasonable level, the result could be that every movie and television show would be readily available online. We wouldn’t have to subscribe to a bunch of different streaming platforms, and we wouldn’t have to worry about the menu of options constantly changing.

And while the owners of older copyrights obviously won’t be thrilled with this arrangement, it should work out OK for them too. Popular older works would still generate substantial revenue. Some copyright holders might actually wind up with more revenue, as new streaming services drum up new customers for old movies.

This could also provide an elegant solution to the “orphan works” problem, where older works can’t be distributed because no one can find their copyright holders. The fees collected for orphan works could be paid into a government-administered fund and then held in trust for any copyright holders who surfaced later. Most of these finds are likely to go uncollected, so over time the government could offer an orphan works discount for new licensees—while maintaining enough reserves to compensate anyone who does show up.

I’m not going to hold my breath for Congress to make any significant changes in this area. Copyright policy has been stuck in limbo in the decade since the defeat of the Stop Online Piracy Act. Copyright interests no longer have the clout to ratchet up copyright protection, but neither do reformers have much power to scale it back.

But Congress ought to be thinking about larger reforms to the copyright system. Today’s copyright rules are all based around the assumption that publishers will distribute works in physical form. The rules haven’t had a comprehensive overhaul since 1998, when online media was in its infancy. Whatever you think of my specific idea, the optimal rules for streaming content online have got to be different from the ones that made sense for 20th Century media.

Are you enjoying Full Stack Economics? Please tell a friend about it. This is an independent project and we need to continue growing our subscriber list to make it financially viable.


Only members can comment.
Please subscribe to a free or paid plan or sign in to join the conversation.