When Netflix released its first original series House of Cards back in 2013, the show was something of a novelty. It was a big budget, highly polished show fronted by high-profile actors, but with all episodes released simultaneously, exclusively online, by a streaming service with little history of original content production.
House of Cards’ star has now waned thanks to a mix of declining quality and damning revelations about leading man Kevin Spacey’s personal life. But the show was the firstfruits of Neflix’s ‘Originals’ strategy, which has seen originally produced content make up an increasingly large portion of Netflix’s catalogue.
In December 2016, just four percent of Netflix’s US catalogue was made up of Netflix Originals according to Ampere Analysis. By the end of 2018, this had grown to eleven percent, and that number is still rising.
Originals are not only growing in number, but they’re also featuring more prominently in Netflix’s marketing, and being promoted more heavily within Netflix’s platform. Netflix now dedicates the top of its home page – the first thing a user sees when they log on – to a full screen promotion for one of its shows or films. More trailers and promotional material for Netflix Originals are displayed below the fold.
This doubling down on original content raises the question – is Netflix gearing up for self-sufficiency? Apple’s new streaming service, Apple TV+, looks like it will only hold original content made by Apple, might Netflix be pursuing a similar model?
There would be a couple of benefits to this strategy. Firstly, whilst original content requires a large up front investment, in the long run its works out as better value than licensing third-party content. “All of the cost of the content is amortised over the first few years, depending on how they do it,” Tim Westcott, research director of channels and programming at IHS Markit, told VAN. “If they develop a successful series, obviously every time they play it they don’t have to pay someone to license it. So it’s a good long term investment – provided the content is actually successful.”
And the move also reduces reliance on big media owners who may decide to pull their content from Netflix as they release their own streaming platforms. “As many of the major content producers contemplate going direct to consumer, third party licensing opportunities will reduce,” said David Sidebottom, principal analyst for entertainment media at Futuresource. “Disney+ [Disney’s upcoming subscription video on-demand service] is one leading example, but all other major TV networks content holders have (or will have) some form of D2C service, particularly in the USA”.
Some believe that Netflix’s strategy shows it’s trying to free itself from third parties. “Netflix’s strategy is clearly moving towards a self-sufficiency model,” said Lottie Towler, an analyst at Ampere Analysis. “Its focus on growing the proportion of original content in its catalogue shows no sign of slowing down – in fact Ampere’s analysis shows the streaming giant is reaching a point where it produces almost all the new and fresh content, while only the older content is licenced.”
But while it seems clear that Netflix wants to become more self-sufficient (Netflix’s chief content officer has said he wants 85 percent of new content spend to go towards original films and TV shows), this doesn’t necessarily mean it wants to become completely self reliant.
Firstly, a service sustained wholly by in-house content might not be viable for Netflix. Westcott said that a lot of Netflix’s appeal is that it has a deep catalogue with a lot of choice, and that it would likely lose customers if it were to strip out all of the licensed content.
Licensed content is not just useful for padding out the library – it’s also some of the platform’s most popular content. Data from analytics firm Jumpshot last year found that the three most popular shows on Netflix were The Office (US), Friends, and Parks and Recreation, none of which are Netflix Originals. Collectively, these shows made up 13.6 percent of all Netflix views.
Total self-sufficiency, then, might be difficult for Netflix, but it also may well be unnecessary. It’s easy to over exaggerate the threat of media owners pulling their content exclusive to their own streaming platforms. It’s true that a few have pledged to do so – ITV boss Carolyn McCall for example has suggested that the launch of Britbox in the UK will likely see less ITV content licensed to Netflix. But McCall said that ITV’s production arm will still continue to make shows for competing services, rather than cutting them off entirely.
For many production companies and distributors, Netflix remains an attractive prospect. “They’re a destination for a lot of different producers and distributors who have a lot of different kinds of content which they’re very keen to sell to Netflix,” said Westcott. “Netflix is a good deal if you’re a distributor because they tend to buy a lot of rights, and they pay you good money.”
And as Brian Golbere, SVP of Technology at IPONWEB’s TV Solutions Group explained to VAN, Netflix, thanks to its audience insights and analytics capabilities, often has a better understanding of the value of individual shows and films than the content owners themselves do. Hence why it’s able to cough up considerable sums for the likes of ‘Friends’.
