22 September, 2016

Netflix wants 50% of its library to be original content

Netflix is looking to shift its content mix even further towards original TV and movies, with a goal of achieving a 50 percent mix between its own programming and stuff licensed for its use by outside studios. The 50-50 target was revealed by Netflix CFO David Wells at the Goldman Sach’s Communacopia conference on Tuesday (via Variety), and Wells added that they’d like to hit that mix sometime over the course of the next few years.
As for its progress so far, Wells said Netflix is already about “one-third to halfway” to that ratio, having launched 2015 hours of original programming in 2015, and with the intend of achieving a further 600 hours by the end of 2016.

The benefit for Netflix with a shift to self-generated content is that the licensing situation is much simpler, and the investment made represents a cost that continues to deliver value long after the initial spend. Licensing arrangements with outside TV and film distributors have a fixed term, and thus represent a recurring cost if you want to continue offering their content in your library. Original content is a one-and-done expense (though admittedly higher up-front), which then permanently continues to the breadth and size of your video catalog.

Not only is creating owned content a fixed, one-time cost for Netflix, but it’s also facing higher competition for licenses to Hollywood and TV rights, since there are more streaming players out there. And the service seems to be hitting somewhat of a growth plateau in the U.S., owing in part to a bump in service costs, which is leading to cancellations. Original content production means Netflix can address niche audiences as well as mainstream with targeted project production, which helps add more potential subscribers once the more mainstream audiences are all onboard.

Original content from Netflix has been pretty stellar so far (Stranger Things and all Marvel shows are my personal favori