Weed-on-demand: Things are always great on demand. Humans have an insatiable appetite for efficiency. They want things, and they want them now. It’s the reason Netflix has done so well. You want to watch a movie, great. In fact you can watch as many as you like – or as many as the ones we have on offer, for a reasonable monthly subscription fee. Ideal. 

In 2005 the music industry was busy talking about the idea of consuming media like water. Or to put it simply, paying for music like you would pay your gas or electricity bills. As if music or media was a household utility.

After years of businesses trying, testing and tailoring the idea into submission as a workable, profitable model. It is an interesting concept, it gave birth to many streaming services you enjoy today like Amazon Prime, Netflix and Spotify.

This concept got me wondering what if this business model reared in the weed industry? What if dispensaries decided to charge a fixed flat-fee as a subscription model rather than a pro-rata cost? So, to you and me: paying a set monthly fee, allowing you to personally consume as much weed as you wanted. Sounds great? Let’s explore the potential pitfalls and benefits of this.

Please note: this is purely for hypothetical purposes, it’s not meant to be taken seriously. All explanations of economic theories have been reduced to be understood as simply as possible.

Supply and demand affects value

You don’t have to be a revered economist to understand the relationship between supply and demand. If demand exceeds supply, meaning that loads of people want something that there isn’t much of – the price skyrockets. This also works conversely, when supply eclipses demand the opposite happens, the price drops. It becomes less valuable. With this in mind, we’d have to imagine that marijuana cultivation (the supply) has far exceeded demand, meaning the wholesale price for weed had dropped significantly.

The bigger the grow operation, the lower the cost

In theory: Although larger factories have higher running costs, it can produce more for a lower unit cost.

If the Industrial Revolution taught us one thing, it taught us that scaling up production means a lower cost per unit. The fall in the average cost is simply known as economics of scale. Basically, the bigger the weed factory, the lower the price of the bud.

Financial incentives would make bud better

In theory: Paying growers per gram sold, rather than buying wholesale would means the quality of your weed would increase because there would be more financial incentive for growers to make a better product, as well as to compete against other growers.

Just like how YouTube pays Lady Gaga a fraction of a penny every time someone plays Pokerface. Every time you buy a bud, the grower would make money. This is a really basic model financial incentive, the carrot-and-stick approach.

Because each grower would want to sell the most weed possible to increase their profits in this new pay-per-bud world, this would immediately increase competition.

In real terms, unlimited usage doesn’t mean unlimited usage – but that doesn’t matter

In theory: Although upper limits would have to be enforced, because the majority would take advantage – or more than their far share, it would reach equilibrium.

Just like how your internet provider probably gives you ‘unlimited’ data to use every month, you know that if you’re subject to a fair usage policy. Fair usage policies take one thing into account, average consumptions. Economically speaking, there would be an average amount of weed everyone would typically take from the dispensary.

Yes, some people wild take advantage of it, but the majority wouldn’t. Equally, if all your friends were part of this service, in time you’d be less likely to take as much as possible because everyone would have weed – decreasing the value.

The reason it doesn’t matter is a basic economic argument first point out by Aristotle who said: “Too much of a useful thing would be of no use”. Where everyone has equal access, it bears no benefit to hold surplus.

It would have to be a large scale operation, or it just wouldn’t work

For all the reasons explained above, this could only work on a very large scale. This is the major pitfall. The scale of it would have to be so fast, there would be other related issues, such as monopolies. Streaming subscription services rely heavily on data usage, if only a few people used their service it would not be cost-effective.

Companies like Netflix and Spotify need a massive subscriber base just to break even. To be in profit requires a magnificent amount of customers. Business models of this scales do not work without widespread adoption.

Monopolies happen without market regulation, thats not a good thing

Another pitfall of scale is monopolisation. In an unregulated market, larger firms begin to gather monopoly status. No one company might be ‘pure monopoly’ (being the only company to hold the majority of the market). Monopolies aren’t necessarily a a bad thing all the time, they have benefits: they generally invest heavily in research and development which spurs better product growth but it does hamper entry into the market by competition, which in-turn affects choice.

Now, like Netflix, it will have a lot of Friends and Sex and The City. It won’t have smaller, cult shows or movies you might also enjoy, because the demand isn’t there. And herein lies an issue, you might not want to smoke Friends or Sex and The City all the time. You might want to smoke quirky British comedies like Nathan Barley or The Mighty Boosh.

To get value for money, you’d have to use it exclusively and regularly

To make sure you got the most for your money, you would have to be use that service solely for your weed and make sure you use it regularly. Netflix is one of those services which you forget to cancel, or always mean to cancel but don’t, or you don’t want to cancel on the off-chance you might want to use it.

It might not sound like too much of an issue to smoke a lot of weed regularly and from the same place all the time, but it does mean as soon as you start smoking less or get bored of it, you’re paying a fixed fee for a service. This makes the pro-rata, paying-as-you-go for weed model more cost-effective.

But, it’s not like it would happen…

The most disastrously obvious pitfall of a Netflix-like business model for a modern recreational marijuana industry is the fact that marijuana isn’t legal in the majority of states. Now, for medicinal purpose, a subscription model would be more workable in theory.

You could estimate a subscription figure on the amount on regular medical users and market to them. If a company could prop up a model like this on medical users before scaling up to widespread adoption from recreational users, that would be one route. As we have seen in the past, medical access does lead towards recreational access. This would essentially be following that.

Secondly, and also blindingly obvious, is the fact that services like Spotify and Netflix make their money from exploiting a zero-sum commodity, that is, something that can be copied and replicated. You can’t copy weed to a hard-drive, it’s a physical commodity whose price is a direct result of physical labour and market demand.

In closing, it probably just makes more sense to buy weed as and when you want it.