Netflix’s Major Shift To Original Content
The holiday season brings with it a lot of different exciting things: the weather is getting colder, retailers are having holiday season sales, and Netflix announced thirty new original Christmas movies available to stream this winter![1] These Netflix-produced movies have become a staple of the holiday season and represent a major shift in Netflix’s business model. For many years Netflix was the leading streaming platform, but following the emergence of Disney+, Hulu, HBO Max and more, the once-leading platform is starting to feel the effects of growing competition.[2]
One of the biggest results of this emergence of new platforms is that Netflix now has competitors hiking up the prices of its licensing agreements.[3] To stay ahead of the other services, Netflix would like to negotiate exclusive licensing agreements with the studios, however these exclusive agreements come with a hefty price tag.[4] It is for this reason that Netflix has made a major shift over recent years to produce their own programming.[5]
Netflix has announced that they eventually want 50% of their content to be original production.[6] In 2018, Netflix Originals accounted for 43.1% of all new titles on the platform, up from 25.2% the year before.[7] Netflix is spending 85% of its increase in budget on original programming—close to a billion dollars a year.[8] It had $9.8 billion in self-produced content in 2019, up from $6 billion in 2018.[9]
While this shift will cost more money for Netflix up-front, in the long run they will surely reap the benefits.[10] The shows which they license come with a 30–50% markup, so this recent shift will end up saving the leading streaming platform a large sum of money in the coming years.[11]
Furthermore, while Netflix’s most popular shows have continued to be those which they license, original content has started to compete with the ever-popular shows such as Friends and The Office.[12] In November 2018, six of the top ten streamed shows that month were Netflix originals.[13] Many of their shows such as Chilling Adventures of Sabrina, The Umbrella Academy, and Stranger Things have become very popular as of late, and represent Netflix’s ability to produce popular and critically renowned shows.[14]
As Netflix must keep renegotiating licensing agreements with studios who suddenly have many other eager buyers, it is likely that more studio-produced content will be leaving Netflix, which will ultimately be replaced with Netflix Originals. So, if you were worried that this will be the last year of cheesy Netflix Christmas movies—don’t fret. Netflix will keep producing more and more of them and we will keep loving them!
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