Why Is Netflix Increasing Its Focus on Original Movies?
Netflix’s focus on original movies
Netflix (NFLX) is increasingly focusing on movies. Recently, the company appointed Scott Stuber to head its original movies business.
In 2017, Netflix intends to spend 5% of its content spending on original movies. Although movie production is expensive, Netflix believes it’s worth spending $1 billion on producing originals rather than spending the same amount on SVoD (subscription video on demand) rights from movie studios.
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Netflix believes that by producing original movies and releasing them simultaneously in theaters and on Netflix, it’s offering subscribers the latest in quality content.
This strategy has resulted in Netflix’s reducing the wait times for viewers between theatrical releases and movies becoming available for home viewing. This move could have prompted movie studios to look at offering premium VOD (video on demand) viewing and reducing theater-only release times.
The company stated in its 1Q17 earnings letter to shareholders that while it believes that its subscribers should be the first to watch its original movies, it’s also open to theater chains such as AMC Entertainment Holdings (AMC) exhibiting its movies simultaneously.
Netflix is also spending more on movie rights. According to a Verge report from last year citing Deadline, Netflix paid $90 million to make Bright starring Will Smith and ~$3 million for screenwriter Max Landis.
Comcast looking at premium VOD for movie viewing
With its acquisition of NBCUniversal around six years ago, Comcast (CMCSA) brought together content creation and distribution. On the NBCUniversal side, Comcast’s Universal Pictures is also following a franchise-focused strategy for its Universal Pictures in 2017. It expects to release movies from franchises including Fifty Shades of Grey, The Fast and the Furious, and Despicable Me.
Comcast’s X1 set-top box has also been a driving force behind its video business, and the company views it as more of a content aggregator with the integration of Netflix and Alphabet’s (GOOG) YouTube on X1.
According to reports, companies such as Comcast could be looking at offering premium VOD services for their movies, which could change the landscape for Netflix.