It’s no secret that Netflix is constantly evolving and changing, as they fight to maintain their edge against Hulu, Amazon, and (soon) Disney. The cost of staying in this race is rapidly escalating too. The streaming giant is spending $8 billion this year to acquire and develop original content, according to Variety (on top of what they’re already paying to license existing shows and movies).
What you may not realize is how fast Netflix is moving away from these licensed shows and films. What Netflix may not realize is how these changes impact their existing subscribers.
Looking back to Netflix’s DVD roots, they trafficked primarily in movies. How much? A whopping 93 percent of their content was film, as reported by BGR. Back in 2010 — 3 years before Netflix debuted House of Cards — Netflix had a library of 6,755 movies, but today that number has dropped to 4,010 today. (And a lot of those movies are sub-par, to be kind.) By contrast, Netflix’s roster of TV shows has tripled, and now accounts for 28 percent of their overall available content.
Netflix is also very much global, reaching over 190 countries with a total subscriber base of nearly 120 million — but only 46 percent of their audience is located in the U.S. In other words, Netflix needs to tailor their content across a wide range of interests, cultures, and demographics. And that’s precisely what they’re doing.
Quite a bit of Netflix’s new original content is coming from overseas. Shows like Dark (Germany), Lilyhammer (Norway), Quicksand (Sweden), My Only Love Song (Korea), Ingobernable (Mexico) represent only a tiny portion of their foreign content. Netflix actively acquires new content abroad and also co-produces it with partners around the world.
The future of Netflix’s offerings appears to be fewer movies overall, and an emphasis on original shows that skew broader and more international.
There’s still plenty of original movies and shows for the American market, but the U.S. is a fractured landscape, which Netflix is filling niche by niche. When the audience is scattered it just makes more sense to diversify. The math is pretty simple too: a single movie is only 90-120 minutes, but a series is 8-13 hours with the promise of additional seasons. If retention is the name of the game, original shows and international series are the levers you want to pull.
However, this intentional instability could be creating a subscriber crisis.
Netflix walks a fine line between retaining their elder subscribers and enticing new members. Due to this shift toward TV series, their existing audience is going to find fewer and fewer movie options, which might push them toward Hulu, Amazon, and Disney. While these other services trail Netflix in original programming, they also offer other benefits (Hulu Live TV, Amazon Prime, and the Disney brands such as Marvel, Pixar, and Lucasfilm). It’s definitely not apples to oranges when it comes to streaming options.
So where’s this all heading? By the end of 2018, when Netflix has deployed their promised 80 original shows and movies, the real test will be the state of their subscriber base. Up to now, Netflix has seen extraordinary growth, but at some point that curve will bend downward. How Netflix reacts will be very telling, and might be the opportunity Hulu, Amazon, and Disney are waiting for to spring their anti-Netflix marketing campaigns.
Netflix’s decision to continually shake up their content selection might come at the cost of some long-term subscribers. It’s also a risk they can afford to take. Their current 120 million subscribers are only a tiny percentage of the potential subscribers out there. It’s a crazy game, this war between the streaming services.