IHS Markit: Amazon and Netflix Ramp Up Global Production

Since rolling out worldwide in 2016, streaming-video giants Amazon and Netflix are building their presence in local country markets with a growing amount of original content, according to IHS Markit.

Netflix launched 1,257 hours of original first-run content in 2017, well ahead of Amazon Prime Video’s 285 hours, according to IHS Markit. Netflix has also dramatically increased that content outside the United States, with 402 hours launching last year.

International content accounted for 40% of Amazon’s total original first-run output last year, compared to 32% for Netflix, according to IHS.

“The availability of local content is primarily how both platforms adapt their services to various countries, along with local currency pricing, local-language websites, dubbing and subtitling,” according to an IHS release.

Netflix global original production has jumped from the first season of “Lilyhammer” in 2012 to 300 titles in 2017.

“Offering content that is locally made, but which plays worldwide, is just one of the methods Netflix, in particular, has revolutionized the TV programming business,” according to IHS.

Amazon has stepped up original production, but is well behind Netflix in overall volume, IHS noted. Amazon Prime Video also produced a single international title in 2012, renewing a cancelled BBC series, “Ripper Street,” and the company has gone on to launch 56 such original titles in 2017.

“Netflix and Amazon have cast a wide net, in terms of program genres, commissioning dramas and comedies, children’s live action and animation, documentaries and rights to theatrical movies,” said Tim Westcott, director of research and analysis, channels and programming, IHS Markit, in a statement. “Both companies have also dabbled in reality TV, and they are expected to move further into this area in the future.”

According to the Channels and Programming Intelligence Service from IHS Markit, at the end of last year, Netflix had 52.8 million online streaming video subscribers in the United States. Netflix international subscriptions outstripped those in the United States in 2017, with 57.8 million at the end of the year. Amazon Video subscribers in the United States reached 30.2 million in 2017. Amazon Video, having switched on globally later than Netflix, is well behind in terms of subscribers outside the United States, which totaled just under 15 million at the end of last year.

“In the linear TV era, channels produced programming primarily for domestic consumption, with international sales an often lucrative — but definitely secondary — revenue stream,” Westcott said in a statement. “The time-lag between U.S. and international release also encouraged piracy of hit shows, like HBO’s ‘Game of Thrones.’ Now, both Amazon and Netflix are originating programming in order to capture a global audience, releasing their originals on the same day and date in multiple territories. This also means that non-U.S. programming has the potential to find an audience in the world’s largest entertainment market — one where subtitled or dubbed programming has been almost unheard-of outside the art-house cinema circuit.”

Netflix’s Other Achilles Heel: SAC

NEWS ANALYSIS – Netflix projects it will add 1.2 million domestic subscribers in the second quarter (ended June 30), which would give the SVOD pioneer nearly 58 million subs in the United States.

A conservative expectation – given Netflix’s market saturation – that will either be confirmed or denied July 16 when the service reports Q2 financial results. Netflix added 1.96 million subs in Q1 compared on a forecast of 1.45 million. Still, concern lingers among investors.

“Should domestic additions fall below last year’s 1.07 million level, we expect Netflix shares to decline,” Michael Pachter, media analyst at Wedbush Securities in Los Angles, wrote in a note. “Should guidance for Q3 net subscriber additions fall below last year’s Q3 additions (0.85 million domestic, and 4.45 million international), Netflix shares may react even more negatively.”

While missing its subscriber growth estimate would undoubtedly send Netflix bears and short sellers into a frenzy, a bigger concern is how much the service is spending acquiring new subs in the United States.

Netflix spent $228 million on domestic streaming in Q1, which was nearly double the $115 million spent in the previous-year period. That equals about $116 in subscriber acquisition cost (SAC) spent attracting each new domestic sub. Netflix spent about $81 for each new sub last year.

With the standard Netflix subscription plan costing $10.99 monthly, it will take the service more than 11 months to recoup the SAC spent acquiring each domestic sub in Q1. In other words, it is costing Netflix more to attract a dwindling new sub base.

By comparison, the service spent about $46 in marketing for each new subscriber outside the United States – up slightly from $44 spent during the previous-year period.

As many observers focus on sub growth, SAC and Netflix’s burgeoning content spend ($8 billion in 2018), the service’s free-cash-flow loss continues to grow exponentially as well. The company has projected a free-cash-flow deficit this year upwards of $4 billion – that’s on top of content spending!

“With declining domestic growth rates and spiraling acquisition costs, Netflix faces a very real set of challenges if it is to continue to command such a strong position,” Richard Broughton, research director at London-based Ampere Analysis, wrote in a note. “Our research shows that while Netflix can continue to enjoy relatively low acquisition costs for international subscribers and a buoyant market keen to embrace SVOD, it cannot afford to take its eye off the ball in the domestic market, even momentarily. Its ability to grow ARPU [average revenue per user] will be critically important to manage long term growth – domestically and abroad.”

 

Netflix Partners with Salma Hayek’s Production Company on Mexican Series

Netflix’s latest original series from Mexico will be produced by Salma Hayek’s company Ventanarosa, Lemon Studios and Stearns Castle.

The series, “Monarca,” will begin production this fall and will launch globally in 2019. It stars Irene Azuela and Juan Manuel Bernal and will follow the world of wealthy Mexican elites riddled by corruption, scandal and violence.

“I’m extremely excited to partner with Netflix, and to be working with amazing Mexican talent in front of and behind the camera,” said Hayek in a statement. “We are proud to show Mexico as a vibrant, sophisticated and culturally rich nation, fighting to control its own destiny.”

“Mexico is a top priority for us in which to continue to develop series, and we look forward to bringing the best originals to the world through partnerships with key players such as Ventanarosa and Lemon Studios,” said Netflix’s Erik Barmack in a statement.

Hayek’s Ventanarosa Productions has produced such films and TV shows as Frida, which earned Hayek an Academy Award nomination, and “Ugly Betty.”

GLOW: Season 2

STREAMING REVIEW:

Netflix;
Comedy;
Stars Alison Brie, Betty Gilpin, Sydelle Noel, Britney Young, Marc Maron, Britt Baron, Kate Nash, Gayle Rankin, Kia Stevens, Jackie Tohn, Chris Lowell.

Last year’s first season of “GLOW” was one of the more memorable additions to the television landscape, deftly mixing comedy and drama with an assortment of quirky characters fighting their way through the seedier nature of Hollywood.

The series is a heavily fictionalized account of the creation of the cult-classic “G.L.O.W.” women’s professional wrestling show of the late 1980s, which stood for “Gorgeous Ladies of Wrestling.”

The real show was a low-budget mix of cheesy sketches and passable in-ring action, a tone the Netflix version manages to re-create in spirit if not in total accuracy. In the first season, down-on-his-luck director Sam Sylvia (Marc Maron) struggled to craft a watchable program from a disparate stable of talent, led by actresses Ruth (Alison Brie) and Debbie (Betty Gilpin). Debbie was once a prominent soap opera star who left the business to start a family, while Ruth stumbled upon “G.L.O.W.” after a series of failed auditions and found a chance to unleash her repressed creativity in helping to develop the upstart series.

The pair were also best friends until Ruth slept with Debbie’s husband, leading to a rift between them that parallels an in-ring feud between their characters, with Debbie as the righteous All-American girl Liberty Belle, and Ruth an evil Soviet agent named Zoya. (One of the fun aspects of the show is seeing which aspects from the real show have been borrowed to fit the fictional narratives).

The second season finds Sam and the girls trying to figure out how to keep all the storylines going for a full season, only to run up against creative roadblocks set in place by their own egos and inability to work together for a greater purpose. Central among them is the fragile truce between Ruth and Debbie, but also prominent is a rift between Ruth and Sam over the creative direction of the series.

The show’s splashy but unremarkable impact on local Los Angeles television also pays off with other microcosms of the Hollywood experience, as the girls must learn to deal with fandom and a blurring of the lines between their in-ring and real-life personas (although with some of the girls, there isn’t much of a distinction to be found there). Since most of the characters are borderline offensive racial and social stereotypes (one girl is made a terrorist character simply by looking vaguely Middle-Eastern; an Asian girl who isn’t even Chinese is named “Fortune Cookie”), this naturally leads to a few complaints from the performers who don’t find their roles as appealing as they would like.

Amid these tensions, Ruth finds herself in the middle of a prototypical #MeToo moment, when a sleazy station manager tries to force himself on her with the pretext of a working dinner to discuss the show’s creative direction, only to punish the show when she runs from his advances.

The series is extremely well written in how it sets up these elements to pay off later. A bit more than halfway through the season’s 10 episodes, all the strife reaches a glorious crescendo that brings all the conflict to a head and leads to some of the most engaging episodes of the series, resulting in an inspired eighth episode that many fans will not realize they needed until they see it.

As with the first season, the episodes are layered with references and subtext that encourage a re-watch to really take it all in and gain a better appreciation of the bigger picture.

While the whole cast shines, Brie and Maron continue to anchor the show with their antipodal portrayals of characters who have had vastly different Hollywood experiences — she the optimist who sees opportunity around every corner, he the cynical veteran resigned to the fact his career has steered him toward making a late-night wrestling show. And yet so much of “GLOW” is about them finding that balance that lets each of them use their show to find at least a modicum of the kind of personal and professional satisfaction they’ve been searching for all along.

Canal Plus CEO Blames Netflix, Regulation for Imminent Shuttering of SVOD Service CanalPlay in France

Canal Plus will close its SVOD service CanalPlay, due to waning subscription numbers in the face of competition from global players such as Netflix and Amazon, CEO Maxine Saada said during a hearing with the culture commission of the French senate, according to reports.

First launched in November of 2011, Canal Plus’s CanalPlay beat Netflix’s launch in France by nearly three years, reported Screen International.

CanalPlay at one time had some 800,000 subscribers but numbers have fallen to just 200,000 subscribers following Netflix’s arrival, Saada told the commission, according to reports. He said French regulations preventing CanalPlay from offering Canal Plus’s high-end originals on the service in the early years of its existence had hindered the ability of the service to compete with the global digital players, according to Screen International.

“At the moment when Netflix arrived on French soil, the only French SVOD player at the time was CanalPlay,” he said. “It had 800,000 subscribers, and we were banned from including originals in the face of Netflix and Amazon.”

That ban has since been lifted, but Saada said the change had come too late, Screen International reported.

“It’s over for CanalPlay. In two years, it has been erased from this market which is in the process of replacing that of television,” he told the French legislators.

“The announcement that CanalPlay is to close in France is another reminder of the growing requirement for major content investment to compete in the increasingly dynamic subscription video sector, particularly amongst local services,” stated Futuresource Consulting after the announcement. “CanalPlay will join the list of high profile closures worldwide over the last couple of years, all with significant parent companies; that includes Shomi (Canada), Watchever (Germany) and KPN Play (Netherlands). Futuresource estimates that CanalPlay had approximately 600,000 subscribers at the end of 2017, but has struggled to maintain pace in 2018 as Netflix momentum continues to build. Netflix doubled its subscriber base in France in 2017 hitting 2.5 million, with more subscriber growth expected for 2018.”

“Offering content that is unique, high quality and ideally, exclusive or original” is key, the Futuresource commentary noted.

“Such a strategy does not come cheap though, something that Canal+/Vivendi was seemingly not willing, or able to fund, particularly when its addressable market is more localised than the likes of Netflix or Amazon Prime Video,” Futuresource stated.

Netflix to Adapt Salman Rushdie’s ‘Midnight’s Children’ for Global Original Series

Netflix announced a new Netflix original series based on Sir Salman Rushdie’s book Midnight’s Children. The series will be available exclusively to more than 125 million Netflix members in 190 countries around the world.

Midnight’s Children won the 1981 Booker Prize, the Best of the Booker twice — both in 1993 and 2008, and the James Tait Memorial Prize. Sir Salman Rushdie was knighted in 2007 for services to literature.

Midnight’s Children is one of the great novels of the world, and its themes are still relevant to the India of today,” said Erik Barmack, VP, international originals, Netflix, in a statement. “The narrative continues to fascinate audiences decades after it was first published. We are incredibly excited to translate this pioneering work of fiction that parallels the birth of modern India, for a global audience. The rich experience and talent of Indian creators combined with the global reach of Netflix, have the potential for millions of more people around the world to rediscover this story.”

“I am absolutely delighted that Midnight’s Children will have a new life on Netflix, and greatly look forward to working with them to help create it,” Rushdie said in a statement.

Midnight’s Children follows the life of Saleem Sinai, born on the stroke of midnight on August 15, 1947, the time of India’s independence. His every act is mirrored and magnified in events that sway the course of India’s national affairs. Telepathic powers also link him with India’s 1,000 other “midnight’s children,” all born in that initial hour and endowed with magical gifts.