Variety is reporting on Netflix and how they spend their money. The article reports that with the intended growth of original content, Netflix has to spend more money up front for original content compared to licensed content, which Netflix can pay out over the course of the contract. With Chief Content Officer Ted Sarandos stating that he's looking to raise the amount of original content Netflix offers to roughly half the available content they offer, you end up with a scenario where investors may be concerned.
As with any business, you have to spend money to make money. Netflix opened up a pandora's box when they transitioned from mailing DVD's to having an over the top streaming service. Once other companies saw the response from cord cutters around the world, companies like Hulu, Amazon Prime, and others came out with their own services directly competing with Netflix. What that's led to is Netflix having to rely upon original content to sway people to subscribe to their service.
The problem with original content is simply the mystery of whether consumers will actually want to see the new shows. Netflix has a great deal with Marvel to help produce shows like Jessica Jones, Daredevil, Iron Fist, Luke Cage, The Defenders, and coming soon, The Punisher. Shows like that have brought Marvel fans to Netflix in droves, causing the Marvel shows to be some of the top viewed programs on the service. Adam Sandler recently renegotiated his contract with Netflix to produce more movies specifically for them, which again has turned out to be a great to attract new subscribers to the service.
Then you have shows like Sense8. Netflix recently canceled the show which caused an uproar with its fans. Netflix doesn't release statistics as to viewership so it's tough to explain why they decided to cancel that show. One factor I can guess at is the fact that the creators of the show, Lana and Lilly Wachowski and J. Michael Straczynski, on their own don't come cheap. Add to that the size of the cast and the fact the show was filmed in over 13 countries over its two seasons and you end up with a show that probably cost a lot of money to produce. No matter how good a show is, if it isn't making money for its broadcast home, then that show is going to be canceled.
Netflix is in a quandry. To succeed, they have to give subscribers reasons to stay with the service. Most licensed content on Netflix is available with other services in one shape or another so it's imperative they create original content that keep people coming back. But based on how they're currently spending money, the fear is that with Netflix banking on continued growth to offset the spending for original content, what happens if they hit a dry spell? What happens if a large number of original content is ignored by subscribers?
So what do you think? Is Netflix gambling their future on growth that may not come? Sound off in the comments section below.
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