Creator: Enrico Tartarotti · Published: 2025-09-25 · Length: 14:24 · Watch on YouTube

Why Netflix price increases make us rage but $1,600 iPhones don't - The truth about tech pricing, enshittification, and how Gmail invites once sold for $200. (from the video description)

Enrico traces how the price of technology "got broken," from Google giving away Gmail to venture-funded startups selling below cost, and argues that AI is the first wave of tech that can't follow the same playbook. Sponsored by Luma AI (Dream Machine and its Ray3 model). Written and produced by Enrico Tartarotti; editing by Seequence Studio and Enrico. (The auto-captions mishear several names: "Enrio" for Enrico, "gmailz swap.com" for gmailswap.com, "lint" for Lindt, "choose wheats" for chocolates, "Ray Free" for Ray3, "Claw" and "OBUS" for Claude and Opus, "ChBT/JGBT/TGBT" for ChatGPT and "enchitification/anification" for enshittification. The corrected names are used below.)

1) Detailed outline

[0:00] People paying for free email

• In 2004, on a site called gmailswap.com, people offered a part in a film, a cute drawing and other odd things in exchange for a Gmail invite. Gmail was free but invite-only, and invites sold on eBay for $150 to $200.
• Today the common complaint is that big apps get worse and pricier every year, that everything is a subscription and companies are greedy. That's called enshittification, and Enrico says it isn't true.
• The question he poses: why do we rage over a $2 Netflix increase but rush to buy a $1,600 iPhone?
• The Gmail story is the start of how tech pricing "got broken forever," and how AI chatbots have now broken the one rule that made it all work.
• Intro: Enrico builds tech products, including Flask, his video collaboration tool. Sponsor mention for Luma AI.

[1:10] What is Gmail actually worth?

• Are your AirPods worth more to you than your Gmail account? Most people say yes, because AirPods are a physical thing you own and Gmail is a service that has just always been there.
• But if both were taken away and you could only get one back, most people would fight for Gmail. So why does something so important to billions feel like it has almost no monetary value?

[1:52] How Gmail launched

• On March 31, 2004, your choice was Hotmail with 2 MB of storage or Yahoo Mail with 4 MB. On April 1, 2004, Google announced Gmail with 1 GB free, a better interface, all on the web. People thought it was an April Fools' joke.
• Bill Gates said he was offended by the amount of space and called leaving all that email on servers "morally repugnant."
• Within weeks invites sold for $150 on eBay, about $342 in today's money, just to get free email.

[2:35] Gmail was never about email

• Google had already found one of the best businesses ever, selling ads on searches, and was very profitable by 2004. What it needed was more people on the web, because more web use meant more searches and more ad views.
• That's why Google happily spent billions on free email, and on mapping the world with cars on every road for Google Maps (cue a clip of a player guessing his location from an upside-down black-and-white map in 0.1 seconds).
• Maps and Gmail have huge real value, but the monetary value we assign them is zero: "of course they should be free."

[3:44] Freeification and the penny gap

• What Gmail started isn't enshittification but the opposite, which Enrico calls freeification: a product that is genuinely incredible yet perceived as having no monetary value.
• The psychology is the penny gap (the zero-price effect). Offered a Lindt chocolate for 15 cents or a Hershey's one for 1 cent, 73% chose the Lindt. When both dropped one cent, making the Hershey's free and the Lindt 14 cents, most chose the free Hershey's.
• Once something costs anything, even a penny, our brains start doing cost-benefit math. Free things aren't just valued more; they're perceived as a different category.
• Google could afford this because of its "money printing machine," Google Ads, which also gave us Chrome and Android. If freeification only meant amazing free products, no problem. But then Silicon Valley noticed.

[4:49] Sponsor: Luma AI

• On the street "where Silicon Valley was born," Enrico shoots footage and uses Luma AI's Modify Video feature to restyle it into a new world.
• He uses two images as start and end frames and has Luma generate the video between them; it can also make videos from text descriptions or references and suggest styles, camera angles and lighting.
• Luma's newest and most powerful model, Ray3, can also turn regular video into HDR. A discount link is in the description.

[5:50] Venture capital as a cheat code

• Imagine being Uber in 2010, with big costs for developers, insurance claims, support and user acquisition, but no search engine paying the bills. The hack: build something amazing and give it away almost free.
• Enter venture capital: a $1.25 million seed round in October 2010, an $11 million Series A, a $37 million Series B, then Google Ventures putting in $258 million, which Enrico calls its largest investment ever.
• In 2015 Uber passengers paid only 41% of the real cost of their trips; Uber burned about $2 billion a year on $1.4 billion in revenue.
• Netflix burned hundreds of millions building its library, and Spotify lost $1.2 billion in 2017 alone while charging $9.99 for nearly every song ever recorded. Airbnb, DoorDash and WeWork played the same game.

[7:00] The playbook and MoviePass

• Step one: build an undeniably great product (nearly every song with recommendations, or rides anywhere without getting scammed by taxi drivers).
• Step two: give it away free or nearly free, subsidized by millions in venture money, which freeifies it.
• Extreme example: MoviePass charged $9.95 a month for a movie in theaters every day, with the average ticket costing it $9.18. Two movies and it lost money; one a day lost $265 per user per month. It went out of business.
• Everyone used these products, and also learned that they had no monetary value. The companies freeified themselves.

[8:03] When the free money ran out

• When venture money dried up in 2022, these companies had to crank up prices, and people revolted.
• WhatsApp was free; when it introduced a 99-cent subscription (per year, not per month) it felt like an outrage.
• Netflix raising its price by $2 drew reactions like "This is corporate greed," "Cancel immediately" and "This is theft. It used to be $7.99."
• Yet iPhones keep selling every year despite rising prices. In 2021 Netflix made a 46.1% profit on a subscription; the latest iPhone's margin is 66%, which on $1,600 is over $1,000 of gross profit. We still feel Netflix, Spotify or Uber are ripping us off more.
• Enrico's conclusion: enshittification never happened. These products were always great and arguably still are. They just trained us to value them near zero, so charging their real cost now feels like a rip-off.

[9:06] Freeifying a whole category

• The effect spreads beyond companies to whole product categories. Imagine a Spotify competitor that pays artists more and has to charge around $30 a month, still cheap for how much music and podcasts people consume.
• Because Spotify freeified music streaming and pushed its perceived value to about zero, that service is doomed from day one.

[10:10] AI breaks the rules

• We now revolt over a $15 subscription for a service that costs about $12 to run, while ChatGPT and most AI tools charge $15 for something that costs about $30 (the captions drop the unit) to run.
• On free plans, ChatGPT, Claude and Gemini hit you with a paywall after a few queries. In the old freeified world that would be unthinkable, like Gmail allowing only three emails a day.
• Cost per interaction is the difference. Streaming a Spotify song or running a Google search costs a fraction of a cent. Video is pricier: an 8-hour Twitch stream at 1080p costs Twitch almost 60 (the captions drop the unit, likely cents) to deliver to one viewer. AI is on another level.
• Enrico pays $200 a month for Anthropic's top Claude tier, mostly for coding. One chat exploring a new Flask feature with the premium Opus model cost $21.74, for that single chat, not per month.
• AI companies lose money on $200 subscriptions; some people burn tens of thousands of dollars a month in AI costs behind that price, and there are leaderboards ranking who spends the most.
• Mainstream users still expect free, so with AI costing roughly ten times more, freeification is "kind of doomed," and giving these tools away would be even worse than before.

[12:00] How AI might get priced

• Subscriptions, betting that your real usage costs less than you pay.
• Credits bought in bulk and burned down, with the downside of the "taxi meter effect," a constant anxiety about usage (imagine Spotify counting down your remaining listens).
• The markup model used by many coding tools such as Cursor: you pay the AI's actual cost plus a 10 to 20% fee. That suits technical users but not the mainstream; imagine a Netflix bill for your share of Stranger Things' production cost plus 20%.

[13:06] Prediction and outro

• Enrico predicts the mainstream will be so used to freeification that it won't pay even small amounts, and will be stuck with cheap, weaker default models. When he forgets to log in and uses the free ChatGPT, he notices how much worse it is than the best models.
• Only a small group of power users will pay hundreds a month for tools worth more than that, which still sounds crazy to most people, much like his friends' reaction to his $200 AI subscription.
• Teaser for the next video: the user interface itself, with its buttons, dialogs and mouse clicks, is about to change completely and is "already dead" (see The Weird Death Of User Interfaces).
• Closing plug for Flask, his next-gen video collaboration tool.

2) Things mentioned

Tech products and services

• Gmail (launched April 1, 2004, with 1 GB free; invite-only at first)
• Hotmail (2 MB) and Yahoo Mail (4 MB) in 2004
• Google Search and Google Ads, Google Maps (Street View cars), Chrome and Android
• Netflix, Spotify, WhatsApp (99 cents per year subscription) and Twitch
• Uber, Airbnb, DoorDash, WeWork and MoviePass
• Apple iPhone ($1,600 model, about 66% margin) and AirPods
• eBay and gmailswap.com (the 2004 invite trading site)

AI tools and pricing

• ChatGPT (free-tier limits), Claude by Anthropic ($200 a month tier, Opus model) and Gemini
• A single Claude Opus chat costing $21.74
• AI spending leaderboards (sites ranking heavy users' AI costs)
• Cursor as an example of usage-based markup pricing
• Subscription, credit and markup pricing models; the "taxi meter effect"

Business and pricing ideas

• Enshittification (which Enrico disputes)
• Freeification (Enrico's coined term for products perceived as worthless because they were free)
• The penny gap / zero-price effect and the Lindt versus Hershey's chocolate experiment
• Ad-subsidized products versus venture-subsidized products
• Venture capital rounds: Uber's $1.25M seed, $11M Series A, $37M Series B and $258M from Google Ventures
• Uber riders paying 41% of trip cost in 2015; Spotify's $1.2B loss in 2017; MoviePass's $9.95 plan versus $9.18 average ticket
• Netflix's 46.1% subscription profit in 2021 versus the iPhone's 66% margin
• The 2022 end of cheap venture money

Sponsor and Enrico's own products

• Luma AI Dream Machine (Modify Video, start and end frame generation, style and camera suggestions) and its Ray3 model with video-to-HDR
• Flask (flask.do), Enrico's video collaboration tool

Media

• Stranger Things (hypothetical production-cost bill)
• Next video teaser: The Weird Death Of User Interfaces

3) Biographies

Enrico Tartarotti

Italian-born YouTuber, designer and entrepreneur whose channel goes "behind the scenes of the design, psychology and stories behind the tech we use everyday." He founded Flask (flask.do), a video collaboration tool, and here he describes paying $200 a month for Claude, which he uses mostly to code Flask. He writes and produces his videos, which Seequence Studio edits with him.

Bill Gates

Co-founder of Microsoft, which ran Hotmail when Gmail launched. Enrico quotes him as saying he was offended by Gmail's huge free storage and calling it "morally repugnant" to leave so much email sitting on servers.

The chocolate-experiment researchers (unnamed in the video)

The Lindt versus Hershey's study Enrico describes matches the "zero price effect" research by Kristina Shampanier, Nina Mazar and behavioral economist Dan Ariely, popularized in Ariely's book Predictably Irrational. Enrico doesn't name them; he presents the result under the name "penny gap."

The GeoGuessr-style player (unnamed)

A player shown in a viral clip guessing his location from an upside-down black-and-white map in a fraction of a second, used to show how far Google went in mapping the world.