David NG writes: Netflix’s promotional tagline is “See what’s next” — a nod to the numerous titles that are instantly available to watch at the click of a remote. For the streaming entertainment giant, “what’s next” is changing in dramatic ways.
While it once depended almost exclusively on old licensed titles from other studios such as “Breaking Bad,” “South Park” and “The Walking Dead,” Netflix is betting that a steady diet of original content will sustain its business.
A Times analysis shows a surge in “Netflix Original”-branded titles in the U.S. over the last three years. The number of new original titles released so far this year is more than triple the number from the same period in 2016. In August, more than 53% of new releases will be Netflix Originals — the first time the company has added more original than licensed content on a monthly basis.
The aggressive move toward original programming is having a palpable effect on content available to subscribers and reflects Netflix’s ambition to dominate Hollywood. The Los Gatos, Calif., company has already upended traditional distribution models and is now lessening its reliance on content from competing studios to fill its direct-to-consumer pipeline.
But this change could also pose challenges for Netflix as it licenses fewer of the popular titles that have played a crucial role in retaining subscribers. With competition heating up from Amazon Prime Video and Walt Disney Co.’s upcoming streaming service, subscriber gains and retention have become the key metric by which Wall Street measures the company’s future viability and cash flow. Last quarter, Netflix missed its new subscriber forecast by about 1 million customers, sending its shares tumbling. The company currently counts 130.1 million subscribers worldwide.
For now, Netflix is betting that more original shows and movies will equate to even more subscribers.
Netflix original content accounts for 43.1% of all new titles so far this year, up from 25.2% at the same point last year, and just 15% in 2016, according to a Times analysis of new releases. The Times aggregated all of Netflix’s new titles, which are disclosed monthly, over the last three years and categorized each TV show or feature film as either a Netflix-branded original or as licensed content.
Original-branded content on Netflix includes such self-produced series as “Stranger Things” and “3%,” as well as the movies “Bright” and “Mudbound.” But it also includes studio partnerships such as the acclaimed series “The Crown,” which is a Sony Television production, and “Orange Is the New Black,” which is from Lionsgate.
Netflix appears to be pursuing a something-for-everyone strategy, offering a wide range of programs from stand-up comedy specials to sci-fi dramas, romantic comedies and crime documentaries that appeal to their “taste communities” — broadly defined groups of subscribers who gravitate toward the same shows.
“Demographics aren’t a good indicator of what people like to watch,” said Cindy Holland, who serves as vice president of original series for Netflix, at a recent presentation at the Television Critics Assn. press tour in Beverly Hills.
Taste communities help drive the content recommendations subscribers see when they log on to the service. Netflix’s algorithm will promote the shows that other subscribers in the same community enjoyed, making those titles more visible to the browsing viewer.
“The most powerful promotional vehicle we have is the Netflix service itself,” Holland said.
At the same time, Netflix is adding fewer older TV shows and movies from other studios, in part because some studios are holding on to their content, reflecting Hollywood’s conflicted and sometimes strained relationship with the company.
As a mail-order DVD service, Netflix became a lucrative source of home video revenue to the studios. And when Netflix launched its streaming service in 2007 … (read more)