Thanks to its massive spending, Netflix has created a seller’s market for producers and studios.
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As Netflix continues to ramp up its annual content investment, the streamer has effectively changed the paradigm for content producers in a way that both expands and limits opportunities for producers and studios as well as for rival networks competing for the best content and talent, per Digiday.
Netflix CFO David Wells said recently that in 2018, Netflix will spend $8 billion and produce 700 pieces of original content, including 80 full-length original movies and 80 foreign-language original productions from local international territories where Netflix operates.
Thanks to its massive spending, Netflix has created a seller’s market for producers and studios. Here are some of the fundamental ways that the new paradigm initiated under Netflix has benefited content producers:
- There are more opportunities to sell content because Netflix is such a major buyer. In addition to buying more shows than other platforms and networks, Netflix also buys more episodes.
- Netflix pays producers more money upfront than other programmers.
- Netflix is mostly hands-off once it agrees to buy a piece of content, and will largely give producers creative free rein over their projects.
- Netflix shows and movies can still be recognized in traditional modes, for example, with critical acclaim or awards.
Yet the new environment also potentially hurts producers:
- There’s no guarantee that a producer’s content will get discovered.If Netflix doesn’t back a producer’s content with marketing dollars or otherwise centralize it on the platform, the content might not get discovered or watched when there are so many other viewing options. Even though Netflix says it will double its marketing spend this year to $2 billion, it will only spend money on marketing a producer’s content if it knows that the content has high value in terms of its ability to drive and retain subscribers. Netflix’s inability to invest in marketing every original production has opened up opportunities for other premium networks that are committed to investing more in marketing shows.
- Even if producers make more upfront for a piece of content, they lose any potential long-term income that might have resulted from syndication deals or international sales. Netflix has increasingly preferred doing content deals for full ownership, rather than short-term licensing deals. As a result, producers don’t make any additional money after the initial payout.
Tech: Netflix changes the paradigm for producers (NFLX)
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