Netflix’s plans for world domination — as both a streaming service and a producer of original content — accelerated dramatically this week, as they battle to separate themselves from multiple, well-funded, big-name, competing ventures. According to Australia’s News.com site, Netflix plans to debut 80 original films in 2018… let that sink in for a moment, this equates to more than one new film per week (at a time when Hollywood is already struggling to fill theater seats).
Over the past decade Netflix re-defined itself from a distributor of third-party DVDs to a creator of homegrown series and films — albeit while incurring $20 billion in debt, according to the LA Times. They’ve grown their global audience to over 104 million subscribers, but they’ve also increased their subscription costs by several dollars since 2015 — a couple years ago this price bump cost Netflix 800,000 subscribers, but their content offerings are much, much stronger today.
All of this raises big questions regarding Netflix’s ability to sustain such massive debt within an increasingly volatile marketplace.
Netflix is clearly driving this market, but in recent years Amazon and Hulu have cut into their margins, CBS All-Access recently arrived, and Disney is preparing to enter the picture too — each of these competitors offers different options and benefits to consumers, resulting in something of a digital space race that shows no signs of slowing down.
Disney’s streaming service combines Marvel, Pixar, LucasFilm, and their ESPN brand — sports could be Disney’s secret sauce. Hulu is also becoming known for high-quality series and films, like The Handmaid’s Tale, but are also offering live TV for cord-cutting consumers. Amazon is obviously part of their mammoth Prime shopping network.
All of this is turning up the heat on Netflix, and they’ve responded by cranking-up the volume of original content way past eleven. Netflix’s chief content officer, Ted Sarandos, describes their focus on original films:
They range anywhere from the million-dollar Sundance hit, all the way up to something on a much larger scale, like Will Smith-starrer Bright… I think people will start seeing the potential for this original movie initiative, that it could be done on the enormous scale we have on the television side”
As the competition for streaming audiences grows, Netflix has focused on original content as their market differentiator. The problem with this premise is that it might not be enough. Disney, Amazon, Hulu, and CBS are all producing original content (and let’s not forget what HBO, AMC, FX, and other cable networks are doing in this space too). Netflix lacks a live TV option or sports or any other ancillary revenue stream (like Sony’s PS Vue, which is tied to their Playstation 4 platform).
However, Netflix is producing original content at a pace roughly exceeding that of all their competitors combined… at least, this is true today. Accruing such huge debts are necessary if Netflix is to maintain their position with respect to creating compelling content and acquiring/retaining their subscribers. Disney, Hulu, et al., are cleary hoping to chip away at Netflix’s market share.
If Netflix can hold onto their subscriber base long-term and somehow continue producing content at this rate, it’s a reasonable bet that they’ll be the last man standing… or at least poised to pick off weaker competitors when the inevitable streaming service culling takes place down the road.