January 30, 2018
Netflix, Hulu, and Amazon Prime Video are switching from content licensing to content creation in a major way. By 2022, the investment in original movies and TV shows will triple to $10 billion annually, according to new data from The Diffusion Group.
“The Big-3 SVOD players own 60% of TV streaming time,” Brad Schlachter, senior advisor at TDG, said in a statement. “They are looking to maintain if not grow this share by creating compelling originals that serve both to attract new users and retain existing subscribers even as subscription rates increase.”
Indeed, among Netflix subscribers, 21% rate originals as “absolutely critical” in their decision to keep using Netflix, while 41% rank them “very important.”
“The data is unequivocal,” said Schlachter.
Netflix, Prime Video and Hulu – through sophisticated user data – have a much better understanding of the limits of licensed content versus the benefits of original fare.
TDG contends that as studios like Disney pull their most compelling content from SVOD platforms, the necessity of a strong slate of originals becomes all the more obvious.
But the Big-3 are not the only players eyeing a larger slice of the originals on-demand streaming market. In fact, companies such as Facebook and Apple are investing in original TV-quality programming to distribute directly to consumers.
“Of course, not all originals find an audience or generate a huge buzz,” said Schlachter. “But when they do, it can change the fortunes of a company. Just look at what ‘The Handmaid’s Tale’ did for Hulu, or what ‘House of Cards’ did for Netflix.”